arschutten

The Future of the Music Industry

These days, it is difficult to define what the Music Industry really is. Not too long ago, it was all about producing the record, and selling to the masses; that is what truly defined success in the Music Industry. You look around now, and it is no longer an industry about the production of music, but the creation of an identity, one that is shared amongst peers and fellow music fans. In this essay I hope to define these changes, and hopefully begin to address possible solutions to the biggest problem the Music Industry faces today: Tomorrow.

The changing of the Music Industry is very visible in some instances. For example, the growth of iTunes and iPods has changed the way media is distributed. The need for online marketing via MySpace, PureVolume, and similar sites has changed the way music is heard and discovered. But, the core of this change is less obvious. It has taken longer to grow, and draws less press. Business 101 teaches us that for a firm to be successful in an industry, they must allow themselves to change according to demand. This is true across the board, no matter where you work. 10 years ago, an electric car was developed and then tested around various parts of the United States. Successful by many means, the car had good range, impressive performance, and clear reliability. The market at the time thought, had little interest in purchasing electric cars, with the exception of the vast minority (much like the sale of vinyl records are today. They meet a specific target audience, but are in many ways, not profitable). But then, the big “Green Movement” began to take place. Al Gore released his movie, pollution in many cities continually break there own pollution level records, and the ice caps begin to show major changes. The point is, green became marketable. It seemed almost too coincidental that just at that time, the Honda Insight, the first hybrid car came out onto the market (which was then overwhelmed by the success of the Toyota Prius, a car that meet other consumer demands that the Honda Insight could just not meet by being extremely small). It seems like perfect timing, but it was all just based of consumer demand. Now, you see this movement being bigger than ever, and every car company offers these hybrid vehicles, and Chevy is announcing the release of the first ever electric vehicle (over 10 years after the first true electric vehicle was produced, but just not marketed). But, this isn’t an essay about car companies, it is about music companies. What this whole piece is meant to prove is that changing market is not one to fear. Rather, look at the changing market as a profitable opportunity. All I ever hear about is how the Music Industry is changing, and we must “adjust accordingly to survive”. I think the first step to success in the Music Industry would be to change that to “change effectively to win”.

So what are all these changes I keep talking about? At this point I am throwing the word change around so much I am starting to sound like Barack Obama. In most instances, when talking about a changing industry, it is better to identify all of the small details, and change each one individually. This again, works 90% of the time; and this is not where the Music Industry is. That other 10% of the time, demand calls for a drastic change, one that changes the entire flow and structure of an industry to be able to prepare for the future. The reason why this is necessary for the Music Industry, is because the demand has changed so slowly, almost under the radar, but still extremely significant. In my opinion, this change really started with the Beatles. They were in many ways the first group to really identify themselves with a particular audience, and they did a great job doing it. Not too say that this hasn’t bee done before the Beatles, but they really just took it to the next level. I feel like the Beatles style of popularity lasted well into the 70’s, and still does today. But it was in the 70’s that a new style of popularity began to emerge. It was the scene called the anti-scene, and it all started with Punk. Punk created another group that can be still be seen today, this anti-scene group had created its own scene, an identity. This seemed to have lasted throughout the 80’s and 90’s. The big labels made the big bands, the little guys made the little bands. Again, there were exceptions, but this held pretty standard across the board. In the late 90’s, you started to see this fade. The little guys were getting bigger and bigger, and dare I say it, making the Top 40 lists. I feel like in many ways, I would like to call this the Warped Tour generation. The anti-scene had grown to the point where they demanded their own music tour, something that has been done before, but never as successful over time as the Warped Tour has been. When this happened, the big guys found new competition, and the little guys saw wealth and success that had never been realized. Today, you can hear a Brittany Spears song followed by a song by Silversun Pickups on the same radio station. We have reached a point in time where success is no longer determined by the size of your backer, but whether or not the target audience is infiltrated and reached with the music. More than anything, more people are listening to more music. I came to this realization when started hearing some of the indie bands I used to promote being listened to by my friends that I thought only listened to radio rap. Now, it wasn’t that these bands had become big or successful, but they were being heard. The major labels have done things to try and meet this halfway, for example the company I used to work for was a distributer for many smaller labels, by using the large scale means the had available. While a great idea in theory, it holds one simple fallacy, something I will address shortly. Following this, another great invention began to disintegrate the grasp that the major labels had on the Music Industry: iTunes. Now, it seemed anyone could get there music sold to any person, anywhere in the world. This is great for everyone, everyone except the big guys. The problem is the big guys base business success off the number of sales. Big CD sales, huge concert tours, this was how the money was made. CD’s, still the number 1 means of sale for music, cost anywhere from 12-18 dollars. The profit made off of the one CD sale can be broken into the profit made per individual track. What iTunes does is allow the sale of just a single track, say the hit song off an album. Now, while the profit made on the sale of that 1 song through iTunes is greater than the profit made off the individual song through the CD, the total profit is greatly decreased. The big guy’s strength is in numbers, through their mass distribution capabilities, big budget promotion, and general song popularity. The little guy’s strength is producing music that more fits the need of specific audiences, an exact sound that one is looking for. Remember that fallacy I mentioned before? Well, that was it. If the little guy’s strength is the ability to meet a market niche, then how does the big guy’s capability of mass distribution and high volume sales really help? The answer is it doesn’t.

