Wednesday, April 14, 2010 at 10:33PM Defining The Music Industry Crisis - 4th Edition
THIS ARTICLE IS OUTDATED, SEE NEW EDITION.
“To every problem there is already
a solution whether you know it or not.” -Grenville Kleiser
In politics, when a crisis occurs a council is appointed to define the problems. A document is then outlined, written, and continuously amended. It is only after everyone agrees on the problems that solutions can be developed and implemented.
With that in mind, this document is meant to identify the main problems that have threatened to destroy the vision that was born on the streets of Tin Pan Alley. The following list is in no particular order but rather listed for the sake of finally getting them all in one place. I urge readers to use the comment board following the article to get involved in the process.
1. Internet Radio
Internet radio providers can not sustain growth due to the growing licensing fees for streaming music and a lack of clear revenue models. New distribution outlets could provide a new paradigm in radio as a whole if revenue models could be clearly defined.
2. 360 Deals
Music industry sales are down more than 50% from 1999's record breaking year. Labels and other funding partners have adopted a new model of business, The 360 Deal. The result is less money for growth and less focus for individual partners. One partner does the job of 5 partners, many of which only have experience in one of the five fields. In the end 360 deals strain everything and everyone causing countless problems yet they are a necessary evil for struggling funding partners.
3. Web 2.0
Social networks and other web 2.0 outlets provide easy and personal access to fans yet the growing number of music networks dilutes the overall message and dramatically increases the time spent marketing.
4. Apple
Apple has been an incredible innovator in the quest to a brighter music industry. We owe them a great debt. However, their unprecedented high market share in digital music sales mixed with their unwavering business models leave no bargaining room for funding partners (labels, publishers, etc..). Growth and innovation in this important industry sector (digital music retail) is therefore stifled without the ability for competitive trials. In addition, Apple's 30% take on each track sold leaves little for artists and songwriters.
5. Physical Sales
Physical Retail stores have lost the ability to turn a profit unless attached to a one stop business model (i.e Walmart, Hastings, Best Buy, etc.). As a result the true music pushers, independent music retail stores, are almost extinct.
6. Traditional Radio
Traditional radio, though still an important promotional front, has lost much of its glory to the on demand world of iPods, satellite radio, and Internet radio. It has therefore become increasingly more difficult to predict market trends without a standard radio format to follow. The result is a much higher risk/return ratio for funding partners (Labels, Publishers, etc..), which in turn limits the number of acts that ever see a major market entry.
7. Lawsuits
The RIAA in an attempt to combat the growing number of music pirates, proclaimed war on piracy by means of civil suits with individual copyright infringers. Many average American citizens were made an example of with outrageous and bizarre settlements. The music industries' minds were in the right place. They had intended to create the perception of risk for stealing music and in turn, change consumer thinking. In the end however, it only generated the image of a "Greedy Recording Industry". This wall between the consumer and the industry has instead furthered the cause for this viral pirating trend.
8. Media Sharing
Video and audio sharing networks act as a breeding ground for the spread of illegal music in the form of audio and videos. These new networks cut into the profits of funding partners (labels, publishers, etc.) yet act as a wonderful way for independent artists and major artists alike to receive viral promotion. In addition, simple mathematics states that all of the illegal media sharing portals can not be shut down. Lawsuits cost money, and the recording industry doesn't have much. Instead, the industry goes after the major outlets one at a time. But for every 1 that is shut down, 7 more are built in its place. Let us just say that this fire is out of control.
9. Piracy & Consumer Value
Let us not forget that stealing music is still more convenient to the average consumer than buying music. In addition, the only way to fully shut down music piracy would be to turn on "Big Brother" and violate very important privacy privileges. Therefore, it can never truly be stopped as long as we live in a democratic society. The solution must lie in the consumer's thought process. Though it may appear that the RIAA is doing more harm then good, they have it right. The battle ground is in the mind.
