Understanding The Decline And Fall Of The Major Record Labels

from the perhaps-it-was-inevitable dept

There's a fascinating, and well sourced, editorial over at Hypebot by Kyle Bylin, suggesting why the major record labels have had so much trouble adapting to these changing times. Bylin argues, convincingly, that a big part of the problem was that as the record labels got bigger and bigger, they focused solely on the "music as commerce" side of things, ignoring the role of "music as culture." Obviously, music as commerce is an important part of the music business, but if you ignore the cultural importance of music (except, of course, when lobbying the government for more protections) you miss what's actually happening in the marketplace: how people are connecting with the music, and what they're doing (and want to do) with the music. Here's a snippet:
As the record industry moved through this stage there was a decline in learning orientation -- in learning what fans actually wanted -- both in terms of how they consumed music and what they were willing to pay for. So to, they began to discount the role that luck played in their success, to assume that the mass-marketing successes that occurred near the end the CD boom, which sold 3-4 million copies, applied to the natural laws of the universe, rather than that of a relatively short-lived phenomenon. This addiction to blockbuster artists is what characterizes the second stage of decline, which Collin's deemed The Undisciplined Pursuit of More. Here, the record industry started out on an unsustainable quest, and, because of their huge successes, they were pressured to grow.

Having reached the peak of the CD boom in 1999, the record industry had become a nearly $15-billion-a-year juggernaut, but under the pressure for more growth they collapsed, and, in the process, a vicious cycle of expectations had been set that strained the artists, the fans, the culture, and their systems to the point of breaking. Since record industry was unable to deliver new music with "consistent tactical excellence," they began to fray at the edges. Disruptive technologies were released, an epidemic of file-sharing proceeded, and, at this critical juncture, vested interests of music executives struggled and competed to achieve repetitive consumption through obsolescence. But these executives were too late, as the record industry, by externalizing the blame for their decline in sales, had already started to show symptoms of stage three, Denial of Risk and Peril.

Music executives began discounting negative data, amplifying positive data, and putting a positive spin on ambiguous data. In stage three, Collin's argues that those in power start to blame external factors for setbacks -- "or otherwise explain away the data" -- rather than accepting responsibility and confronting "the frightening reality that their enterprise may be in serious trouble." Right away, the Internet and file-sharing became easy scapegoats for the decline in sales that the record industry faced.
There's nothing all that surprising in the essay, but it's nicely written and explained. Well worth reading the whole thing.
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Filed Under: business, denial, luck, record labels, strategy

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  • identicon
    Lobo Santo's Ugly Goldfish, 11 Dec 2009 @ 7:51pm

    Definately a Friday post. Light on content, full of emotional reflections, and generally something that the basement kids can debate over the weekend.

    Let the fun being:

    f--k the RIAA and every other 4 letter agency!

    f--k the colleciton companies and all those twits!

    die stupid record labels, you never did anything good, you are useless, and you suck!

    Carry on. See you on monday.

    reply to this | link to this | view in chronology ]

  • icon
    rosspruden (profile), 11 Dec 2009 @ 8:02pm

    Network TV is in that second stage

    Network TV is so obsessed with creating the next big blockbuster hit that they'll cancel potentially great TV if it doesn't find its audience in only half a season, e.g., Firefly. In network TV's current climate, the original Star Trek would have lasted an entire season, much less three.

    reply to this | link to this | view in chronology ]

    • identicon
      Anonymous Coward, 11 Dec 2009 @ 8:11pm

      Re: Network TV is in that second stage

      E.g. everything Joss Whedon is naïve enough to put on network TV (lately). =/

      reply to this | link to this | view in chronology ]

    • identicon
      Anonymous Coward, 12 Dec 2009 @ 4:35am

      Re: Network TV is in that second stage

      I must be one of the only sci-fi nerds who though Firefly was crap. It was poorly written, had weak character development and stupid stories.

