No One Likes The Music Labels. Who Cares?
The number of UK consumers who said they trusted the industry fell from 47% in 2007 to 31% this year, with confidence disturbed by moves by the music industry to track down and punish illegal music copying, and high-profile scandals in broadcasting.
Surveying younger consumers aged 18-34, Edelman found that 55% would take "direct action" against a company if they objected to its practices, 53% would share negative opinions with friends and 46% would ignore a firm's marketing and advertising. Even more damning, a further 39% said they would not invest in those companies.
That's terrible! But remind us again: In what era did consumers cherish media moguls and the companies they ran? Was there a love-in we missed in 1999 and 2000, when the music industry recorded record sales while peddling the likes of Britney Spears and the Backstreet Boys?
The music business, of course, has been in steep decline since then. But it's not because of a PR crisis: It's because the Internet, helped along by the likes of Shawn Fanning, and later Steve Jobs, has made it possible to get any song you want for 99 cents or less -- most often for free. The industry certainly hasn't helped itself since then by taking forever to adapt to that reality -- a fact it still hasn't really come to grips with. But it's trying. Not hard enough, says the Guardian:
The survey showed 56% of young UK consumers would rather buy legal content, if it was at a reduced price, than download illegally. That compared well with the 27% who refused to pay for content, and the 17% who said they might pay, but could continue to download illegal content as well. Much piracy, this would suggest, is fed by the lack of a legal online alternative.
While we're at it, let's take on this persistent myth: The notion that the music business is preventing people from getting the music they want online at a reasonable price. That was indeed true ten years ago, when the industry's Napster alternatives were PressPlay and MusicNet, a couple of lousy, label-owned "music services".
But now you can get just about anything you want -- legally -- at any price point you'd like: RealNetworks (RNWK) and Napster (NAPS) will let you download as much music as you want for about $13 a month; Apple (AAPL) and Amazon (AMZN) will sell you individual tracks for less than a buck apiece, and on-demand streaming services like Last.fm and imeem are completely free. Yes, each offering has an asterisk or two, but if you're a music lover, they're awfully compelling.
The bigger problem for the music business: There just may not be that many music lovers. Recall that Radiohead, perhaps the world's best-loved tech-savvy band, offered to let their fans pay whatever they'd like for their new album last fall -- and most chose not to pay a penny. If that's at all indicative of bigger trends -- and we think it is -- then the music industry's future is clear: A modest, niche business supported by a handful of passionate consumers, and ignored by most others. And no PR agency will be able to fix that.
Now the Internet has given cheapskates a much better way to get music. Some buy a track here or there, others don't pay a dime.
And, no, I don't think people are spending less on music because they're making political statements. Case in point: Sony BMG's rootkit problem, which happened in November 2005, didn't do anything to its album sales. (Remember all those "Boycott Sony BMG!" cries?) Its album market share dropped from 25.66% in August 2005 to 25.32% in December 2006. That wasn't due to rootkit publicity, but rather a slight but predictable drop that is in line with the company's decline in market share since the merger. (21.76% in October 2007 from almost 30% at the merger in 2004.)
I agree that consumers have little to complain about (but they sure do love to complain). The price of music has been outpaced by inflation over the last ten years. CD prices are lower. There are free alternatives online, and it's possible to buy tracks rather than albums. The frequent complaint that today's music sucks mystifies me and proves those people do not spend time seeking out new music. By sticking with radio and TV commercials, they have not adopted new means for discovery. There's an incredible amount of great music being released today...if you can find it.
likely music and all content businesses are going to become like book publishing biz -- tiny margin business where everybody in the food chain gets paid modestly except for occasional huge hit monsters
http://scotlandonsunday.scotsman.com/entertainment/It39s-only-rock-and-payroll.4000820.jp
People love music, but they HATE to be ripped off.
The fine art world has been tremendously successful over the years in protecting the value of original works of arts (as opposed to reproductions), or original limited series in the case of works more easily copyable (such as lithographs and photographs). This is particularly important since we are on the cusp of technology that can reproduce paintings in their original medium down to the precise brushstroke.
Taking a cue from the art world, in my opinion, the record labels could do a better job of exploiting limited signed editions, etc.