10. An Unclear Future
The music industries, both production and business, are now intimately and infinitely tied to digital and to the Internet. The systems that govern digital music across the web are not yet fully realized by the core of the music industry. A clear vision for the future of these newlyweds (music and Internet), has not yet been defined. The marriage is still rocky and working out its kinks. Without a clear understanding of this it is hard for any organization in music to effectively plan for the future.
Reader Comments (12)
Life events are not in crisis, in my experience the good side of the music piracy" have help the viral impact in the music business in a world wide market, however the city policies in some states (US) have been making very difficult for promoter to invest in upcoming and developing acts, because concerts are becoming so expensive that is not worth it to do show for new artists or bands.
I believe that the golden years in the music business are long gone, which means a label executive sitting in an office investing a lot of money in radio and making millions, it's not coming back, It's not going to happen, so the industry need to realize that the new business model must have more sources of income and understanding that the with prices going so low or free the income for artist will be lower that is used to be. Of course at the end just a few artists will make the big money.
In my opinion the key looking forward in the music business is including the fans in the making money process. I have been working in a model and I believe with the evolution of technology we will be ready son to offer a new business model very soon.
I find it incredible that none of the above 10 points address a vital issue: quality. The industry has no one but itself to blame. First, it foisted CDs upon the public and charged an outrageous price for them and CD players. Then, in its rush to cash in, it produced a thousands of CDs with a single decent song on it. People were tired of paying $18 to $25 for rubbish. It was one thing to turn a $5.99 vinyl album into a frisbee, but quite another to shell out $25 for crap. And as for Apple not leaving enough for artists, how much of that $25 CD went to the artist?
And yes, Live Music is also in crises. Nobody, outside the top acts, can make any money playing live. All I see in the music biz is the recording and live venue industries trying to find news ways to gouge consumers and to keep as much of the money as possible. I ope they can all play instruments, because the way things are going, there won't be professional musicians much longer.
I have 2 subjects to point out off the top of my head: 1) resolution quality 2) product value
1) RESOLUTION: Before the internet and this whole digital age we now live in where anyone can get anything they want for free off the internet and our whole worlds are dominated by computers, people used to share music by taping records and CDs. That didn't destroy sales because people actually cared about the quality - cassette recording just weren't as good. Plus you didn't get the actual product, the art, etc. So what's the dif. now? For some reason people are willing to just download mp3s - sometimes at low bitrates. WAY lower quality than the tapes I would make off the radio back in the day. But so why is the general public willing to put up with the bad quality of an mp3, rather than paying to legitimately own the product?
2) PRODUCT VALUE: It used to be that the only people who made professional music were professional artists. (This is a dicy subject because art is subjective). Your regular hobbyist didn't have access to the equipment and skills required to produce a real album. So there was a natural filter - for the most part, the bands or artists with less talent weren't granted access into the industry. Now, the changes in the way recording is done and the whole digital realm have made it possible for most people to create, produce and make their music available to the world on the internet. So the market is saturated. Simple economics then. When supply is down, demand (or more pertinently in this case, VALUE) goes up. When supply is UP - value goes down. Music as a product is unfortunately not as valuable anymore. That's the sad truth, but we all have to face it.
If however the industry can start selling something that can't be made by just anyone, something that requires the resources only the industry has access to, and is worth buying - then people will buy it.
I mean think about it. How many men out there go to the barber for a shave? Now that people can buy razors at the store, they just do it themselves, making the service obsolete. Same thing with milkmen. Or for that matter - speaking of Tin Pan Alley - sheet music. Who buys that anymore? The whole reason that business did well when it did was because that was the only form of recorded music at the time. Until records came along.
How long has the music industry been trying to sell the 3 - 5 minute song? Why is that still the standard? Can't we some up with something new? Mozart and Beethoven didn't write 3 - 5 minute songs.
As for live music - how long have we watched 4 or 5 guys playing their instruments on stage? 50 years?
The problem with the music industry is this: we are trying to sell a product that has lost its value in the marketplace.
i've seen some good comments already that I was thinking about but here are a few.