arschutten

So what now? What do the big guys do? What do the little guys do? Remember at the beginning when I talked about how Music Industry is less about the production of music, but more about the creation of an identity? You may be thinking to yourself “Wait, doesn’t that kind of contradict what you just explained”, and the answer is yes, in many ways it does. I feel that the concept of indentifying yourself with a scene is dying. I also agree that now more than ever, the production of so many different types of music is better than ever. But, there is also a different way of looking at it. People are no longer looking to identify themselves with a scene, but rather identify themselves as an individual. And as far as the production of music, you don’t need to worry about it, music is producing itself. I mean myself for example; I am a 22 year old college student, and I had a full professional-level studio in my house (I also got myself a lot of debt, but that is beside the point). Even now that my studio is gone, I still have the capability of creating record-ready tracks at any given time. What does this mean? It means that today, more music is being made, more people are listening to it, and most importantly, each individual consumer is listening to more music. The way I see it, I look at one person, and the music they listen to. Lets say before, this person maybe listened to 10 different artists, they ones they truly like. They keep those CDs in the car, listen to them on repeat all day, they can’t get enough of these songs! Now, that same person has an iPod, or some other MP3 device. Instead of having 10 CDs in their car, they have hundreds at their fingertips. To me, this sounds like more sales. If before they had 10 CDs from 10 different artists, this means that they spent about 150 dollars, divided 10 ways. Each of these CDs has 15 songs, which means they bought 150 songs total. That means on average, they spent about 1 dollar per song. Now, in our time, this person doesn’t have these CDs anymore. Now, they are listening to only the songs that they really want, no more of the songs they just skip over every time on the CD. Not only that, but they are listening to more artists too. Let’s say for example that they now have 50 different artists on their iPod. From each artist they have 3 songs. So, they have the same 150 songs as before. Each one of these songs cost them 1 dollar on iTunes; 150 dollars. Now, lets just say, in theory (and this may be a hint to the conclusion of this essay) that these songs, while available on a CD, are not mass marketed via the traditional means of music sales. Rather, they use the readily available, and free, means of promotion (e.g. MySpace, PureVolume, word of mouth). This means that the bottom line on the production of this music is very low. This, in addition to the lack of need for CD production and distribution costs, creates a very high profit margin; let’s just say for example 3 times the amount that would be made selling the CD (if divided by per-track). That means that those 10 artists from before, they are still selling their music, but instead its 3 tracks online. Those 3 tracks make 3 times as much money, so in essence, it is equivalent to the profit of 9 tracks off a CD. Initially, this can be seen as a loss. But, instead of 10 artists, you have 50, that means that 40 more of the artists are making this same amount of money. Not only that, but because more people are listening to more music, let say in theory that the number of people that bought these songs are double the amount of people that would have purchased the CD. That means that selling 3 songs to twice as many people is equivalent to selling 1.2 CD’s. So not only is there greater profit made off selling just the 3 songs online, but 5 times as many artists are enjoying this benefit. What it really boils down to is cutting costs. In every other industry, one of the ways to increase profit is to cut costs. Using online means of sales is the best possible way for music companies to cut costs. When you cut costs, you increase profit. So now, in 3 sections, I will specify some steps in how the Music Industry can be saved.

