Recording Industry In Deep Shmoo

The recording industry has a lot on its plate lately.

While profits dwindle in today’s download-friendly climate, executives are struggling to find new strategies to compete and catch up with the technology that some companies have been criticized for ignoring for too long.

Warner Music Group recently reported a 58 percent drop in fourth quarter net income.

Earnings fell 3 cents per share to $5 million from 8 cents per share, or $12 million, in the previous year.

While quarterly revenues reached $869 million from $854 million a year ago,

Thomson Financial analysts reportedly estimated revenues of $875 million and earnings of 2 cents per share.

A bright spot in the report was WMG’s digital revenues, which rose 25 percent and represented 15 percent of total revenues, the Wall Street Journal reported.

"As expected, this has been a challenging quarter, reflecting the difficulties in any industry transformation of this scale," WMG chairman Edgar Bronfman Jr. said. "But we remain confident for two primary reasons: continued growth in the broader music market that our long-term strategy targets, and the disciplined creative leadership shown by WMG to expand our music business model."

Part of expanding that business model has meant pursuing new licensing opportunities.

WMG recently announced a partnership with the family of Frank Sinatra to manage Frank Sinatra Enterprises and pursue new marketing opportunities. Through the deal, WMG will own and manage the singer’s name and likeness as well as his Reprise recordings, films, TV specials and unreleased footage. WMG will also apparently represent the rights to Sinatra’s Columbia and Capitol recordings.

And then there’s Universal Music Group.

To hear chairman and CEO Doug Morris tell it, the record industry was getting pushed around for far too long. Universal’s recent licensing deals with Yahoo, YouTube and Zune, as well as the company’s move to sell DRM-free downloads through some retailers have all been new strategies to not only keep afloat in the current climate, but also limit the power of Apple’s iTunes.

In a recent Wired magazine interview, Morris told the story of the Shmoo, a character from the old comic strip "Li’l Abner" that could be cut up and shaped into any form.

"That’s what was happening to the music business," he said. "Everyone was treating the music business like it was a Shmoo.

"Is it correct that people share their music, fill up these devices with music they haven’t paid for?" Morris said. "If you had Coca-Cola coming through the faucet in your kitchen, how much would you be willing to pay for Coca-Cola? There you go. That’s what happened to the record business."

But when asked why Universal had taken so long to jump on the digital bandwagon, Morris told Wired the industry had lacked the know-how to make the leap earlier on.

"There’s no one in the record company that’s a technologist," he said. "That’s a misconception writers make all the time, that the record industry missed this. They didn’t. They just didn’t know what to do. It’s like if you were suddenly asked to operate on your dog to remove his kidney. What would you do?"