Out With The Old, In With The New: How Innovation Has Completely Changed The Music Business
from the big-changes dept
Until recently, the music industry provided artists one path, and one path only, to reach and connect with their fans and monetize their pre-recorded music. Artists had to sign to a record label, transferring ownership of copyrights, relinquishing exclusive artistic control, and giving up most of the revenue from the sale of their recordings. Fans could only buy pre-recorded music in physical form from retail outlets from the limited number of artists that labels chose to anoint. Labels were aware of their unique position and took full advantage of it by gouging both artists and music fans.He goes on to point out that the reason the labels were able to do this was because of four key factors that only the major labels could really provide:
Four main reasons: barriers to recording, manufacturing, distributing, and marketing music were virtually insurmountable.However, he notes that all four of these areas have been disrupted by new technology, and that process is continuing, such that the key advantages that the major labels have continued to rely on are slowly disappearing as well:
First, it’s far cheaper to record now than it ever has been before. In addition, the level of expertise needed to record has dropped considerably. With a laptop, some one-time purchases of software and some hours to learn how to use it, a home recording studio can be created for the cost of one day’s recording at a high-end studio.Because of this, you no longer are required to deal with a major label. The majors do still dominate radio play, but the piece also digs in (in great detail) as to why Price thinks terrestrial radio is about to be completely destroyed by technology as well (think: once interactive streaming is standard in cars and on phones...). But the major labels haven't done that much to adapt to this pretty massive change to their market. And that's caused them a lot of problems (as seen in their bottom line). Of course, rather than admitting their own failures in adapting, they've basically tried to blame pretty much everyone else. Price highlights the ways in which they've tried to cope:
Second, in the digital world there is no up front cost or risk to manufacture inventory. The music is available in unlimited quantity as a digital file that replicates on demand only after it’s bought or accessed to stream.
Third, music fans have shifted from buying CDs in stores to buying/streaming music on-line. Now an artist, for a nominal fee and the click of a button on a website, gets an unlimited amount of self-replicating inventory with no up front cost into the world’s largest music retail stores (i.e. iTunes is larger than Walmart ever was), all while keeping their copyrights.
Fourth, there is now equal access to music discovery outlets – YouTube, blogs, Slacker, Pandora, Spotify, digital music stores’ discovery features, Twitter, Facebook and other social networking applications are open to everyone, not just the elite few artists signed to labels. The only media outlet not open to everyone is commercial radio, but with that going the way of the 8-Track over the next few years, the last stranglehold of the traditional music industry will be gone.
- Sue music fans for copyright infringement
- Create more onerous agreements between labels and artists requiring them to give up even more of their copyrights, not fewer (the infamous “360deals”) while providing less value.
- Use antiquated royalty accounting systems and provisions to slow down or reduce royalty payments owed.
- Stifle innovation under the guise of “protecting” copyright (As one example, the majors made it a condition that they must own a piece of Spotify in order for Spotify to have access to their music).
- Killed artist development and long term careers in a mad dash attempt to make money as quickly as possible.
- Feed the media as much false information as possible (i.e. the entire music industry is dying) in an attempt to discredit, slow down and delegitimize the new emerging industry.
Either way, it's great to see Jeff lay out all of this in one place, and it shows that he's still thinking about the nature of the industry and where it's heading next. While many from the old industry still look at the future and try to figure out how to hold it back, more and more are realizing that the right play is to move forwards, quickly.