First off, what everybody needs to do. Every person in the industry, from the biggest of the big guys, to the guy playing his guitar at my favorite dive bar, needs to move on from CDs. CDs need to become just like what vinyl records have become; a novelty item, not something you pay for the product, but rather with the purpose of having it. The environment music is in is all based off the album. If you look back, the album was just a way of collecting as many songs as possible into one place. When vinyl records were the main means of media, they would pack as many songs onto the record as they could, sometimes they would even have 2 records because they couldn’t fit everything onto one. Then, when CD’s came out, it was the same thing. They would fill the CD, as to get as much good music out to the people as possible. But, during the life of the CD, it has become less about getting as much music out per sale, and more about creating some sort of ideological mix-tape of the artist, usually to high-light only several of the songs. Today, or primary media is quickly becoming MP3 players, a form which can hold hundreds and thousands of songs in 1 location. So what is the purpose of the album anymore? There is no need for the collection of songs into a single place. The consumer wants to create their own collection of songs in a single place, and create their own identity as defined by their music. Strive away from the concept of “album”, and work back towards the concept of music. Once the bottom line can be reduced to that of the production of the music itself, profits will me maximized. The means are out there, and they just need to be embraced. Additionally, concerts, shirts, stickers, all that good stuff, they still provide direct income for the band. The separation of performance and record will allow artists tour more, and market themselves across a larger spectrum. No more of these “XYZ CD Tour”, but touring becomes a form of marketing for the band, not the album. This creates more life-time customers per artist, and combined with the cheap and effective way to download music, allows more people to “explore” more bands.

Now, just the big guys turn. The first and foremost thing that needs to be done is what I said everyone needs to do. Done and over with, we can move on. But, by doing the aforementioned, the big guys lose their greatest strength; the mass distribution system and marketing power. What needs to be done is a re-direction of focus for the companies, and instead of focusing on production and distribution, focus on the name. Just like in any industry, a branded name means a lot. The big guys can use their already established names to get more artists than anyone else, create more hype than anyone else, and in turn, most likely sell more tracks than anyone else. Use the money saved by abandoning the old-fashioned means of distribution to hire more A&R Reps, talent scouts, and market managers. These allows greater depth across the global industry, and allows the better targeting of specific audiences, rather than the mass “blitzkrieg” style marketing, where you just sweep across everyone and hope for as many hits as possible.

What about the little guys? Well, the little guys need to take advantage of this opportunity. Where before, they had to focus on distribution and getting the name “out there”, now they have access to the largest possible global market there is. They are no longer knocked out by the power the big guys had, they are on an even playing field. Not overwhelmed by the need to strive for big marketing efforts, they are more driven by the ability to hit the market they want to get to, and that’s it. But, most importantly, localize. Now, at the same time, one always needs to have a global state of mind. Again, another contradiction, but hear me out. The little guys will already be global, as the product is available to anyone with a computer and an internet connection. But, this also allows you to be more local than ever before. It becomes easier to focus on markets that offer the opportunity for success, and ignore the markets that don’t. Why waste thousands of dollars to host a show in San Francisco, when demand states you should be playing 3-4 shows a year in New York. Doesn’t matter whether the band is based out of Tampa Bay or Portland, localizing means localizing the demand for the product.

Now what excites me most about the possibility of all this to happen, is the result. More artists will get paid more money. Record companies will become more specific, and ideally more successful. The consumer is allowed the freedom to only pay for what they really want to buy. But, most importantly, I truly believe that this will make success in the music industry for everyone more about finding the best possible product than ever before. My dream for the result of this entire concept in a nutshell: May the best music win.

