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Part 4: Mobile & Internet“I'm interested in anything about revolt, disorder, chaos, especially activity that appears to have no meaning.” When rock star rabble-rouser Jim Morrison concocted this engagingly inflammatory soundbite for a journalist in 1968 he was reflecting the civil-strife anti-war society around him. The music business that surrounded his success was an ordered world where The Doors made records and people bought them.
Fast-forward to 2008 and he could be describing the very business that made him famous. Revolt, disorder and chaos are now consuming the business and chewing through its profit sheets. As for activity that appears to have no meaning, thirty-seven years after their singer died The Doors tour with a singer that mimics Morrison. They even have a new name that’s perfect for these disordered times: Riders Of The Storm.
And what a storm. Profits are plummeting so fast that some question the continued existence of the major music labels. They respond by squeezing out the maximum cash they can extract, increasingly from outside businesses that sense huge opportunities and will keep experimenting until they find what works or their cash runs out. Driving almost everything is the concept that music is free. It just won’t go away. But someone has to pay for it, so who?
Canadian musicians think it should still be you. They propose a $5 monthly levy on every Internet and wireless account in the country to pay for music downloading, much as we pay a TV license fee or pay TV subscription. Many companies are relying on advertisers to be the new paying customer. We 7 gives away music with an ad attached, which disappears after a month. Companies such as iMeem and Last.fm try to build audiences of many millions so that advertising volume will pay the bills.
But why pay for a banner ad if you can be a patron of the arts? That’s Nokia’s approach (they invented the ringtone after all) with their new Comes With Music service. From mid-2008 certain Nokia phones will be able to download all the music the owner wants for one year without paying for it, after which he can keep the music.
Not even old-fashioned music selling is immune from new ideas. The self-release of Radiohead’s ‘In Rainbows’ album last October as both a pay-your-own-price download and an expensive boxed disc had everyone wondering if this was the new album-buying model. It looked so good a concept that Cliff Richard released his new album as a sliding price download – it gets more expensive the more people buy it.
Are these the new ways to do business? Sure, if you’re Radiohead or Nokia. But despite what the evangelists and press releases say, it’s all guessing. Nobody really knows because this is a brand new game. They only know that when even the squares on Wall Street have figured it out and publicly downgraded a music label’s share value, the problem in the industry is very serious.
The crisis is underlined by the continuing and deepening slide in CD sales – down 22% in just one year. Sales are now falling so sharply it’s assumed they’ll be almost extinct within a few years. But the same thing was said about vinyl records and they’ve refused to die; over 1 million were sold last year, in particular the 7-inch single, which has regained its cachet as a collectable objet d’art. In February, for instance, Supergrass are releasing their single “Diamond Hoo Hoo Man’ as vinyl only. While digital sales are growing, they’re failing to compensate – the 3 billion tracks sold on iTunes are mostly individual tracks, not albums. To an industry gorged on two decades of high-margin album sales it’s not enough.
Labels are good at shouting about their woes but outside of recorded music it’s a healthy business. Radio audiences are steady, iPod sales are up 31%, concerts and merchandise are up 4%. The latter is where musicians are now expected to make their money and it works well, especially at the bottom and top of the tree. The new groups use the Internet tribal drum to fill clubs, while all those legacy groups make up lost CD royalties by putting their animosities aside long enough to fill the world’s arenas.
What scuppers a lot of new ideas from becoming trends is that they ignore customer behaviour. Nokia’s Comes With Music is a significant development in the legitimisation of free music, but the music will only play on the phone or a pc, with no ability to burn it to CD or put it on another player. To somebody using Limewire or loading CDs into an iPod it’s hard to see what the value is. It ignores the entire history of music consumption, where every format development for 100 years has been driven by one factor: convenience.
From 78s to LPs to cassettes to CDs to MP3s, the reason each new format has caught on is because it’s more convenient than the previous one. The advent of stereo in the early 1950s is the only popular development based on sound quality; the benefits were so obviously better than mono that everyone wanted it. If anything, the quality of MP3 is a huge step backward from CDs and vinyl. Tough luck Mr. Audiophile, it’s become the consumer standard, the only file format that can be played on any music player or computer.
If the music labels can embrace convenience and customer behaviour, learn to capitalise on the new ways people experience music and stop being pig-headed, then the next few years could be an open frontier seldom seen since the late ‘60s. The “universal jukebox” is likely, playing whatever you want on whatever’s convenient - pc, mobile, or iPod. Payment is moving towards a monthly subscription and advertising income model. Those hated DRM software locks will disappear. A lot more musicians are going to control their own careers outside of the major label system.
Screw it up, though, and it’s possible that within two or three years the multinational owners of the major labels will break them up and parcel them off to anyone with a taste for adventure. Another year of DRM and litigation will encourage more private p2p networks and anonymous routing to them, making them untraceable. Fail to legitimise those networks and we may see the demise of paid recordings, at least by the listener.
The business of music has changed irrevocably. “I think the golden age of the record labels – the 1960s to the 1990s – will be looked at as a historic aberration,” says Bill Flanagan, Executive Vice President/Editorial Director of MTV Networks. “It was a really good aberration, though.”