      I think that had more to do with its cancellation than anything else.

      reply to this | link to this | view in chronology ]

      • identicon
        Anonymous Coward, 12 Dec 2009 @ 4:52am

        Re: Re: Network TV is in that second stage

        I for one want to know what the hell you are comparing it to.

        reply to this | link to this | view in chronology ]

      • identicon
        grapeshot, 12 Dec 2009 @ 8:14am

        Re: Re: Network TV is in that second stage

        No, you are not the only scifi fan who thought Firefly was mostly utter crap. I watched most of the episodes when they were originally broadcast, and thought they were very poor stuff with only occasional flashes of something interesting. Any reasonably sophisticated movie/tv viewer finds the show to be little more than an oddly conceived and awkward concept wrapped up in some glib dialog. I couldn't believe that the maker of Buffy and Angel was also responsible for this garbage! I even tried re-watching the series on the SciFi rebroadcasts, but found it to be even worse than I had originally thought. (Serenity, the movie, was at least watchable, but the ending was a horrible cheat; it's not a movie that I can recommend.)

        Fox actually gave Firefly much more of a chance to catch on than they had given several of their other shows. What should have been clear to any objective observer is the ratings numbers, which started out decent, declined PRECIPITOUSLY (er...that means the numbers swiftly tanked). The only conclusion that can be drawn is that most audiences saw the show and clearly said "no thanks!" Even the follow up movie, Serenity, had only mediocre box office, barely making back what it cost to make and market-- and this was after an entire summer of special screenings in major markets to try and build up word of mouth momentum. Perhaps the DVD sales of the show and movie have at least made some small profit for Universal, but obviously not enough for them to consider any sort of revival of the franchise.

        Even though I don't like Firefly. I would not deny that Firefly fans are very devoted to their show, and enjoy it immensely. I'd like it, however, if they would shut up about how totally awesome it is. Believe me, scifi fans and main stream audiences have had plenty of chances to sample it, and at this point they have voted with their pocket books. The franchise will remain a cult phenomenon at best. The mainstream audiences and scifi fans (those same ones, for example, who went to see the latest Star Trek movie in droves) are very clearly not interested in Firefly.

        reply to this | link to this | view in chronology ]

  • icon
    Modplan (profile), 11 Dec 2009 @ 8:05pm

    Disruptive Innovation

    The word disruptive is used here - is the article referring specifically referring to the concept of disruptive innovation I wander?

    The concept pretty much explains in far more detail part of what was mentioned (need for growth for example), but frames it in a way which shows that often the things that lead to decline in certain situations are very much rational decisions on part of external pressures.

    reply to this | link to this | view in chronology ]

  • identicon
    mrG, 11 Dec 2009 @ 9:12pm

    The Role of Luck Strikes Again

    they began to discount the role that luck played in their success
    This made me laugh out loud, because it is precisely the situation circa 1979 after The Biz failed to produce an endless stream of Saturday Night Fevers -- that LP was an unprecidented list price of $9.99 (for 2-disk set) and was almost entirely re-release material, and by the type the hype was maxed out the stats said that every household in Canada owned at least one copy.

    The industry execs, however, took their magic markers and drew a trend line zooming up from the prior years up through that blip for SNF and got out the yardstick to continue the line through the ceiling. They hired scores of people, built new pressing plants, signed new artists, and snorted a great deal of the profits I'm nearly sure, but you can guess what happened next.

    reply to this | link to this | view in chronology ]

  • identicon
    Anonymous Coward, 11 Dec 2009 @ 9:36pm


    "We didn't know who to hire," he says, becoming more agitated. "I wouldn't be able to recognize a good technology person — anyone with a good bullshit story would have gotten past me." Morris' almost willful cluelessness is telling. "He wasn't prepared for a business that was going to be so totally disrupted by technology," says a longtime industry insider who has worked with Morris. "He just doesn't have that kind of mind."

    reply to this | link to this | view in chronology ]

    • icon
      Hephaestus (profile), 14 Dec 2009 @ 7:29am

      Re: This says it all

      "Morris has never accepted the digital world's ruling ethos that it's better to follow the smartest long-term strategy, even if it means near-term losses. As far as he's concerned, do that and someone, somewhere, is taking advantage of you. Morris wants to be paid now, not in some nebulous future. And if there's one thing he knows how to do, it's use the size of his company to get his way."

      This is the same problem that gets so many other companies in trouble. Only looking at this quarters profits and not planning for the future.

      reply to this | link to this | view in chronology ]

  • identicon
    and again, 12 Dec 2009 @ 1:27am

    copyright is nt ownership

    i have noticed a trend in capitalism when it starts to fail in any sector or business

    SCO is the great example
    they sue everyone they think they can hoping one will pay off and when they dont POOF

    30000 lawsuits times 5000 = 150 million in ten years or a measly 15 million a year
    not exactly a big payout is it

    the result has been word a mouth to p2p and millions nooo hundreds a millions getting 100% without you cause you install fear uncertainty and doubt into your own product

    eventually they then decide to go after your isps
    so prices rise , caps , throttling and guess what people with tons a "stuff" just go off the net and they still aren't buying.

