By Bill Densmore
Clickshare Founder
Here's a very short tale of two industries -- record labels and newspapers. They could hardly have taken more different approaches to the Internet. But they should consider jamming together.

Let's start with the newspaper industry. When the World Wide Web flashed to prominence in 1995, the news industry quickly embraced it. The embrace was, in a sense, overpowering. Quick to fret about the threat of Microsoft's "Sidewalk" local entertainment sites, the industry jumped headlong into a rush to shovel the contents of its newspapers onto free websites.

Microsoft quickly realized that even if it had the bank balance, it didn't have the competence or the patience to dominate local information. But it was too late -- America's newspapers had already decided that "protecting the franchise" meant giving it away.

The result -- news has become more of a commodity than it ever was. And the newspaper industry, seven years later, is trying to understand why in the world it was so quick to devalue and give away its core product. Now, many publishers are saying to online folks: "Where's the beef?" And they are troubled by the answers they are getting.

Flash to the recording industry. What a contrast! The five major record labels have had to be dragged kicking and screaming to the online world. For years, they resisted putting music online -- until Napster forced them to go on the legal offensive. Now, the labels are reluctantly fiddling with pay-per-song downloads and subscription services. Estimates are that as few as 100,000 users are actually subscribers. Meanwhile, their inventory has flown the coop -- millions of MP3 files of copyrighted songs are floating about the Internet.

Were it not for the fact that music CD sales are dropping -- down 7% or more in the last year -- the labels might stonewall the digital downloading phenomenon with a combination of court battles, vigorous lobbying for protectionist legislation that aims to take away an individual's right to make copies for personal use, and token reductions in CD prices.

The news industry, faced with looters, just gave away the store. In contrast, the music industry came after the looters with a tire iron -- so the looters just figured out how to make and swap the product themselves.

Why did these two industries take such different approaches? This might be a good question for antitrust investigators. But the contrast is stark. More important, what do they do next?

Both industries have got to stop thinking about "product" and start thinking about "service." What the news industry delivers is not a newspaper, its an information service. And what the music labels are selling is not CDs, but the appreciation and sharing of music and artistry. As polar opposite they were, neither industry's approach has worked, because neither industry has made the switch to thinking about service, rather than product.

The irony of the situation -- and the important change in perception which has to occur -- is evident in the shorthand we use for each industry. We speak of "record labels" and "newspaper chains." But these companies are actually music licensing and promotion services -- and local information providers. If nothing else, these industries need new names for themselves.

The PressPlay, MusicLink and Listen.COM subscription services are a start in music.

And there is promising evidence that the news industry -- let's not call it the news-"paper" industry any more -- is learning how to segment and customize products and sell them in new packages. These packages serve special needs of target customer niches.

The Minneapolis Star Tribune's PurplePlus website is a good example of taking a vertical niche -- intensive coverage of the NFL Minnesota Vikings -- and selling it by subscription to die-hard Vikings fans. Several newspapers -- Boston, Washington, D.C., Topeka, Kansas, to name a few -- are building deep local music-sharing sub-sites.

So while they arrived at their current Internet strategies from opposite poles, the two industries have something in common. Each is in desperate need of new audiences.

The U.S. news industry wrings hands at every conference over how to attract more 18-34-year-old consumers to the news-reading habit. Penetration among young readers keeps dropping. Where will future customers come from, the industry asks?

Meanwhile, the music industry has a different problem. For years, it has profited by converting the music collections of teen-age and young-adult consumers, first from vinyl to cassette and then to CDs. These are the core music buyers. The rest of us -- those over about age 35 -- listen to music all the time on radio, in stores, with our children. But we don't buy it. A British research firm's comprehensive study portrays the changes sweeping music.

Thus, the news industry is desperate for younger customers; the music industry needs older listeners to be buyers. Can these two industries make music together? Consider: