Defining The Music Industry Crisis - 4th 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.