Fruitonica

It is silly to have two separate threads, but I'm sure a mod can fix it up.

I thought it was a pretty decent essay, eloquently written and fairly well organised. Although the gaping whole in your discussion was of piracy and illegal music downloads, which is I think where the record companys are taking the biggest hit, and that is why I can't forsee them becoming more successful like you're predicting.

This completely ignores the album being an artistic whole, becoming more than just the sum of its parts, generally I want to download a whole album not just one or two songs. The attitude you're advocating is more that of the extremely casual music listener.

Can't agree with this, music is still hugely associated with subculture.

But overall, nice job : )

mr dave

the music industry is easy to define, it always has been. it's about turning a profit, same as every other industry out there. easiest way for the labels to do that is to target hit singles to the demographic with the largest amount of disposable income (adolescents), especially when contemplating the mainstream aspect of the industry.

branding an identity on the same level as the music has been an established part of the industry since the 70s.

instead of rambling about electric cars you might want to talk about the last decade of online distribution. it's the growth of P2P sharing that changed the way music is discovered, ipods only change the way its stored. itunes wouldn't exist if napster / soulseek / limewire / kazaa / oth.net etc. hadn't established a tangible market for that type of data.

it's also rather foolish to talk about online distribution only to ignore online piracy.

in regards to the band - fan identity. you have to look beyond the music at this point and start considering social demographics. i'd say one of the biggest factors to the beatles popularity wasn't their attempt to bond with their audience post - sgt. pepper's but world war 2. you had LOTS of families rebuilding themselves and their neighborhoods after the war, and when did kids born in the late 40s / early 50s hit adolescence? what was the easiest way for them to rebel against their parents / the system that took away their father / uncle / brother / cousin? pop music has always been the soundtrack of adolescent rebellion, it's usually one of the first real attempts an individual makes to distinguish themselves from the people that came prior to them.

as for the punk movement it follows the same rebellious growth. it wasn't specifically a rebuke against the psychedelic pop of the 60s but a new generation of kids who wanted to establish something new for themselves. the main limiting factor at the time was airspace so they had to go underground. instead of seeing it as a disadvantage the more savvy members of the scene spun their environment as being one of the leading factors to the scene. it's still all about being a 'REAL' punk today right?

the reason you think identifying yourself with a scene is dying is because you're getting older and moving past the scene the industry is currently pushing. you are no longer their target market. they want to sell product to your little brother / sister / cousin, a kid who still lives with their parents and gets an allowance, not a college student accruing debt with every waking day.

your 'math' hurts my head. you're just throwing numbers around to support your predetermined conclusion. how does a drop in distribution costs affect the production costs? do the labels suddenly write off advances once the distribution goes digital?

abandoning CDs is not going to happen soon. some aspects of the industry still require a tangible product to be exchanged. claiming that vinyl records were all about stuffing as much product on the platter as possible makes me wonder if you've ever heard the term 'concept album' let alone actually heard one.

you really think that performances aren't part of a record contract? that it's up to the band to front the foolish amount of money to put on a large scale tour / show? the ideal is nice, the reality is that it's WAY expensive to put on a half decent show, let alone a top line arena performance. you really think the people who've busted their butts to finally get to a point of being paid to play music for a living want to have to keep carrying a 200lb bass cabinet down 4 flights of stairs after a show and continue living off peanut butter?

you also miss the biggest change to the digital distribution method since itunes - video games with downloadable content. guitar hero 3 and rock band have been proven to boost record sales and serve as a platform for introducing people to new music. those games are the replacement for the 'music' channels and mail order clubs my generation grew up with in the 90s.

then there's the 'in rainbows' method for established acts. radiohead proved it could be a successful distributing method with their last album. by willingly offering it for free initially it removed a lot of the pressure of a new album. you didn't feel like you had to like some of it because you had paid something for it. it also provided the band with tangible data in regards to the overall popularity of the music which could be used to release a more appropriate amount of media to meet the demand of the consumers.

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