Channel Champion Blog

Why couldn’t the record industry see the writing on the wall?

shutterstock_178243253While attending Baptie’s Channel Focus North America event in Miami earlier this summer, it struck me that the tech space is going through what the record industry went through with digital music in the early 2000s. I saw it in the way attendees talked about the cloud. Every other minute, it seemed, the word cloud came out of somebody’s mouth; “cloud angst” was everywhere.

Music Sharing — What a Concept!

This deja vue point of reference is based on my experience at a music company I helped build in the early 2000s called Ecast Inc. Our premise was that if we could use the growing Internet to deliver music to places like bars, taverns, or restaurants, people in these out-of-home markets would be able to listen to millions of songs, versus limited jukebox selections.

We figured that we could offer the service by building a broadband out-of-home network that could deliver content through digital downloading jukeboxes and, most importantly, deliver advertising. We could work with Internet service providers to build the network itself. But to populate the service, we would need to work with the companies who owned the music—the record labels. It is how these labels dealt with the rise of on-demand music that got me thinking about how channel companies are responding to the cloud.

Moving Beyond a Failed Model

Back in the 90s (and for the decades before), the record labels owned the rights to most of the music people listened to and gave people access to it when and how they pleased. The musicians created and recorded the songs; the labels owned the music. The labels got rich, while most musicians—not so much. Ultimately, due to blinding greed, this model was destined to fail.

Our pitch to the labels was that by licensing their songs to Ecast, they could get more music out to more people, which would increase demand and make them even more money. But the record companies were stuck in time. They didn’t see how they could monetize this kind of music sharing, and didn’t trust the financial model we presented to them. They didn’t understand that we in the digital world were there to promote their success. After all their years in business, they still didn’t understand that if consumers weren’t exposed to new music, they were never going to buy it. Stricken by fear of change, the record industry failed to quickly adapt—a mistake today’s channel professionals cannot afford to make.

The record industry failed to quickly adapt—a mistake today’s channel cannot afford to make. Click To Tweet

Companies that sell through channels need to learn—and in many cases help their partners learn—to embrace change, because change is coming whether we like it or not. Or rather, change is here. Just like providing on-demand music has proven to be a good model for companies that have embraced it, so will embracing the cloud benefit tech companies. Why? Because this model works for the ultimate consumer. Consumer demand was something the record companies tried to resist. You can’t. Instead, you need to figure out how to make it as easy as possible for consumers (whether they be individuals or enterprises) to buy.

Is the Sky Falling for Partners and Vendors? That Depends on Your Definition of the Sky.

I know tech partners that sold their managed services companies five years ago because they were scared to death that the cloud was going to kill their business. However, today one of the biggest draws for The Channel Company events continues to be “how to become a successful managed service provider.” So technically the sky is still there, however the depth of blue may have diminished. And the length of day is heading towards an Alaskan mid-December rendition.

For now there continues to be growth in the traditional market. Recently, a representative from a very large global distributor gave a presentation at Baptie Channel Focus in which he said that, while he understood that the role of the cloud would continue to grow into the foreseeable future, was there is a ton of growth in the non-cloud space, too. As he was outlining the numbers, people were nodding their heads in agreement. However, I overheard a person close by whisper, “I get this, but we need to make sure that we are still covering our rear-ends on the cloud.” They are right; eventually many of the non-cloud partners will be “the walking dead.”

Take Advantage of the Moment

Whether you are talking about fear of change or belief in the status quo, one thing that has helped vendors and partners survive has been the more-gradual-than-forecasted adoption of cloud services. This has given many companies the time they need to figure out how to make the transition. But that time is running out. Many believe we are reaching the tipping point where those who have not moved across the chasm are already stuck. The move from non-cloud to cloud has not been a binary switch. But that time approaches. Those companies that understand the need to switch to the cloud need to make the leap right now or they will not make it across.

In my next post on this topic, I’ll discuss how those that get there will need to embrace digital marketing or they will not survive the second divide:  the chasm between the marketing haves and the marketing have-nots.



Steven Kellam, SVP of Sales and Marketing at CCI

Steven Kellam PictureAs a growth specialist, Steven is responsible for CCI’s sales and marketing strategy and vision for today’s goals and objectives as well as positioning the organization for continued, long-term success. Steven has experience in both the VAR space, having run a successful Managed Services IT business, and  a background in Manufacturing where he built a channel of over 2,000 partners.