    Oh my what now not only is Hollywood going to suffer but ISPS too? sooner or later it will totally unravel like the 6 billion lawsuit in Canada, showing they are counterfeiting others wares anyways so after or during this suit should not the people of Canada under a cdr levy be party too this as 450 million was given to the CRIA in fees?
    WOULD those artists claim those fees or say ...sorry for the trouble have a gift and lets start over be an interesting gift certificate wouldn't it
    450 /30 = 15$ towards buying cdrs and they set prices and you could buy Canadian?

    i know rant rant
    but hey its how ive seen it and with the wind mobile decision opening to foreign isp ownership
    will Hollywood just buy out our isps now?
    watch people DROP net large when you do so buyer beware.

    reply to this | link to this | view in chronology ]

  • identicon
    Aesop, 12 Dec 2009 @ 7:25am

    The Goose That Laid the Golden Eggs

    This story may be applicable

    reply to this | link to this | view in chronology ]

  • icon
    ColonelPanik (profile), 12 Dec 2009 @ 7:39am

    Profit over product

    News papers became obsessed with profits at the expense
    of the "editorial" content.

    Auto makers put profit ahead of quality.

    Health care became wealth care.

    TV, music, movies have all been selling shoddy but
    charging customers premium prices.

    Do not get me started on education.... Universities
    are stealing the students research, hoping to make
    a profit with out compensating the producer.

    Fliping houses? Selling broken software? The food
    we get may be killing us? Just for profit?

    Lets hope that the "Best Government That Money Can Buy"
    will step in and save us.

    reply to this | link to this | view in chronology ]

  • identicon
    bigpicture, 12 Dec 2009 @ 10:21am

    Feedback Loop

    That is exactly how the feedback loop works, and is driven by the lowest common denominator. TV ratings, advertising, music popularity and sales etc. etc. Even the human brain works on a feedback loop. This whole issue hinging on how the feedback is interpreted, relevant / not relevant, beneficial / not beneficial, positive / negative etc. etc. And so everything public is driven by the lowest common denominator (lowest standards) and not the highest standards. The whole social model has to change for this (what we aspire toward) to change.

    reply to this | link to this | view in chronology ]

  • identicon
    Gene Cavanaugh, 12 Dec 2009 @ 2:29pm

    Downfall of Music as content

    Well written article, and your analysis is good.

    It overlooks what may be the biggest mistake of the industry, though, IMO.
    As the labels increasingly sacrificed quality for commerce, they were forced to turn to people who were susceptible; the young. It is well established that there is a huge "sheep" factor in what the young embrace. By making what they were doing seem like "everyone's" choice, they were able to draw in the younger set independent of the content quality - the only thing that really mattered was "acceptance", which can be artificially simulated.

    However, as the young get older, and as the up and coming young look to those slightly senior to them for guidance on which way the flock is stampeding, the absence of quality will become ever more of a problem. We see it now in movies that attempt to succeed by bigger and bigger explosions and "grosser" scenes; with little regard to quality.

    In the long term, the flock will turn away from such things, since there is really very little to hold them except that "everyone is doing it".

    reply to this | link to this | view in chronology ]

  • icon
    Jason Buberel (profile), 12 Dec 2009 @ 6:54pm

    Nice find - a good read

    Thanks for pointing this one out to us Mike - a nice find. I especially enjoyed the grim-sounding names that were used to describe each phase of the lifecycle :)

    reply to this | link to this | view in chronology ]

    • icon
      Hephaestus (profile), 14 Dec 2009 @ 7:56am

      Re: Nice find - a good read

      "I especially enjoyed the grim-sounding names that were used to describe each phase of the lifecycle"

      Hubris Born of sucess
      Undisciplined Pusuit of More
      Denial of risk and peril
      Grasping for Salvation
      Capitulation to Irrelevance or death

      I especially like the "Grasping for salvation" one, It leads to such interesting times and wonderfully screwed up unintended consequences as they try to prevent their demise. Getting arrested for filming a birthday party, getting fined $700,000 for having 24 one dollar songs on a p2p network, getting thrown out of college, etc .....

      reply to this | link to this | view in chronology ]

  • identicon
    Anon, 13 Dec 2009 @ 5:19pm

    This must be true as American culture has always been known for its high minded ideals and spirituality. It's the place people go to polish their souls.