So: where are we heading?
Part 2: Music Labels
Part 3: Live
Fast-forward to 2008 and he could be describing the very business that made him famous. Revolt, disorder and chaos are now consuming the business and chewing through its profit sheets. As for activity that appears to have no meaning, thirty-seven years after their singer died The Doors tour with a singer that mimics Morrison. They even have a new name that’s perfect for these disordered times: Riders Of The Storm.
And what a storm. Profits are plummeting so fast that some question the continued existence of the major music labels. They respond by squeezing out the maximum cash they can extract, increasingly from outside businesses that sense huge opportunities and will keep experimenting until they find what works or their cash runs out. Driving almost everything is the concept that music is free. It just won’t go away. But someone has to pay for it, so who?
Canadian musicians think it should still be you. They propose a $5 monthly levy on every Internet and wireless account in the country to pay for music downloading, much as we pay a TV license fee or pay TV subscription. Many companies are relying on advertisers to be the new paying customer. We 7 gives away music with an ad attached, which disappears after a month. Companies such as iMeem and Last.fm try to build audiences of many millions so that advertising volume will pay the bills.
But why pay for a banner ad if you can be a patron of the arts? That’s Nokia’s approach (they invented the ringtone after all) with their new Comes With Music service. From mid-2008 certain Nokia phones will be able to download all the music the owner wants for one year without paying for it, after which he can keep the music.
Not even old-fashioned music selling is immune from new ideas. The self-release of Radiohead’s ‘In Rainbows’ album last October as both a pay-your-own-price download and an expensive boxed disc had everyone wondering if this was the new album-buying model. It looked so good a concept that Cliff Richard released his new album as a sliding price download – it gets more expensive the more people buy it.
Are these the new ways to do business? Sure, if you’re Radiohead or Nokia. But despite what the evangelists and press releases say, it’s all guessing. Nobody really knows because this is a brand new game. They only know that when even the squares on Wall Street have figured it out and publicly downgraded a music label’s share value, the problem in the industry is very serious.
The crisis is underlined by the continuing and deepening slide in CD sales – down 22% in just one year. Sales are now falling so sharply it’s assumed they’ll be almost extinct within a few years. But the same thing was said about vinyl records and they’ve refused to die; over 1 million were sold last year, in particular the 7-inch single, which has regained its cachet as a collectable objet d’art. In February, for instance, Supergrass are releasing their single “Diamond Hoo Hoo Man’ as vinyl only. While digital sales are growing, they’re failing to compensate – the 3 billion tracks sold on iTunes are mostly individual tracks, not albums. To an industry gorged on two decades of high-margin album sales it’s not enough.
Labels are good at shouting about their woes but outside of recorded music it’s a healthy business. Radio audiences are steady, iPod sales are up 31%, concerts and merchandise are up 4%. The latter is where musicians are now expected to make their money and it works well, especially at the bottom and top of the tree. The new groups use the Internet tribal drum to fill clubs, while all those legacy groups make up lost CD royalties by putting their animosities aside long enough to fill the world’s arenas.
What scuppers a lot of new ideas from becoming trends is that they ignore customer behaviour. Nokia’s Comes With Music is a significant development in the legitimisation of free music, but the music will only play on the phone or a pc, with no ability to burn it to CD or put it on another player. To somebody using Limewire or loading CDs into an iPod it’s hard to see what the value is. It ignores the entire history of music consumption, where every format development for 100 years has been driven by one factor: convenience.
From 78s to LPs to cassettes to CDs to MP3s, the reason each new format has caught on is because it’s more convenient than the previous one. The advent of stereo in the early 1950s is the only popular development based on sound quality; the benefits were so obviously better than mono that everyone wanted it. If anything, the quality of MP3 is a huge step backward from CDs and vinyl. Tough luck Mr. Audiophile, it’s become the consumer standard, the only file format that can be played on any music player or computer.
If the music labels can embrace convenience and customer behaviour, learn to capitalise on the new ways people experience music and stop being pig-headed, then the next few years could be an open frontier seldom seen since the late ‘60s. The “universal jukebox” is likely, playing whatever you want on whatever’s convenient - pc, mobile, or iPod. Payment is moving towards a monthly subscription and advertising income model. Those hated DRM software locks will disappear. A lot more musicians are going to control their own careers outside of the major label system.
Screw it up, though, and it’s possible that within two or three years the multinational owners of the major labels will break them up and parcel them off to anyone with a taste for adventure. Another year of DRM and litigation will encourage more private p2p networks and anonymous routing to them, making them untraceable. Fail to legitimise those networks and we may see the demise of paid recordings, at least by the listener.
The business of music has changed irrevocably. “I think the golden age of the record labels – the 1960s to the 1990s – will be looked at as a historic aberration,” says Bill Flanagan, Executive Vice President/Editorial Director of MTV Networks. “It was a really good aberration, though.”
So: where are we heading?
Part 2: Music Labels
Part 3: Live
Part 5: Radio
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