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Media Research Exec Says Music Industry Is On Its Last Legs
Ponca City, We Love You writes "For years, the major record labels have fought a pitched battle against the MP3 format. Although major labels like EMI and the Universal Music Group have embraced MP3s in recent months, a story from the Mercury News says early returns from those moves indicate they've had little impact on the industry's fortunes — for better or for worse. 'These are ailing businesses on their last legs,' said Eric Garland, chief executive of BigChampagne, a market research company focused on digital media. The question of copy protection on song downloads 'matters a whole lot less to them than it once did.' The industry has a bigger problem. Consumers used to buy CDs for $10 or $15 a pop. Increasingly, they're buying songs at about $1 apiece instead. So, even if transactions continue to increase, the industry is seeing far less money each time consumers buy and it's having a difficult time making up the difference."
So long Music Industry, and thanks for all the Phish!
They need to do a better job of recruitment. On any given night I can find better bands playing at local clubs then I hear on the radio. How about they all chip in to recreate a free classic MTVesque station to market directly?
"God fights on the side with the best artillery." - Napoleon, Marshal of France - speaking truth to power
There is a war going on for your mind.
Seems to me TFA predicts the end of the album as we know it, not necessarily the music industry. Could we be entering the golden age of the one hit wonder?
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What a clever way to show how propietary content and artificial constraints on access can spell doom! I bet more than half the comments in this thread will be about the idiocy of putting a registration-required article in the summary.
As for the actual topic at hand, if the music industry goes away, who will provide music? Once the vacuum is created, it will be filled by someone else. Music isn't like buggy whips. Maybe it's like bottled water, though. You used to get it in those plastic gallon bottles, but nowadays you mostly get it either from large 5 gallon jugs or 500ml bottles. Content stays the same, packaging and marketing changes.
What's the bottom line? The evolution of the music industry will lead to dumber and more expensive product of something that is essentially free otherwise.
Does that mean that if the record companies want to keep making money, they need to produce albums with a bunch of good songs instead of a $16 album with one good song? Oh, the humanity!
Proud member of the Weirdo-American community.
I really think this is BS. I have a friend who has worked at Atlantic for the past year or two and he currently has 5 gold records hanging on his wall and one platinum is on the way. If these bands are selling so well, why is the industry doing so poorly. Also, these bands are not totally mainstream. I bet 90% of /. hasn't even heard of them.
My understanding is that, for a $1 iTunes download, the breakdown looks something like this:
$.75 - Label
$.20 - Apple
$.05 - Artist
If the middleman (who provides neither the content nor the bandwidth, and takes 3/4 of the money) can't make a profit here then I think perhaps they're doing something wrong.
Let's not stir that bag of worms...
If the music industry of today goes the way of the dinosaur, it is inevitably their own fault. Rather than adapt and work with technology, they chose to fight it and eventually fought their own customers. Companies that had nothing to do with the music industry (Apple, Amazon, etc.) found an untapped and unexplored way to sell music to people at competitive price using the relative ease afforded by the Internet. The music industry now says that they don't make enough money because they find themselves to be the middleman instead of the people with the product.
You built a wall around yourself and ignored the real problem. Your own costs are too high, you rely more on the popularity of an artist/band rather than the true talent he/she/they possess, and you chose to ignore new technology in how it could bring you new opportunities. Think fast or die slow.
This is exactly why the single is the big deal now. If an album was 12, 15, or 18 great songs then people would buy all the songs.
Some albums were a cohesive experience. "The Wall" by Pink Floyd isn't one song and 9 batches of bad rehearsal. Led Zeppelin's albums always fit pretty well together, too. Lots of rock bands did this at one time or another, and the easy listening people nearly always do.
As for the album as just a compilation of unrelated songs, sure, some bands and soloists have always done B-sides. Some of them did good B-sides, though. 5 great songs and 5 or more good songs is, to me, worth $10. One hit and 9 or more songs the proverbial million Shakespearian monkeys could each write and perform individually is definitely not. This is one reason the movie industry hasn't been hit by copyright infringement quite as hard -- it's called production values.