    Yeah, that's why immigrants come here.

    Good to see filesharing has ennobled and returned the soul to contemporary (and niche) artists. Also good to see the humble nobility of file sharers to go out of their way to do this for artists well being and piece of mind.

    reply to this | link to this | view in chronology ]

  • identicon
    Nick, 14 Dec 2009 @ 1:32am

    At the risk of copying...

    Tony Wilson and Factory Records realised back in 1988 that fighting copying wasn't the way ahead. This is what they had to say when COPYCODE was defeated and they made the first commercial DAT releases in the UK...

    "We find the British record industry's negative attitude to DAT release ludicrous and counter-productive. The dangers of copying will only be fought off by a continuing attention to the fetishism of the artefact: the desire of the fan to possess not just a piece of music but a piece of the artist, by the purchase of the official item. Concentration on design, packaging, and the artist's role in this set of product imagery will inevitably render copying a minor irritation."

    reply to this | link to this | view in chronology ]

  • icon
    Griff (profile), 14 Dec 2009 @ 4:14am

    It's simple

    The record labels think that the recordings they get from the artists are the primary thing of value.

    In fact the artists themselves are the prumary thing of value. The recordings are just manifestations of that value.

    Everything else seems to follow from that misunderstanding.

    reply to this | link to this | view in chronology ]

  • identicon
    Murdoch's #37 fan, 14 Dec 2009 @ 8:47am

    At the end of the weekend, we have mostly whiny basement kids arguing about nothing. Excellent post Mike.

    reply to this | link to this | view in chronology ]

  • identicon
    Andrew D. Todd, 14 Dec 2009 @ 11:12pm

    The Music Industry's Troubles and the Industrial Revolution.

    Most of the discussion of the music industry's difficulties is on a very short time-scale. I have discussed this amnesia before:


    but I would like to expand on it a bit.

    We need to talk about music in terms of the industrial transition. In the pre-industrial period, no one had machinery, and everything was, perforce, at human scale. During the industrial revolution, selected people had access to machinery, which they could then use to treat other people as objects, eg. as assembly-line workers, or as part of the market for mass-produced goods, instead of customers for custom goods ("bespoke" as an English tailor would say). In the third phase, the post-industrial period, everyone has machines, and it is no longer possible to build a business model around having machines. This phase is post-industrial because machines, while ubiquitous, no longer define social relations. The third phase has enough similarities to the first phase that it is worth looking back to the first phase for analogies about how the new economy will be organized. So. To apply this to music, let's look back a hundred and fifty years, before Thomas Edison invented the phonograph. Also, bear in mind that a microphone, an amplifier, and a loudspeaker are just as much a mass-production device as a printing press, a record-pressing plant, etc. They remove the limits of how many people can hear the speaker or singer's voice. Once a performer had a microphone in his hands, he was operating in industrial mode.

    That said, most of the proposed scarcities which Mike Masnick has been proposing are industrial products. For example, someone who wants to wear T-shirts with various artwork can buy a specialized computer printer, and print whatever he wants to print on a white T-shirt. The scarcities are likely to be at a personal level, where a large company does not offer any great advantage. In the pre-industrial period, large companies were usually quasi-governmental, eg. the Honorable East India Company.

    The notion of a music fan is a comparatively recent idea. In 1859, the audience were "patrons," something quite different, as I will develop later. I am somewhat skeptical about the music industry's survival prospects, as an industry. I don't think concerts are a way out. A concert depends on the element of mass-production in an applied sound system, both to enable the artist to play for many people, and to keep the artist at arm's length from the audience.

    Full scale rock concerts are held in stadiums, the only available venues capable of holding tens of thousands of fans. This means that they have common characteristics with professional sports. What they sell to the patron is the opportunity to be part of a crowd, and possibly a controlled riot, to do things he would ordinarily not be able to get away with. This factor overcomes the fan's natural preference for viewing events and entertainments in the comfort of his own home.

