More on why vinyl survives

Following up on my post of last month about the survival and revival of vinyl records, I stumbled across a neat story and quote supporting my argument that the winners from this (apart from the fans) would be “those who have persisted with pressing plants, artwork services etc [and] are now reaping the rewards of their persistence and rare capabilities.”

Über- trendy Monocle magazine has a report in their most recent issue (Dec 09, Jan 10) on London’s The Vinyl Factory (TVF).  It turns out a couple of clever chaps picked EMI’s old vinyl press and associated staff for peanuts back in 2001 and have turned it into a powerhouse of fantastically packaged and produced records from artists like Massive Attack, Pet Shop Boys and Timbaland.

Here’s some neat footage of how they make them (it’s always good to feed the consumer fetish with some production porn):

I love this quote from the article (first it’s TVF’s creative director Sean Bidder speaking, then the magazine):

“”Music fans might get 95 per cent of their music for free, but this means they are even more careful with how they invest that 5 percent,” says Bidder.  Although “breadth for free” may seem to be the future for much of the media, depth is always going to be valuable, and companies like TVF produce experiences worth paying for.”

I couldn’t have put it better myself.

And in looking for a pic to illustrate this story I discovered there is an Aussie subsidiary/version of this outfit (see here for a 2007 news story).  Finally, a pay-off from the protectionism that pretty much forced local manufacturing upon multinationals in Australia up until the 1970s  – a factory that could be resuscitated.

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Will the WTO have any teeth on the downside?

The World Trade Organisation (WTO) has justifiably received much criticism in recent years for its failure to push through the next round of trade liberalisation. Instead bilateral and regional agreements tend to have been the domain for reductions in trade barriers.

It is a fascinating turn of events therefore to see the WTO emerge as the forum attempting to stem the rising tide of protectionism. There are genuine fears that the current rash of stimulus policies also represent retrograde steps that will reintroduce national preference, higher tariffs, quotes and the like.

Technically the various rules within the various WTO-monitored treaties should act to prevent such behaviours. Unfortunately the WTO’s enforcement measures often are trade-restricting themselves (such as right for a nation to impose countervailing duties on offending nations), and the body is often slow to investigate and act.

This is a not a minor issue in the international business arena. Much multinational expansion is predicated on reasonably free movement of their goods. If this cannot be retained we will be seeing a much more traumatic crisis than that currently being tackled at the national level. The WTO’s moves warrant very close attention. A return to some winning form is strongly needed.

How will multinationals protect themselves?

There is a growing realisation across the business press that the Global Economic Crisis is transforming the international trade environment to one that is much more protectionist than we’ve seen in recent decades.

The general push for freer trade has been a strong driver of globalisation since the mid-1970s at least. Tariffs have tumbled along with other barriers to trade and investment. Through the GATT and WTO, and a huge swathe of other multilateral and bilateral trade agreements, goods and services have been easier to move around than ever before (particularly once we factor in lower transport costs).

While the US in not alone in imposing some trade-restricting provisions within their proposed stimulus packages, they certainly have the biggest flow-on effects in terms of triggering likely tit-for-tat responses from other governments.

The bailouts and nationalisations were seeing around the world in banking and auto sectors are conceivably just the tip of the iceberg in terms of measures that would certainly be seen as subsidies under any sensible definition. They are trade-distorting and trade-preventative in terms of impact.

As the IMF is already reporting a huge decline in international trade over the past three months, and the World Bank is forecasting more declines.

The question that is too often ignored in these discussions is what likely impact this will have on the behaviour of multinational firms. It perhaps shouldn’t surprise given the complexity of their choice sets.

Much of the protection push revolves around shielding industry and jobs in domestic economies. A sizable chunk of the firms being protected and subsidised are themselves firms who trade goods across borders, both as exports and also via imports of inputs, intermediate goods (and sometimes final goods).

Increased protection at home may shift the balance back towards domestic activity. Any advantage in international markets derived from subsidies may be undone by retaliatory responses from other national governments (lobbied by their own local players). Any rises in tariffs and other trade barriers may serve to untangle existing value chain configurations as multinationals abandon internationally distributed production processes as too costly, unwieldy and/or unpredictable.

For so long the movement of productive activities around the globe was derided as a race to the bottom. What will we call a retreat to home base?

And what about those multinationals for whom home is but a small portion of their global markets? Are they part of the protection plan of other nations? That would certainly seem to be the case in Australia.