Reasoning by analogy, some have suggested that record labels can prosper by embracing the internet, just as move studios prospered by embracing VCRs. In fact, these two situations are completely different . The crucial difference is movie studios make movies record labels don't make records VCRs created new distribution channels for movies, allowing movie studios to establish new price points for their product and expand their market under the demand curve. Aggregate revenue increased, as well as the number and variety of movies produced. Monopoly rents Record labels can't adopt this strategy, because their underlying business model is different.
Record labels are sales and marketing engines .
The internet is a distribution channel, and the record labels cannot control it. Right now, the internet is stronger on delivery than on payment, but that could change. The internet allows musicians to market their own product. They don't need record labels to find customers. This is so novel that we don't even have a word for it, but it is just as much a threat to the record labels.