I have no idea how many times over the past decade I either heard or read a person in tech say that major record label execs were luddites incapable of adapting to the digital transformation of their industry. Too many to count for sure.
I’ve long argued that while there may have well been a deep lack of understanding about the new reality, or worse an unwillingness to push a few important boundaries, transitioning a multi-billion dollar business in the face of tectonic shifts in the underlying industry model, while also protecting what will eventually become a legacy business (yet which still produces 90% of ones’ revenues) is no easy task.
So what happens when a tech guru gets a shot in a similar situation? JC Penny is the answer. Bill Campbell said the following at a recent event held by Intuit:
Whatever you need to do, you have to keep the current business going while you are experimenting with your new one. He didn’t do that. What he did was put a bullet hole in his current business and went about trying to create a new one. And when the new one went down, well think about it, 25 percent? It’s a multi-multi billion dollar company. It’s a disastrous thing.
No matter where I was, you always think about how you limit the downside as you are making product transitions. He didn’t do that at all.
That’s exactly the challenge faced by the major recording labels since ~2000. Could they have done things differently? Definitely. Did they make serious strategic errors. Definitely, again. But I certainly didn’t (and still don’t) envy the peeps trying to adapt those business to a new reality.