The State of the Music Business: 2009

Everything has changed, absolutely everything.  The majors were worried when the cassette deck came out.  It changed things, to some extent.  It allowed the music fan to record a copy of music with some limitations.  If they didn’t have another copy of the song, he or she could record it off the radio.  Then they had to forward their way through the songs and commercials to hear the song they really wanted.  If they went high tech, they had a double cassette deck and could copy that song onto even another cassette.  Indeed, that worried the majors…but they had no idea what was coming next.

The primary problem with cassette duplication was degeneration.  The source song was performed either from the radio or from a turntable.  With the radio your signal was limited to whatever you got in your house and, in my house, was a function of how well I tacked up the “T” wire behind a poster of one of my rock heros.  When playing records, everything depended on the quality of the turntable, the stylus and how much abuse the record was subjected to during its use.  Thus, in both circumstances, the cassette recorded a significant loss of fidelity from the original source.  Heaven forbid you left a cassette tape in the car too long.

The genie came out of the bottle with the advent of the digital age.  When technology progressed to the point of a compact disc the first reaction of the major labels was “Great! We can charge more!”  There was much talk about how the manufacturing process being in sterilized environments with the workers being dressed in white coveralls.  They even decided to call the container a “jewel case.”  and raised the packaging deduction in an artist’s royalty rate to 25%.  What a boom!  They could convince the public to replace their old records, cassettes and eight track tapes with theses new “CDs” which carried on them crystal clean copies of the recordings.  Wow!

Later came the combination of this digital music and the Internet.  As we learned, the Internet and computers were really just a combination of ones and zeros.  Digital recordings of music were the same thing.  The challenges at the time involved the size of a digital file and the slow transmission speed of an Internet connection (then over a 56k modem at best).  The invention of compression formats addressed the first issue and MP3 arose to the top of the pile.   Although a minor reduction in fidelity resulted,  it was now possible to send a song over the Internet to someone else.  It worked, but took a long time.  Then came DSL, cable modems and T1 lines and transmission speeds took off.  The genie was now out of the bottle and riding on the back of a rocket.

The reaction of the majors was to ignore the changing trend of digital sales and the advent of the MP3.  Internet websites began to pop up offering free downloads and file exchanges.  The most famous at that time was Napster.  The attack came but the majors and publishing companies were reluctant to license their coveted products to Napster and these similar sites.  The kept plugging along as before-ignoring the new emerging trend and the new iPod generation that was soon to come.

Today

Today sales are down in the billions of units.  Illegal downloads are rampant and not capable of being controlled.  A new generation has emerged that gets its music from the Internet and their friend’s laptop computers.  Most young people have some type of mp3 player (primarily iPods).  They are satisfied with the quality of the product even though the fidelity has technically suffered from the original.  First week sales have plummeted and platinum albums are declining.  Convenience has become more important than quality.

Digital sales have skyrocketed and (in most cases) outnumbering physical products.   So called “brick and mortar” stores which were a staple of the music buying public have closed.  Gone are: Peaches, Tower Records and Specs.  They could not keep up in the format shift.  Now the biggest music retailer in the world is iTunes (R).  It is said that iTunes (R) makes up about 80% of the total sales volume.  Some say it is too late for the majors and we think they’re right.

Since I was a kid we spoke about albums.  There were great albums, lousy albums, concept albums, live albums, double albums, “best of” albums and compilation albums.  The music fan bought the new album from their favorite artist which contained some tracks they liked but often times tracks that they did not.  That was acceptable because the album (or CD) was the predominant  delivery device.  The mp3 and digital delivery has changed that scenario entirely.  The album is now dead and the single rules again, as it did long ago in the first days of rock and roll.  The purchasing public now buys only what they want which has become one song at a time.  Since it’s no longer required for the public to purchase tracks they don’t like, it’s radically affected the total album sales for both digital and physical product.  We anticipate that it is also going to affect the way “albums” are recorded and contracts are written-with reference to those “albums” and related recording commitments.

The result of this drastic reduction in sales has seen labels closing or, maybe worse yet, consolidating into a generic conglomeration of nothingness. Artists have been dropped and budgets have been slashed.  Staff has been constricted and the future looks grim.  New artists are having an incredibly hard time getting “signed” to the majors and if so to deals that are not at all favorable to the artist.  In many ways it is a difficult time. So, what is the answer? That is difficult to say.  However, one thing is clear.  This industry has always moved forward with the hard work of forward thinking individuals.  Innovators and brave artists have succeeded in the past and will continue to do so into the future.