1. Music does not hold the sacred place it once did in our hearts and minds because now there's way too much of it with absolutely no filters, and technology has given us too many choices of media all competing for our time. That coupled with the fact that in addition to the many independent artists online, some of which who are really great, you also have a plethora of folks with basically little or no knowledge or skill at music. ( I know this is so subjective but please be real before you get upset) Yet they have at their disposal the tools to write and record a song today and get it on the internet tonight and blog about to their followers. People forget that The Beatles wrote some 200 songs and discarded them before the world ever heard "Please, Please Me" or "Love Me Do" It was called honing your craft. But now Mary in Iowa writes three chords and records her first song ever and the world is supposed to jump up and down and cheer for her. Then, take that act times many millions of newcomers each day uploading new music and building new websites and you get an idea why it's so hard to find something you like. Once upon a time, you had to be really good at your craft to get the attention of the industry. Then you had to be a really good performer too because the next act coming through town the following night was also great. But you also had outlets that actually paid you good money such that you could make a good living at it. So quality artists had a real percieved value to their fans who appreciated their efforts and were happy to pay them for their efforts, whether in record sales or in concert ticket purchases, so that they could continue.
2. The part about Apple being unfair taking 30%??? Please, what did you make as a new artist on a major label? 9 to 12 cents on the dollar if you were lucky and then you had to split that with the band! (and that was only if the record company recouped, which of course they rarely ever did)
3. My prediction is that the next musical artist of any significance will not come out of this primordial ooze that is the current online music scene; not from Twitter or Facebook or Linked In followers. They will come out of a place of scarcity. You won't be able to easily find them in the usual places but you will hear all about them the old fashioned way, through word of mouth. They will be fiercely original, extremely good and will present their new version of music as an art form in such a way that you cannot get it on your iPhone App or iTunes or iAnything. You'll have to go see them and you will be blown away by the "human" experience of it. And then you'll want to go back for more and you'll pay dearly to do that and you'll tell your friends that they must see this act too. And maybe then and only then, when this new pied piper comes along, people may one day realize the value and importance of music again and artists may once again get paid for the quality of their work. And when that new artist goes walking along this new path that was not there before they forged it, I assure you the new music industry will be right behind them throwing money because that's what they've always done. Maybe this time around, they'll get it right and create a more fair system by which art can again prosper and the public benefits.
i believe one of the most significant issues caused by the digital music revolution and Web 2.0 artist to consumer channels is the rapid decline of the "well funded indie" ; that breed of maverick , entrepreneurial label that sourced and nurtured talent outside of the major label system over a number of releases , often resulting in their artists and indeed the label itself being fully funded by the majors at the point of crossover for the artist . The list of artists and labels is too long to go into !
As a result of the declining revenues caused by the switch from physical to digital sales (and mass piracy AND single purchases over album purchases) Indie labels struggle to exist as they cannot generate enough revenue to fund signings and promotion ; Majors are signing fewer and fewer artists and taking less risks and Individual artists do not have the bandwidth or the "industry "connections at promo and retail to cut through the mass online noise
it's a big big problem because without the new breed of Alan McGees etc' taking longterm risks over Jesus and Mary Chain etc we don't get Oasis......
It is interesting how the Beatles music does not fade...I believe it is because Artist and craftsman/women are becoming extinct,, no more Shoppe class or music class offered in schools with fewer places to perform,, there was a time if you were just a half ass musician you were able to still make a living and never have to leave the island of Manhattan.
If in fact music is going to survive then the concept of Knowledge work that has been exploited all over schools and society for the last 40 years needs to be reconsidered .Manual work is looked down upon and being a musician is in fact that manual work...The internet will not save music nor is it to blame for the down fall of our legacy. To many of us are song writers before we are artists the Beatles worked long hours 7 days a week to master their craft playing strip joints long before "Love me do" was recorded . Let's all find a way to bring back the joy of work and creation as the first sheet the money and fame will come only after that,, this is how it was done in the good old days...
The gigs are out there the money is out there, where the true craftsman is you’ll find quality , work with your hands spend the time honing and refining every single day.
Intrinsic richness comes first after that you will have your fame .
You still can’t hammer a nail with the internet .
