I was reading an article in the New York Times today about Rick Rubin’s efforts to breath new life into Columbia Records, which is owned by Sony Music. In the article, there were a lot of great quotes that reminded me of the conversation today surrounding the sale of residential real estate:
“The Big Red focus groups were both depressing and informative, and they confirmed what I and Rick already knew,” DiDia told me afterward. “The kids all said that a) no one listens to the radio anymore, b) they mostly steal music, but they don’t consider it stealing, and c) they get most of their music from iTunes on their iPod. They told us that MySpace is over, it’s just not cool anymore; Facebook is still cool, but that might not last much longer; and the biggest thing in their life is word of mouth. That’s how they hear about music, bands, everything.”
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Rubin sees no other solution. “Either all the record companies will get together or the industry will fall apart and someone like Microsoft will come in and buy one of the companies at wholesale and do what needs to be done,” he said. “The future technology companies will either wait for the record companies to smarten up, or they’ll let them sink until they can buy them for 10 cents on the dollar and own the whole thing.”
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“Columbia is stuck in the dark ages. I have great confidence that we will have the best record company in the industry, but the reality is, in today’s world, we might have the best dinosaur. Until a new model is agreed upon and rolling, we can be the best at the existing paradigm, but until the paradigm shifts, it’s going to be a declining business. This model is done.”
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“The most important thing we have to do now is get the art right.”
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Rubin paused. “That’s the magic of the business,” he said. “It’s all doom and gloom, but then you go to a Gossip show or hear Neil in the studio and you remember that too many people make and love music for it to ever die. It will never be over. The music will outlast us all.”
Nearly everyone is in agreement that the music business has been changed forever by file sharing, the iPod, and the Web, and that got me to thinking about how similar the music industry is to the residential real estate industry and so I put together this chart comparing the two:
I think the chart shows there are quite a few similarities, and yet some profound differences. The biggest major difference I see is the point of purchase. Music, being digital, can be purchased on the web. Homes, not yet digital, should be seen in person before purchasing. I don’t see the web changing that difference any time soon. At the same time, however, I don’t necessarily agree with those that say that this fundamental difference protects the residential real estate industry from the Web.
Rather, the areas of similarity indicate that, like the music industry, there could very well be opportunities for the web to alter the residential real estate industry fundamentally over the coming years. The most obvious area is in advertising. Like radio play for music, newspaper advertising for real estate is all but dead. Instead, the focus for advertising and promotion of both music and real estate is now all about the web.
An issue with which I struggled was whether brokers should be included in infrastructure or as the owner’s representative. I ended up putting brokers in the infrastructure camp because the agent is the one with the direct connection to their client and, as so eloquently emphasized by Kris Berg, ultimately provides the service. Kris appears to be the epitome of someone who takes the duty to represent another seriously, and that human element is fundamentally separate from the infastructure that comes after.
Putting brokers in the infastructure camp, however, is no small issue, for I think the infrastructure is where the web will have its greatest impact. Agents supply that human connection that is critical to the process. Infrastructure, however, being one stepped removed, is more easily replaced, which is why the music labels and real estate Associations and MLSs are under so much turmoil right now.
Yet this is one more area where I think there is a fundamental difference between music and real estate sales, at least historically. A huge part of the infrastucture in residential real estate is the cooperation that allows for the aggregation of the listing data into what becomes a new copyrightable compilation that has enormous value to the creation of the real estate market. There is a human element to this cooperation that is offered and created by the volunteers and staff of the Associations and MLSs. This human element cannot be easily replaced.
I don’t know very much about the music industry, but I think it is most interesting that the record companies are seeing cooperation as a potential for salvation similar to the cooperation occurring in the residential real estate business. That cooperation could create a new work of art, the infinite music collection, that is made available in the way consumers want.
Consumers are what matters, after all, whether they are music fans or home sellers or buyers, which leads me back to Rick Rubin’s conclusion that, “The most important thing we have to do now is get the art right.” That’s what Kris Berg said and it’s a clarion call to all of us.
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Five minutes after I posted this, Ardell comes out with this, which is all about getting the art right.