Wednesday, July 4, 2007

What's Up With the Music Business? (Almost Nothing. Unfortunately.)

The music business has fallen on hard times. This is hardly news to anyone - whether you're connected to the business side of music or just an interested bystander. The Rolling Stone, commemorating the 40th anniversary of the Summer of Love - ah, yes, that would be 1967 - is running a two part series that deals with the current state of affairs in the "record business" - The Record Industry's Decline, by Brian Hiatt and Evan Serpick. There aren't any revolutionary insights here, but the article does a reasonable job of surveying the landscape, and there are bodies everywhere. Unfortunately, they are mostly either lifeless or on life support, and there doesn't seem to be much consensus about how to reverse the deadly epidemic. Will the music industry be ruined? Well, yes. And no.

Of course, what was once the "record business" is now the "music business" (so major labels can find new pockets into which they hope to put their hands and come up with more than just a penny or two). This is wishful thinking. Generally speaking labels are looking about for the most proximate source of new revenue (hopefully a source that has few alternatives and little negotiating leverage). In the past, that has been the Artist. Especially the developing artist. And that seems to be the place that labels are again hoping to turn to find additional dollars. The argument is pretty easy to understand: you wouldn't be the Artist you are if we hadn't invested enormous sums to record and bring your new release to market. We built your brand. We made you. Now that the industry has fallen on hard times, we need you to acknowledge that the model we created so long ago doesn't work for us any more, and we need you to give us a larger share of the great fortune you stand to earn when your brand becomes a BRAND. We'd like a piece of your touring revenues. (After all, you'd sell far fewer tickets if we hadn't recorded and promoted you.) And we'd also like a piece of your merch sales. (Who'd be buying those Tshirts if we hadn't made you a star?)

Unfortunately, the major labels are bound to find a few problems with their new approach. First, developing artists don't generally have much revenue to spare, and when they are no longer "developing," they have better lawyers and managers who are, it should come as no surprise, loathe to suggest that the Artist part with a percentage of touring or merch revenues without seeing some quid pro quo from the major label. But the second problem with the new approach is more fundamental. It doesn't get to the heart of the problem. Jeff Kwatinetz, CEO of the management company, the Firm, asks the telling question: "How is it that the people that make the product of music are going bankrupt, while the use of the product is skyrocketing?" And he concludes, "The model is wrong."

Indeed it is. I hope to spend some time over the next several days and weeks blogging about this. But I'd also like to call attention to some possible solutions, some companies that I believe are headed in the right direction and even call attention to my startup, iggli, which is still very much in stealth mode but destined to become far more visible in the months ahead.

Until then, I'd like to see people's reactions to the Rolling Stone article and more particularly to the set of proferred solutions to the current music business crisis that Rolling Stone has outlined in "The Fall of the Record Business: What Next?"

1 comment:

Grandpa Mojo said...

Looking at the 5 theories in the Rolling Stone article, I noticed something. - There really are only TWO real "models" at the very basic level of music distribution (which is what we are talking about here) - and those two models are for a user to either a) own music or b) access music.

Theory 1 - ad supported = access music.
Theory 2 - peer to peer = own music.
Theory 3 - endless access points = own music.
Theory 4 - labels operate as managers = own music.
Theory 5 - consumers as retailers = own music.

One of the most compelling bits of data we got from the "What Teens Want" conference is that this next generation does NOT want to own content. - The are perfectly happy as long as they can access it, share it, etc. - Additionally, "our generation" (non 18-24 yr olds) don't want to own certain types of content either! - I may want to watch the occasional I Love Lucy episode, but I'd rather not have to store it locally on a DVD or hard drive.

So, it seems to me that what is happening is a fundamental change in the distribution model for music. Major labels used to own that distribution network and therefore could wield tremendous power. Now that the distribution network has been expanded, their power is minimized and therefore, also their influence.

It would seem that a fundamental shift needs to happen in thinking about music as a static medium.