We don't owe Apple anything. They saw the obvious gap left by the ineptitude of the music industry and filled it. It wasn't rocket science. The film industry will go the same way with Cisco if they don't watch out.
What should any industry do when they lose control of the pricing of their products? Take control back again by creating new value-added products - and don't let Apple near them.
IT companies have no idea how to entertain people. This is the entertainment industry. Get out there and start producing new products that excite and entertain and stop gazing at your navel.
As well as being for entertainment, music is also an INDUSTRY. The internet has been around for 20 years, and industries know how to make money using the internet. You create products that are built for e-commerce and sell them. Where was the music industry's R&D spend during the good times? You have to invest in the future.
I'm a grumpy old man, but I remember when music was exciting. I remember when going to concerts changed your life. I can't remember when I was last entertained by a live band. Where is the show business? (Other than in stadium performances, that are lavishly created to entertain, but lack any real contact with an audience). Wandering on stage with the audience wondering if they are looking at a STAR or guitar tech (tech is probably better dressed) and running through a set without regard to the audience is NOT entertaining. Having the volume as loud as possible, just below the feedback level with mixing set to produce record style stereo spread that bears no relation to the position of the artist on the stage - is NOT entertaining. If a guitarist is on the left, I want to hear the sound coming from the left. (This was a recent example of a world-class band - totally let down by the sound engineer)
Ifyou can't make money from selling recordings, then stop looking at radio as an advertisement - you have nothing to sell, because it is available for free. Radio is a business whic also has to be entertaining, and pay for its content. If it fails to entertain the public and the advertisers that fund it, it should fail.
The world will always need inspiring music. Good songs will still make money. Entertaining bands will still be successfull. So go out and entertain the public, and if you find the public aren't interested make way for the next person...don't blame the technology.
I agree that the major labels are partly to blame – with mass consumerism at all costs, quality or artisanship suffers. In the marketing of goods, services or music in our "throwaway" society, part of the problem with our flat economy stems from pure greed and lack of accountability where profit reigns supreme.
In part, education will provide the impetus for change – in awareness and understanding moving forward to create a new vision with collaboration of fresh ideas, an evolving business model and perhaps finally a change of perception of value…for artists, producers and consumers.
Artists of all mediums need to learn more about business. The creative class will be key to future economic growth!
I think that the seismic shifts experienced by the music labels since their peak year in 1999 is a great thing for musicians as a community, though clearly a disaster for the established music industry. I think that music has always been much more eclectic than we knew, but pre-internet and particularly since the emergence of social networks discovery of new music was controlled by a few gatekeepers: radio, MTV, retail chains, etc., led us to the belief that we all liked only a few mega stars, (who ultimately sod 10s of millions of albums).
Once it became simple to share music digitally, music lovers turned to friends whose musical tastes they respected rather than the increasingly "marketed" artists promoted by "the industry". Now there are many more acts who get found since they don't have to squeeze through the gatekeepers at the labels. The costs of creating and distributing music has declined dramatically, and there are more democratic ways of getting your music to consumers. (This is not to trivialize the challenge of getting your music found in any way, but technology has certainly provided new and powerful tools to help such as myspace, Pandora, etc.)
I think that while the day of the mega-acts has gone--artists who dominate the world, (eg. Michael Jackson, Madonna, U2, etc.), who basically owned recorded music when there were fewer ways to discover new artists, there will now be a greater opportunity for more artists to have careers as musicians, but at a more modest level of success. I think that's a good thing for musicians and artists in general
Chris,
Thanks for creating this, lots of good points in there. I wonder if we can consider Apple a "problem" just because they are a technology business doing what technology businesses do - advancing. The problem is that the music industry handed over their business to technology. I hope someone in the music industry figures out that they are IN the technology business. When's the last time you heard the headline, "Universal Music Group Hires ex CTO from google to handle their online strategy?" You don't hear these headlines because it never happens. The Music companies have the same guys in charge who have been running the music biz for 30 years and until they die off or retire, I don't see any sea change coming.
