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In a move which outraged as much as it surprised, the Recording Industry of America announced today that it would no longer sell music to what it considers to be its least “advertising” customers. This follows closely the release of a Stanford University study on the methods and frequency of word-of-mouth advertising. Some critics of the study question its validity due to a conflict of interest; the Recording Industry of America was one of its sponsors.

The study tracked the buying habits of five thousand Americans in all demographics across the country. What the researchers found was that the most word of mouth advertising was done by a small core group of fans. The majority of consumers created a “word-of-mouth net”, where they would tell two or three friends, who would tell two or three others, and so on. This group comprised 80% of the consumers across all markets—yet it comprised nearly 100% of word-of-mouth advertising. In other words, about 20% of all consumers do not advertise a product by word of mouth. They do not write about their favorite bands in their blog, they do not purchase additional merchandise such as T-shirts, and they do not have a wide social network, meaning that conversations regarding musical preferences almost never arise.

This study follows a series of others over the past fives years revealing a distinct trend in the effectiveness of various types of advertising. As more and more people move from mass communication channels such as radio and television, to individual, personalized channels provided by the internet, blanket advertising over an area has become less and less effective. More effective has been the “buzz” generated by viral marketing. However, the unknown origins and meanings behind viral marketing efforts are often a security concern in the areas where they’re deployed, and most marketing companies have given up entirely due to the hassle and expense of their message being confused as a potential terrorist attack. In turn, this means that more familiar word-of-mouth advertising has moved to the forefront of progressive marketing campaigns.

“Word-of-mouth has always been every marketer’s goal,” said Sydney Lane, President of Milk Toast—the design firm in New York City responsible for Altek Industries’ incredibly successful Green Dot rebranding campaign. “Imagine: getting a customer to pay for the privilege of advertising your product for you. The brand loyalty one can exploit in this situation is nothing short of phenomenal. We’ve been working with the Recording Industry to leverage the success we’ve had in other word-of-mouth advertising ventures.”

The president of the Recording Industry’s Protection of Finances Department, Arthur Pendergrass, explained how data mining has aided the effort. “For the past ten years, we have collected data about every person who has purchased any album or merchandise from any of our artists or partners. Each customer is assigned a unique ID number which tracks their purchases across the country.

“Over time, we’ve built up a comprehensive picture of who buys what—and by using advanced data mining algorithms, we’ve been able to measure, with 95% accuracy, which of these customers are generating subsequent sales to other customers. But what we’ve also noticed—and this has been confirmed by the Stanford University study—is that a measurable segment of the population generates no additional sales at all, and very often purchases no additional merchandise aside from the album itself.”

Traditionally, this group has been ignored by marketers altogether. Mr. Lane says, “although they may fall within a particular target market demographic, they are not necessarily desirable customers. Very often these ‘low volume’ customers not only don’t spread positive advertising via word-of-mouth, but they will go out of their way to complain when a product or service is bad. From a net profit standpoint, they cost money.”

While the Recording Industry of America is widely considered to have public relations difficulties, they have demonstrated over the years that the protection of monetary compensations for their works is their first priority. This led directly to the creation of the Protection of Finances Department.

“With the recent legislation restricting [viral] marketing, we’ve been looking for other options,” said the CEO of the Recording Industry of America, Roger Bellini. “Our strongest marketing option right now is word-of-mouth advertising. We have made a simple business decision: if you are not the type of person to tell all your friends about the music you buy, you are not the type of person we are interested in selling our music to.”

Arthur Pendergrass elaborated, saying, “There is a definite monetary figure that can now be attached to word-of-mouth advertising. It no longer makes economic sense to sell music to those who refuse to leverage this.”

The criticism to this decision has been swift and strong. Gary Stella, editor of the online music publication hEAR Magazine, said, “It’s bad enough the Recording Industry sues dead people—but to refuse to sell music to someone because that individual is not profitable? If you’re not making money selling music, then raise the price of the music. Well, they can’t do that; that’s what caused the explosion of music piracy in the first place.”

“As an artist, I want to sell music to everyone who wants it,” says Andy Slate, lead vocalist for the acoustic group Black and Tan. “It doesn’t matter who they are. What the label is saying is that they don’t make enough off this guy. But what really pisses me off is that I no longer get to choose who can buy my music. The label does for me.”

Gary Stella goes on to express the difficulty of acquiring music when it can’t be purchased. “What can a person do? Have someone else buy it and give it to them? The Recording Industry is trying to make giving music as a gift illegal, too. If they’re not buying by proxy, they download it. If you can’t get music legally, you’ll get it illegally.”

Regarding the legality of not purchasing music, Pendergrass is on record as stating: “Our customer database gives us greater control over the distribution of music than we have had for many years. For example, if someone who we have decided not to sell music to is walking around with an iPod, they’re breaking the law. Simple as that. How can they be listening to music on a player if we refuse to sell it to them? How did they get it? They got it illegally.

“We are providing our customer database to law enforcement around the country, encouraging them to cross-reference it with those they pull over for traffic violations. It is now possible to arrest people on the street for stealing music; no longer can they hide behind the anonymity of the internet. We are able to provide more monetary protection than ever,” Pendergrass said. Then he added, “For our artists.”

When asked about the plethora of artists that were now releasing their music online to be downloaded for free, Pendergrass declined to comment.

“I don’t know how long they expect to be able to get away with it,” said Stella. “People aren’t going to stop listening to music just because they can’t buy it. The Recording Industry is fighting for so much control over the entire distribution chain, they’d probably beam music directly into people’s heads and bypass media altogether, if they could just figure out a way to do it.”

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