Uh. This is a UK based survey. Quick reality check... You can't buy popular, legal, DRM free tracks outside of the USA. And what is on offer is (by direct conversion) usually more expensive.
In my opinion, this is the closest to getting what I listed above:
http://mp3.about.com/b/2008/03/30/warner-music-proposes-isp-music-fee.htm
"I was just at the museum and there was this "Picasso" thing on the wall...they were charging $10 million for it... what a scam."
Catbird, I think you are illustrating the point perfectly...unfortunately, it makes the opposite point you wanted it to. Fans of art do perceive higher value in, and are willing to pay up for, originals. Go buy that same Picasso print on a poster and it'll cost you $10. Better yet, download the image online and print your own poster at Kinko's for $5. Or, perhaps more relevant to this discussion, download the image and use it as your computer background for free.
Similar to the Picasso example, music fans are also willing to pay up for originals: live music!
Recorded music should just be a marketing expense for the more lucrative, and limited, concert ticket and merchandise. In fact, due to the near zero marginal cost, digital recordings should be pushed by artists/labels as much as possible...then head to the local bar, music venue or stadium as much as possible to perform for your fans.
Dean, I think you nailed it when you said labels should focus on "...serving the needs of its hard core music fans...they are the ones most likely to attend concerts, purchase high margin related merchandise (bonus packages, etc.), and evangelize new artists".
-Kevin
So if the "live" gig is the original, what's the studio album?
Or do you want all copies of the original to be live recordings?
And if you expect a band to give away their studio recordings for nothing (even if that helps them to promote live gigs), you will force them to make bad recordings - because they can't afford Abbey Road. Not all bands or artists contain someone with broad recording, engineering and production skills so they need to hire those people & facilities. Who pays?
Ross
Studio recordings are "polished" works. Production is free from real-time constraints and technology allows artists to accomplish things they couldn't dream of doing live.
A live performance is limited to "real-time" abilities and resources. And recordings that take place in these "live" environments generally lack the audio fidelity that studio recordings have.
Genre plays a factor -- a rock group's live performance may not differ all that much from the recording, but as you can see in urban music, or any genre that relies heavily on technology, a live show is much different from the studio album.
In this sense the studio recording does have its own value that makes it more than simply a copy of a live performance.
But the Internet has made the market much more transparent, and Napster, Youtube, Scribd (and to a certain extent Flickr as well) have delivered their point to consumers that they can get stuff for free, easily, and without shame. Instead of bringing down the price to acceptable levels, the music industry tried to further rip-off consumers, and now gets the revenge of the frustrated consumers.
I think that any artwork that can be copied and distributed digitally will be a commodity soon, i.e. it will be available FREE or almost free once released to the world. Anything that is original (e.g. live concerts, fine art, readings) will do OK and get even more expensive (see prices for concert tickets). In any case, artists should forget about making money from the rights in the long run.
The music industry still offers the same flimsy CD in a crappy jewel case with low quality printed covers and inlays with microscopic lyrics if you're lucky… as they did 20 years ago. And they wonder why we give them the finger! The industry is full of fat cats who have never had to face up to real competition from other sources of entertainment; they've spent 20 years competing with each other (comfy) in a rapid growth market. Now their total market (CD music) is contracting and they've finally realized that their real competition is the other stuff I can do with an hour of my time. And the best response they've had for the past 5 years is to cry foul. Pathetic really.
www.feyenoordav.nl
I think the Industry has reversed (in an unnatural way) the music marketing process, causing a lot of people to share your belief that artists can't afford to make a good studio album (p.s. - I too enjoy a good studio recording and understand its importance vs going to a live venue). It's true that not all artists can afford a well produced studio album, if you're talking about the next Britney Spears, or other Industry-manufactured act, that no one has ever previously heard of but needs to become famous overnight in order to provide short-term payback (on the huge marketing/production/distribution dollars spent) and huge long-term profits for the labels.
I think the more natural process, and likely what needs to happen going forward, is that rather than a major label manufacturing, and shoving down our throats, the next Britney Spears, you have local acts that slowly gain popularity in their communities (both geographically and online) until they can sell out local venues, then regional venues, and then national venues.