You touch on another point that I find very interesting, but it's not the "problem" as you define it. That is the death of the independent record store. IMO, new, good, groundbreaking music starts in the underground and bubbles up to the mainstream. Some of the healthiest music genres that are self-sustaining are those with a healthy underground where young artists have a platform and can make SOME money doing what they love. When we created Beatport, this was our goal in dance music, to create a healthy underground platform where the independent labels could thrive and new artists would spring up all the time in this genre. On the other end of the spectrum, look at Hip Hop. No underground at all, your either a pop star, or nobody and nothing inbetween - and people wonder why this genre is going through such a bland period. Hip Hop needs a healthy underground feeding it new artists and sounds.
** So, back to my premise regarding independent retail stores. The Indie stores may not have driven the volume sales that Majors were looking for, but they represented a place where people could gather, discuss, listen and enjoy new music in every major city across the nation. Where does that place exist now? Blogs? The internet is supposed to be this cultural phenomenon where people are able to find other like-minded individuals (Hyper-local right?) and share tastes and sounds - but this hasn't reallly happened in a meaningful way that would support the industry. Indie retail shops are one perfect example. I feel like there should be at least 1/2 as many indie retail shops online as their existed in the physical model based on demand, but that hasn't materialized. Why? IMO, the barrier to entry for these shops is just too high.
** When my friends and I opened a record store in 1996, we did it for about $15,000.00. We rented a place, called some distributors, created a brand, some limited marketing and opened the doors. We had Dance, Hip Hop, a little indie rock stuff, whatever content we thought was applicable to our market segment. What would it cost to do the same thing online today? In my recent estimates, somewhere between 2-3 million dollars. You know where most of that money goes?
*Advances to major labels to get their content.
*Publisher payouts on a per-download basis.
*Data Storage (see, you can't just take PART of a Major label catalog, you have to take ALL of it, which is a massive storage/ IT issue - = Many many terabytes of storage)
When we opened our record store in 1996, these weren't our issues.
What's the solution? If the music industry wants to compete with Itunes and Amazon, it should strive to create and support a competitive online retail environment.
The reason I'm not buying or looking for any new music is because the big-time labels have spread themselves too thin, resulting in not spending time evaluating the true talent of artists on their labels. Some of these people have zero musical abilities and only a pretty face or edgy marketing package. That makes the entire label look bad when consumers listen to the product and realize, hey- - that one track that they've been playing? That is the only track on the entire disc that I can get into. The rest is total garbage. But the music label exec heard the one song and signed the artist.
Next thing that has totally destroyed the music industry for today's generation is the degradation of MTV. I watched over a period of a few years how MTV transitioned. It is no longer music television. It is pre-teen reality based television that is heavily influenced by rap and hiphop. Great if you like rap & hip-hop, but bad if you are an adult that is interested in learning about the latest punk or metal virtuoso act.
For the past few years, I've been enjoying my old CDs. No new acts that are worth listening to. Until a friend of mine tells me, "Hey, you've gotta hear these guys", I'm content with the music that I already have in my library.
The situation in the live music scene is definitely dire. So much so that we have organized musicians in Portland, OR in a Fair Trade Music campaign. The common practice here is for the venue to keep the ticket revenue to cover fees which are completely arbitrary and determined on a per venue basis, leaving the musicians with whatever is left. Some are determined on a percentage of sales and others are to cover the wages of their employees. One venue told us that their employees deserved set wages the same as their landlord while musicians don't. At times it seems as if the venues view themselves as service provider to the musicians and not vice versa. Some of the places exist solely on selling alcohol to concert goers while placing the responsibility of promotion solely on the musicians. They don't have their own customers. We've termed it the "Leech off the Band" model. To reference the larger economy and it's state, corporate accountability is becoming a more and more relevant topic in society. It becomes especially important when the place you go to buy a few drinks and watch your neighbor play music is screwing them out of the money you pay to see them. Music hasn't been devalued so much as it's been swindled. Our goal is one of recognition and support for venues that are engaging in fair business deals with musicians. I'd love to talk more about the state of live music. Feel free to email or use the contact form at www.fairtrademusicpdx.org
Cheers,
Graham