But what almost everyone doesn’t know is that this is nothing new. The entertainment industry has decried every technical innovation since the player piano and the Edison victrola as the looming death of their industry. Nate Aderson, over at Ars Technica has a great roundup of historical documents from the entertainment industry, 100 Year of Big Content Fearing Technology, In Its Own Words

In 1906, famous composer John Philip Sousa took to Appleton’s Magazine to pen an essay decrying the latest piratical threat to his livelihood, to the entire body politic, and to “musical taste” itself. His concern? The player piano and the gramophone, which stripped the life from real, human, soulful live performances.

“Under such conditions,” Sousa believed, “the tide of amateurism cannot but recede until there will be left only the mechanical device and the professional executant. Singing will no longer be a fine accomplishment; vocal exercises so important a factor in the curriculum of physical culture will be out of vogue. Then what of the national throat? Will it not weaken? What of the national chest? Will it not shrink?”

It is a truism of human nature that if you have a good thing going, you want to keep it going. Nobody likes to fiddle with their business model. But hey. life is rough, wear a helmet.

One of my favorite quotes about business and technology is from Robert A. Heinlein’s first short story, “Life-Line.” In the story a scientist invents a machine capable of predicting the exact time of a person’s death. He is sued by the insurance industry whom he is threatening with extinction. The matter goes to court and the judge finds for the scientist writing:

There has grown up in the minds of certain groups in this country the notion that because a man or corporation has made a profit out of the public for a number of years, the government and the courts are charged with the duty of guaranteeing such profit in the future, even in the face of changing circumstances and contrary to public interest. This strange doctrine is not supported by statute or common law. Neither individuals nor corporations have any right to come into court and ask that the clock of history be stopped, or turned back.

That quote should be engraved in marble letters five inches high in every boardroom and statehouse in the nation.

The relentless drumbeat from the music and movie industries for the last ten years can be summarized thusly: “Help! Illegal downloads are killing us. We need Big Brother to squash our customers for us!”

Wrong!! There are two things killing (at least) the music industry. The first is the rise of legal downloads. The profit margins for the labels on a $ .99 song at Apple or Amazon are literally pennies as opposed to the old system of several dollars per CD purchased. So, even though more actual music purchase transactions are being rung up in vrtual cash registers the world over, it literally takes hundreds of the new transactions to equal even one physical CD purchase as far as the record labels are concerned. Hence, falling revenues and profits.

The second problem is one that has not been discussed much at all as far as I can tell. If in the aggregate, the consuming public has about as much disposable income today as in 1999 (which is the dawn of the Napster Era), then total music sales should have stayed the same, albeit in higher volumes of $ .99 each. But total music sales have been falling. Hence, “Piracy is killing the music industry.”

But a new study by the Guardian in the UK posits a different theory: downloading isn’t killing the music industry, the gaming industry is.

If we assume that there’s roughly the same amount of discretionary spending available (which, even allowing for the credit bubble, should be roughly true; most of the credit went into houses), then it’s clear who the culprit is: the games industry. By 2009, the amount spent in games and music is almost exactly the same as 1999 (though note that the music industry changed its methods from 2004).

Yes, downloaders aren’t spending money on the music industry, and in that way they are hurting it. But I’d argue that the true volume of “lost” sales is nowhere near the claims made. Assume that music couldn’t be copied (as many games can’t). I don’t think that the volume of music sales would equate to all those downloads. At best, it would be £600m larger.

But the reality is that nowadays, one can choose between a game costing £40 that will last weeks, or a £10 CD with two great tracks and eight dud ones. I think a lot of people are choosing the game – and downloading the two tracks. That’s real discretion in spending. It’s hurting the music industry, sure. But let’s not cloud the argument with false claims about downloads.

Have a good weekend.

His latest project is a collaboration with alternative dalrings, Sparklehorse, and featuredsa Who’s Who of guest artists: The Flaming Lips, Iggy Pop The Shins, and the Pixies’ Frank Black. The album is entitled Dark Night of the Soul,. It ships in a delixue case with a 50 page booklet of photos by filmmaker, David Lynch, of Elephant Man, Blue Velvet, Twin Peaks, and my personal favorite, Wild At Heart.

The record is amazing. It’s not really my cup of tea style-wise. A bit too broody and slow for my taste. I’m mostly an up-tempo kind of guy. Despite that though I can recognize great songwriting and producing when I hear it. And “Dark Night of the Soul” brings the goods.

So here is the technology transformation bit: An as-yet unspecified “contractual dispute” with his label, EMI has led to the label refusing to release the album commercially.

Danger Mouse’s solution? Set up a site where fans can purchase the David Lynch booklet, CD cover and a blank, recordable CD for $50. Then tell fans to go find the music on the Internet any way they can. Hint: Bit Torrent and Pirate Bay.

There are two epigrams that date from the Early Days of the Internet (say, 1998). One is: Information wants to be free. The other is: The Internet treats censorship as damage and routes around it. You don’t hear people talk like that anymore. but that doesn’t mean that those things aren’t true.

The Recording Industry As We Know It™, and its twin sister Commercial Radio™ have about three to five years left to live. As soon as broadband wireless service (e.g. WiFi, 3G/4G cellular, WiMAX) becomes more or less ubiquitous, their customers are going to scatter like a school of fish chased by dolphins.

Why would anyone listen to the latest dreck from Christina Aguilera or to Boston for the billionth time when they could just listen to whatever they wanted streamed from their own music collection, or to a niche Internet based “radio” station that serves up the kind of music they like, or to Internet stations recommended by a friend on Facebook?

The large record labels are becoming increasingly irrelevant to many musicians as their reason for being amounts to a way to ship lots of bit of shiny, silver plastic. But digital downloads are steadily eating the market for CDs. Sales of CD’s have been down for years. Purchased digital downloads are largely replacing them. The problem is, you can’t mark up a digital download 80% like you can a bit of shiny, silver plastic. The margins on downloads are minuscule, like 2 percent. Two percent times several million is still money. It’s just not hot-and-cold running cocaine and hookers kind of money, if you know what I mean.

More and more band make their money on the road, doing the hard work of touring. This fact is seen in the increasingly consolidated ownership of large music venues and the possible merger between the world’s largest ticket broker, TicketMaster and the world’s largest venue and tour management company, Live Nation. Can you say anti-trust?

But, as Danger Mouse shows, there are a million ways to skin a buck from a market in fragments. None of them have anything to do with the Recording Industry As We Know It™.