This is complimented by online marketing and distribution, which has low marginal cost. While the artist doesn't get the HUGE upfront payment from the labels, and the total revenues potentially end up to be less, there's no harm to the artist or labels (if they can successfully evolve, which its not clear they can or will) because they didn't need the multi-multi-million dollar marketing budgets that the industry requires today.
Ultimately, this creates a much longer process from the garage to MSG, but it has the residual and positive effect of having the best music (not the best marketed music) rise to the top because you've allowed the crowd/fans to choose what's best (not Industry businessmen).
Two final points:
1) Although an important response to your earlier comment (although I think the above makes for more interesting conversation) is that as technology evolves, the cost to produce quality recordings is dramatically decreasing. And perhaps the coming shift in the music Industry business will inspire more youngin's to find interest in engineering, producing, mixing, etc. Teens are founding tech start-ups all the time by leveraging new technologies in combination with interest, motivation, hard work and smarts...I imagine this could be the same.
2) Do musicians NEED to be super rich? What happened to the struggling artist? Most musicians still consider themselves artists, or at the very least entertainers (and those that don't will likely be weeded out during the above process anyway). Do artists need to own three mansions, drive 5 Bentley's and do nothing but party and shop? Back to your earlier analogy: how did artists like Picasso live their lives? The Industry has created an environment where musicians become so for fame and fortune rather than talent, inspiration and/or passion...I'm not convinced this is a trend that needs to continue.
Lastly, here's an interesting read: this article is 7 years old, but I think its insightful if very forward looking:
Giving Away Music to Make Money:
Independent Musicians on the Internet
http://www.firstmonday.org/issues/issue6_8/pfahl/
-Kevin
The recorded music industry will become niche. And the revenue expectation adjusted to suit. Artists will be fine with that. What they will be miffed to hear is the public adopting a culture of music for free. Artists reasonably expect to be compensated for their efforts. And that concept applies to anybody. The newly graduated dentist emerges from university after years of hard work and study with a glowing result. Would it be reasonable for that person to expect to apply those skills and be rewarded?
Talent, time and money is all expended in the making of a record. Sure the costs are lower now but not zero. It makes sense to not produce something to make a loss on it. For indie bands CD/download sales are not a loss leader. They can't afford it in the hope that other revenue streams will make up the shortfall. Loss leading assumes you've got traction and a buffer.
And live show revenue is not the sure fire replacement strategy either. You can't constantly gig. You can't live on a tour bus. The public only has a certain amount of time and money for entertainment.
This is the era of the fan. The fan decides and now there is so much choice the casual music listener is over it. The days of contemporary music as broad cultural icon are gone. The music industry landscape that saw a few on the mountain and the many on the plateau is so utterly flat that you can see everything yet find nothing. Little niches will emerge. Unknown to most but vital to some. Tribes of people gather around an artist. Not hordes. Artists actively engage with the fan. The fan is the new boss.
The recorded music industry will become niche. And the revenue expectation adjusted to suit. Artists will be fine with that. What they will be miffed to hear is the public adopting a culture of music for free. Artists reasonably expect to be compensated for their efforts. And that concept applies to anybody. The newly graduated dentist emerges from university after years of hard work and study with a glowing result. Would it be reasonable for that person to expect to apply those skills and be rewarded?
Talent, time and money is all expended in the making of a record. Sure the costs are lower now but not zero. It makes sense to not produce something to make a loss on it. For indie bands CD/download sales are not a loss leader. They can't afford it in the hope that other revenue streams will make up the shortfall. Loss leading assumes you've got traction and a buffer.
And live show revenue is not the sure fire replacement strategy either. You can't constantly gig. You can't live on a tour bus. The public only has a certain amount of time and money for entertainment.
This is the era of the fan. The fan decides and now there is so much choice the casual music listener is over it. The days of contemporary music as broad cultural icon are gone. The music industry landscape that saw a few on the mountain and the many on the plateau is so utterly flat that you can see everything yet find nothing. Little niches will emerge. Unknown to most but vital to some. Tribes of people gather around an artist. Not hordes. Artists actively engage with the fan. The fan is the new boss.
Also any industry that tries to survive but suing it's own customers deserves to die a painful death.
So, now the music industry needs to start thinking outside of the box on how to make a profit. However, I believe it will get worse before it gets better.