The Music Industry Crisis Document - 8.1 Edition

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When a crisis occurs, a council of thought leaders is appointed to define the problems, develop a recovery strategy, and carry out a comprehensive action plan for restoration. This document was created for this very purpose with the collective thoughts of thousands of music pros on LinkedIn and various private forums.  The finished project is now a blueprint to begin the reconstruction process.  

With that in mind, let us identify the main problems that have threatened to destroy the vision that was born on the streets of Tin Pan Alley.  Here they are, finally, all in one place and in no particular order. 

1. 360 Deals

Music industry sales are down more than 50% from 1999’s record breaking year. Labels, publishers, managers, and other funding partners have adopted a new model of business for new artists, The 360 Deal.  The model allows for funding partners to extend their revenues into streams that have always been ONLY reserved for the artists (ticket sales & merchandise). This new model is the result of the financial strain caused by the devaluation of music forcing agencies and labels to consolidate and make cuts all across the board.  In the end, 360 deals strain everything and everyone, causing countless problems, yet they are a necessary evil for struggling funding partners.

2. Internet Radio

Internet radio providers cannot sustain growth due to the growing licensing fees for streaming music and the lack of clear revenue models. If revenue models could be clearly defined, additional innovative distribution outlets could provide a new paradigm in radio as a whole.

3. Web 2.0

Social outlets such as facebook, twitter, YouTube, Last.FM, MySpace, Ping, Google+, and other web 2.0 outlets provide easy and personal access to fans, yet the growing number of networks dilutes the overall marketing message and dramatically increases the time spent marketing.  Additionally, the same number of tools have been built to help musicians better reach their fans.  Innovation is grand, but oversaturation leads to confusion.

4. Apple

Apple has been an incredible innovator in the quest for a brighter music industry. We owe them a great debt. For the sake of being thorough however, their unprecedented market share in digital music sales, mixed with their unwavering business models, leave no bargaining room for funding partners (labels, publishers, etc.). Without the ability for competitive trials, growth and innovation in this important industry sector (digital music retail) is stifled.

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5. Physical Music 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 iPads, iPods, satellite radio, and internet radio. It has therefore become increasingly more difficult for music marketers to predict buying 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. Live Music

The recent merger of Live Nation and Ticketmaster has once and for all centralized the live music industry into what could become a monopolizing empire. This kind of power is usually never a good thing, as it limits the market’s growth potential and provides the opportunity to gouge prices due to the simple science of supply and demand. If they account for 90 percent of the live music business revenue, they control the market. We are not pointing fingers yet, but this music juggernaut could prove to be a problem if left unchecked by a lack of competition.

8. Lawsuits

In an attempt to combat the growing number of music pirates, The RIAA proclaimed war on piracy by means of civil suits with individuals who infringed upon copyright laws. Many average American citizens were made an example of with outrageous settlements in an attempt to create the perception of risk for stealing music to change consumer thinking. In the end however, it only generated the image of a “Greedy Recording Industry”.  This perception only furthers the divide and strengthens the pirates’ viral cause.

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9. The Quality of Music

Quality music is lost to the average listener.  An MP3 strips musical data out of a song to reduce the file size to make it more accessible (as compared to the larger, better quality, full format WAV file).  The result is poor audio quality and a desensitized public.  This only furthers our problem with the devaluation of music.

10. The Product of Music

The product of music is no longer a viable revenue stream for musicians or music partners due to the accessibility of free music, both legal and illegal.  The result of this new shift in the value of music is the dissolution of 2/3 of the main revenue streams available to musicians and partners – record sales and publishing residuals (the third major source is tour revenue). New value propositions for buying music must be found to combat this growing problem, as well as the creation of new and innovative sources of income.

11. Media Sharing

Video and audio sharing networks act as a breeding ground for the spread of illegal music and music videos. The illegal networks cut into artists’ and partners’ profits by limiting sales. The legal media sharing networks act as a wonderful way for independent and major artists to receive viral promotion, but also limit sales via free streaming channels.

12. Independent Music

Due to the digitalization of music and the ease of distribution via the Internet, more and more recording artists are moving into the independent music space and forgoing partnerships with music labels and other seasoned music industry partners (publishers, managers, agents, publicists, promoters, etc).  This move allows for the artists to maintain control and keep all the profits.  Though this seems GREAT for the musicians, it limits the ability to enter the national marketplace for the majority of them who do not have deep private pockets backing their careers. The average independent musician is also inexperienced in the ways of music business, resulting in mistakes and oversights when it comes to the execution of plans, common practices, and legal matters.

13. Search Engines & P2P

Search engines offer the ability to find a free copy of ANYTHING via a torrent or p2p client in less than 1 minute.  Without regulations in place to prevent illegal downloading sites from appearing in the search results, stealing music will always be as convenient as buying or streaming.

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14. Piracy & Value

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 consumers’ thought processes.  Though it may appear that the RIAA is doing more harm than good, they have it right. The battleground is in the mind.

15. An Unclear Future

The music industry is 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.

16. Music Education

The arts in schools (band, choir, orchestra, jazz, art, theater) have been cut back, scheduled after school hours, or eliminated entirely due to a weakened economy. The result, if prolonged, will be fewer musicians and music advocates, only furthering the devaluation of music as a whole.

17. Social Awareness

The average citizen is not aware of the current state of the music industry. Copyright law as it pertains to music may be obsolete or it may just need some reformation.  Either way the public needs to be made aware of what is happening in politics (as it concerns copyright), the difference between sharing and stealing, how piracy affects musicians, and so on.  The only ones who know we are in crisis are those who work in the world of music. The message must be championed and taken to the public.

Conclusion

We in the music industry are battling consumer thought. The public opinion has shifted to a place where music simply has no value.  The average Joe feels no fear or remorse for breaking copyright laws.  People buy bottled water, though it is available for free, because there is a value proposition; it is clean, cold, and portable.  We aim to rebuild the value proposition for buying music. At the Restoring Music Foundation, we are not disillusioned by the loftiness of our goal, but rather reconcile with the notion that for every problem there is already a solution.  They say it takes 8% of the public to agree on something new to shift the entire public opinion in a new direction.  We intend to be the catalyst.

Join the conversation: (#restoremusic)

Now that the crisis has been defined, let us no longer talk about the problems; let us instead talk of solutions.

By the Restoring Music Foundation, and based upon a crowdsourced research document titled, "Defining the Music Industry Crisis".  Since the start of the project in 2007, the issues have been discussed in numerous professional music industry circles on LinkedIn (most notably within the well-respected Music and Entertainment Professionals group).  In the end, after thousands of comments and 7 subsequent editions, this article represents the 8th and Semi-Final edition.

To receive updates on future editions and other news as it pertains to the RMF's mission to restore the music industry subscribe to our blog.  Use the comments below to take part in this momentous undertaking by helping us crowdsource the music industry mind for the purpose of sustainability. 

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