    There is a tendency to blanket stadiums with surveillance cameras. It has been discovered that the police can use the videos to track down and prosecute offenders after the fact, rather than attempting to arrest them on the spot. If the evidence isn't good enough, the authorities just install more cameras until it is. Every time there is a stabbing, more cameras will be installed, and, once installed, the cameras will remain in place, and record what the English call "ASBO offenses." There is no expectation of privacy in a stadium, and it is very difficult to argue against more cameras in a stadium on civil liberties grounds, more so than it would be on a public street. When this is combined with Ticketron's "Photo-ID and Credit-Card" approach, the videos form a searchable database. The cameras are registered against the assigned seats.

    This, I think, strikes at the heart of the economy of the stadium. The audience will discover that it is no fun to personally attend an event where they are expected to be on their best behavior, as considered retrospectively by video-witnesses who are entirely sober. Much the same applies to the larger and rougher sorts of clubs. In traditional small-town society, where there is no anonymity, where everyone knows you when you walk down the street, it is understood that if you want to behave in an uncontrolled way, the best place to do so is your own basement. There is a whole strata of society in which it is the norm to have a basement bar, where one can drink with one's equals, but not with anyone else. The people who have power do their drinking in private with their friends, and cannot understand why a public establishment should not be regulated within an inch of its life. That is what I think will happen to arenas.

    Now, returning to the way music actually was in the year 1859, I noted that the audience were patrons, not fans. It was understood that the artists were quite commonly the social inferiors of the audience. The real scarcity, the one which was paid for, was the personal service of the artists. The meaning of this varied. A man who played in a symphony orchestra could make a reasonable living teaching music to teenage girls-- but it was understood that he would not be considered an eligible husband for the kind of girl whose parents could afford lessons, and it was preferable that he should be a married man, so that the issue would not arise. The same thing applied all the way up the ladder. Even the most famous musicians were striving for some kind of royal or official appointment or something of that nature. Now, of course, here we are talking about high music.

    The low music, of the type which someone like Lily Allen produces, is something different. In 1859, that kind of music was performed by music hall artistes. Music hall artistes were not generally paid enough to live on. They were expected to round out their income with a spot of prostitution. The same went for the more theatrical elements of the high music (ballet dancers, female opera chorus singers). The more affluent members of the audience went to see a show, picked out a showgirl from the assortment on-stage, and, after the show, went backstage to arrange a one-night-stand. "Connect with Fans" had a very literal meaning, a gropingly physical meaning.

    Now, in the post-industrial period, the position of a typical practitioner of the high music is no worse than it ever was. With the spread of affluence, all kinds of things are possible. The local ballerina might very well be able to convince the school board to pay her to give classes to children whose parents cannot afford to pay for lessons. In round numbers, state and local governments spend something like half a trillion dollars annually on education, and employ millions of teachers. That is wealth undreamed of by the recording industry, whose revenues are, I believe, falling from a peak of ten billion dollars or so. The education system has lots of room for people to be paid for teaching all kinds of things.

    However, for the low music, the problem is different. If we take Lily Allen at her word:


    No one wants their children to be taught that kind of thing. Granted that Lily Allen's mental age is about fourteen... still, lots of fourteen-year-old girls make money babysitting, not a lot of money, of course, but enough to buy the kinds of things it is right for them to have. Obviously Lily Allen could never have done that. She seems to be the classic emotionally disturbed "Hollywood child." The economic problem of pop music is that it is socially boxed in. It does not have access to the full resources of society, because it is a music of inferiority. The only personal service which the low music can come up with is prostitution.

    Nell Gwyn (1650-87) was the classic pre-industrial actress-courtesan, but since her most notable customer was Charles II, she wound up as the founding mother of the Dukes of St. Albans. Charles had fourteen recognized bastards by various women, in which one can only regard as a public display of his virility.



    reply to this | link to this | view in chronology ]

  • icon
    Derek Bredensteiner (profile), 22 Dec 2009 @ 2:39pm

    Why doesn't anyone care about the gas stations?

    We have to protect the gas stations! Millions of dollars and thousands of jobs will be lost in years coming due to rampant growth of efficient electric motorcycles and cars.

    Where will we buy our sugary snacks when these oasis's of the highways are gone? Nevermind that they were never actually in the business of selling gas (selling cds) and that this effort is really to protect the oil cartel (RIAA) or that gas stations will continue to exist through pumpless convenience stores like circle k and 7-11 (independent artists, new labels), we have to stop electric vehicles now before we lose our sugary gas station snacks for good!!

    reply to this | link to this | view in chronology ]

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