Another reason is that the movie industry has largely moved to market-based pricing instead of setting a minimum any disc should get (hey -- isn't that illegal anyway?). If a movie just came out and it's really hot on the market, it might be $30 on DVD and $45 on Blu-Ray. If it's a B monster flick from the 1960s, there's a good chance it's in the dollar bin. How many albums from the big four record companies are in a dollar bin, or even a $5.00 bin? Lots fewer than deserve that deep of a discount, I'll say.
'Cause I don't. I've lamented the death of the LP since CDs appeared; the only benefit CDs ever gave me was that I didn't have to flip the disc over. What did we lose? Well, in a lot of cases, liner notes, the cool label on the media, etc.)
;)
What I miss is the *packaging* of the LP. They were big and afforded great album art, along with all kinds of neat extras (like the spinning wheel on Led Zeppelin III, or the zipper on Sticky Fingers, or the stickers and posters in Dark Side of the Moon). And even without the extras there are just so many album covers that are just great *art*. It was the cover that made me buy Joy Division's "Closer", even though at the time I'd never heard of them. Frankly, the album cover, AFAIC, is still the best part of the record.
So, hey, music industry...why don't you downplay the actual tracks and hit up on the packaging? In the Internet world everything is just a stream of bytes so your bytes aren't much more special (and certainly not worth more) than anyone else's stream of bytes. So give it up and make something tangible, keep-able, desirable. Put the disc in a wooden box with a wool interior, or wrap it in tinfoil, whatever...make the *experience* more meaningful. As much as I enjoy the convenience of buying a track in iTMS, I am missing an "experience" that I got with some of the better-packaged albums.
And the crazy thing is that this is not new to the music industry; they've put out special collectors editions of stuff for years and years; I have CDs that came in pseudo-film cannisters, wooden boxes, even bubble-wrap. Sure I paid a premium but I didn't just want the music, I wanted the creative packaging as well.
Witness the power of the free market at work. When you've been fixing prices for decades to shore up your profits, you shouldn't be surprised when that system comes crashing down, once an innovation comes along that turns your industry on its head.
This is how OPEC will feel, if ever we get off our asses and start making commercially viable electric cars.
The industry isn't going anywhere, it's just changing. Most people don't understand that the labels are basically venture capital for musicians. A VC invests in a start-up and gets stock in return. A label invests in artists and gets (historically) CD sales in return. Large companies can throw their weight around because they had enough starting capital to create good products, make the right partnerships, and grow. Large artists like Radiohead can do a "name your price" promotion because they had enough marking, promotion, and distribution to gain a sizable following. VCs invest in a portfolio of companies because they know 1 in 12 will succeed, and that 1 has to pay for the 11 failures. Labels invest in a portfolio of artists for the same reason.
Small start-ups can self fund, but the largest companies continue to have significant VC backing because it takes a lot of resources to make products and grow. Companies sign with VCs because they want that upfront investment. Unsigned artists can promote/distribute, but the biggest artists continue to have major label backing. Most serious artists continue to want label deals because they want the upfront payment and marketing/distribution muscle that allows them to focus on their artistry and not how they're going to feed themselves tomorrow. As proof, notice that even the big YouTube/MySpace artists are signing label deals.
So what's changing is that the labels will have to provide more services for artists and get things other than CD sales in return. But the need for "venture capital for artists" isn't going anywhere, so long as there are people who want to make music for a living.
Record labels' bigger issue is replacing CD sales
By Troy Wolverton
Mercury News
San Jose Mercury News
Article Launched:11/17/2007 01:37:25 AM PST
In the end, the long battle by the record labels against unrestricted digital music may have been little more than sound and fury signifying nothing.
At least, that's how it's starting to appear now that two of the major labels in recent months have embraced in some fashion the MP3 format, which has no copy protection. The early returns from those moves indicate they've had little impact on the industry's fortunes - for better or for worse.
Instead, the moves highlight a bigger problem. And that is how the labels are going to replace sales of CD albums, which constituted the core of their business and have plummeted in recent years.
"These are ailing businesses on their last legs," said Eric Garland, chief executive of BigChampagne, a market research company focused on digital media. The question of copy protection on song downloads "matters a whole lot less to them than it once did."
