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​Zelnick: Drop coin in music biz Ex-BMG chief sees growth in industry, urges investment

The Hollywood Reporter, 03.07.03
Georg Szalai

NEW YORK -- Strauss Zelnick, CEO of ZelnickMedia and former CEO of Bertelsmann AG's BMG Entertainment, on Thursday called on investors wary of the music industry, saying it was "a good time" to invest in the sector.

Speaking at the second annual Billboard Music & Money Symposium, Zelnick said he expects the industry to overcome challenges like online piracy in the coming years and find ways to use new technologies as a new growth driver of the business.

History has shown that "new media always disrupt the business initially but then help it boom," Zelnick said.

Zelnick called for a broad attack on piracy through legislation, standardized encryption, the offering of alternative forms to access music and better enforcement. "Enforcement has been sloppy at best," he said.

Zelnick shrugged off concerns that the arrest and prosecution of young online pirates may hurt the music labels' public standing. "We must just pick good cases for prosecution," he said, suggesting that the public wouldn't feel for a student who makes a side business out of burning and selling CDs.

Zelnick also called for the development of music services that allow for downloads that are affordable and make economic sense for music companies.

He predicted that the CD would continue to lose in importance and that the industry would sooner or later develop a new format of music delivery that is "nonspinning, chip-based" and comes in packaged form like a CD.

The executive also warned that consumers cannot be won over by price cuts but only by compelling products.

Addressing industry speculation about the next round of consolidation, Zelnick said he expects at least one of the five major label groups to "disappear" via a sale or merger down the line, but he wouldn't predict which one.