For years, the major record labels fought a pitched battle against the MP3 format. The format doesn't allow for any copy restrictions, which made it a popular choice for songs swapped on illicit file-trading sites such as the original Napster and Morpheus.
To combat such piracy, the major labels insisted online stores that sold music had to wrap songs and albums in digital rights management (DRM) technology, which can restrict the number of copies users can make of a song or the number and types of devices it can be played on.
But online music and electronics vendors complained that such restrictions were limiting sales, in part because not all formats worked on every type of player.
In the past year, the music labels have become increasingly receptive to those arguments. In April, EMI announced it would make its entire catalog available for sale in DRM-free formats. In August, Universal Music Group, the world's largest recording company allowed the sale of a significant portion of its catalog in the MP3 format.
The labels' moves have opened up competition in the digital music space. In September, Amazon.com launched a digital music store, featuring only MP3 tracks. Meanwhile other, older digital music vendors, including iTunes and Wal-Mart's Web store, added DRM-free tracks.
Because those songs lack DRM, they can be played on just about any digital music device.
Although it's still early, DRM-free music seems to have had, at best, a slight positive benefit to the music industry.
Sales of DRM-free music to date have "outperformed" EMI's expectations, and Wal-Mart has seen its MP3 sales grow "considerably" since August, when its Web store made them available, representatives for the two companies said. However, neither they nor other labels or Web stores disclosed specific sales results.
Overall, the number of digital songs sold each week seems to have been unaffected by the launch of the major DRM-free stores since May, according to data from Nielsen SoundScan. Digital song sales - both of tracks with and without DRM - are in the same range after May as they were in the weeks before DRM-free sales started.
But that's small consolation for an industry whose wholesale revenue in the United States was down 11 percent in the first half of this year, according to IFPI, the industry's global trade group. That's on top of declines in retail sales in six out of the past seven years, according to the Recording Industry Association of America.
Even if the effect has been questionable, some analysts think that eventually all the labels will sell DRM-free music.
"The writing on the wall, for the most part, is here for DRM," said Michael Gartenberg, a vice president and research director for Jupiter Research.
But not yet. Universal and Warner are still just experimenting with DRM-free music, and Sony BMG isn't even doing that much, analysts note.
"The marketplace wil
Oh wait.
The movie folks fought like heck to kill the VCR. And in the end, not only did home video not kill the movie biz, it likely saved it. Try to image a movie industry that only makes money from theatre showings and the occasional soundtrack. Now it's not tapes but discs, but we have the movie, the director's cut, the remaster, the collectors box set. I doubt Disney pumps out all those direct-to-video sequels because home video is killing their business model.
Likewise, when the music industry folks finally get their heads out of their butts, they'll realize direct digital distribution is not a threat, but rather the savior.
I don't know why they haven't jumped on board years ago. You mean we get to sell music without the overhead of a physical plant to produce discs/tapes/whatever, without a transportation infrastructure to deliver the product to retailers, without having to share the profit with stores? What's the catch?
Yes, making quality copies is easier for the consumer than taping off the radio or making a dub from a friend. But 1) that fact doesn't negate any of the positives of the above paragraph. And 2) playing luddite and ignoring all the positives of the above paragraph doesn't prevent any of the issues of unlicensed digital copies.
So as it is now, the RIAA folks get all the negatives (from their point of view) of the internet and digital music, while refusing to partake in any of the positives.
One day they will wake up, just like the movie folks did. When that happens, not only will the digital revolution not kill the music industry, it will save it.
To the folks who say the music industry will go away because bands don't need it, I disagree. Not everyone has the resources to build/rent a studio and make masters. And throwing up your mp3s on the band web site is trivial when you're a local hit and expecting a couple thousand downloads; it's not quite the same when you're hoping for millions of downloads. Putting together a tour of college town bars with an old VW van is not quite the same as organizing an international tour of stadiums.
Yes, the current business model is something akin to the record companies are property owners and artists are overworked dirt get combed by share croppers. Yes, I hope direct community built between bands and fans through the web will give artists move leverage. But I doubt music companies as we know them will disappear any more than the web and digital distribution has freed authors and killed off the publishing houses.
3. To act as a filter. Few people have the time to sift out which acts are good and which are not. It is this case where the industry has failed most miserably.