ANALYSIS: How we fucked up the music industry, and what other companies are learning from us (hint: not enough)

I started my career in music back when music videos still cost a million dollars.

If I was born 10 years earlier, I’d be a multi millionaire by now. I wouldn’t have had to work nearly as hard. Money was flowing all over the place and the party was never going to end.

Today, the music video budget for a super star artist is maybe $75,000, give or take. It is less than 10% of what it was a decade ago. Money just isn’t easy to come by.

I’m not complaining. Our industry used to attract a lot of people drawn in by the lure of easy money. Some may refer to these people as “douchebags,” but I digress. The people working in music today are passionate about their jobs. And they make ridiculously less money.

That’s why it is hard to read an article like this one.

Does anyone pay attention to what we just went through? I had lunch with a big time movie producer the other day. They’ve worked on huge $100million+ films, and they were lamenting that the average budget for a mid-sized film has dropped from $60 million to $30 million. One of the biggest reasons? When they make their budgets, they’ve reduced their estimate on DVD sales all the way down to zero.

Another good idea from film masterminds (or… an industry metaphor?)

I’m no expert in the film or TV industry. Heck, I’m hardly an expert on the music industry. But I do know that a bomb of a film still made its money back, by selling the rights to cable, selling it on DVD, licensing it around the world, etc. This happens in music, too. Maybe an album tanks, but if the song is used in a TV commercial or whatever, the label gets paid, as does the artist. For major labels, there is actually a LOT of money in this, with entire divisions dedicated to music placement. The point is, your income has to exceed your expenditures, and we sort of fucked that up. “We” as in the industry, but as consumers too. There is a great article about that right here.

It is not news to anyone that as an industry, we were slow to react. Here is an example. The ‘old’ music model was that you would have an artist record an album, press it to CD, package and shrink wrap it, ship it to a store, then have the employees unpack it and put it on a shelf. As a label you would pay maybe an 18% distribution fee for all that to happen. There are whole companies built around this model. It was a huge business! And a lot of work.

OK, now Apple comes along and builds their digital store. As a label, you type in your meta data and click some buttons. Apple charges 30% for this service.

iTunes is the biggest distributor now. They sell more music than WalMart or Target or Best Buy. And their marketshare is growing. More or less, the music industry conceded a third of their revenue to Apple.

Well, fuck us. It was our own damn fault. There are no shocking revelations in this article or anything like that. Anyone even on the periphery of music knows we spent all our resources fighting Napster and P2P while Apple came in and built their digital store. What I’m curious about is: who is going to do for film what iTunes did for music?

There is one potential game changer for us. The reason pop music gets pushed so hard is because that is how our business model is structured. Follow the money: pop music succeeds because right now, that is what brings in the revenue. 70% of sales often occur in the first week of release. Everything is front loaded. Our model rewards pushing something as hard as possible for a short while and then abondoning it, moving on to the next flavor of the week. That last 30% takes a lot of work! Every once in a while something sticks, and everyone cheers, but that is rare. At least one big label I know of doesn’t even have an “artist development” department any more.

These five defined my childhood.

So what happens when streaming services become more popular? Those pay based on consumption. Let’s say you pay Spotify $10 a month, and you listen to Spice Girls’ “Wannabe” over and over again. It’s the only song you listen to. Well, Spotify or whoever takes their cut off the top and pays the rest out to the Spice Girls’ label. If you listen to “Wannabe” and Ke$ha, they split your money. They pay out based on what users are listening to. The thinking then becomes: OK, do we want a big pop song that everyone will listen to like crazy over the summer, or do we want an OK Computer, an album that over 30 years is going to pay over and over and over?

Would love to hear your thoughts. Leave a comment below or send me an email.

UPDATE: TechDirt has a great analysis up with a similar viewpoint that is worth reading. Anyone in the film industry who can shed some light on this for us?


5 responses to “ANALYSIS: How we fucked up the music industry, and what other companies are learning from us (hint: not enough)

  1. I obviously feel from the artist perspective, but a real piece of art is something that can be relevant to humanity to help it heal, or progress. Essentially when it comes down to the whole cosmic aspect of art and music, many artists who do truly respectable music will tell you music comes to them from somewhere else. Another dimension perhaps, and the whole point is really that perhaps while we are squabbling in this ever changing world, the core of what music makes someone feel is beyond the hands of salesmen, and more to a connection of something greater we as humans only lightly feel when we listen to music.

  2. i think the model of spotify is definitely a strange one, coming from the UK where I’ve seen the price and rules of spotify changed more times than i could count. I’m surprised they haven’t redefined the lines since it launched in the states last year, perhaps they’re now making enough money to barely stay afloat.

    Personally i think approaches need to be completely re-thoughtout, you can already see bands on indies focusing a lot more on preorder packages with all sorts of bonus’s so maybe that will work out for them. because relying on a pay check from any streaming site is definitely a pipe dream. for the larger acts its a lot sadder, maybe everyone will have to end up like lady gaga or whoever and tour the same markets 3-4 times before it comes time to make album number 2…

  3. First, promoting an artist that can generate multiple complete works seems like it should produce cost savings by not having to spend to the same extent on advertising to create ”artist” awareness (only inform of new product) and payment to as many people like you to search for new ”talent.” But as far as generating ”artist” awareness, the good news is they can bring in any incompetent PERFORMER and place them on one of the primary opiate distributing media (restricted number of products presented with a large initial audience; like television) and watch the masses grab hold. Even better news is that they can save cost of informing on the product because as long as a few critics say the pathetic piece is good, well no one actually looks to see if the emperor has any clothes, or as long as they can pander to their target audiences through secondary marketing (many products with a small initial audience, but if you reach a tipping point in the number that follow – still not necessarily dependent on quality- they are now popular, and oh yay network structures, watch the masses again grab hold. So THANK YOU to people like you who push this shit through social media, and the trash that follows, it’s why I rarely hear anything good or origial unless I go listen to non-volume reinforced local music. I’m not advocating for a few ”artists” who generate complete works over many that put together a partial piece, as I prefer local music (if only because at least it occasionally provides some originallity without the the actual artists pandering heavily to the audience and being complete garbage). Only noting that thanks to mindless social media like twitter and facebook, and the garbage that specializes in pushing it like yourself (I believe I saw somewhere you noting this as an area of expertise) and the ”artists” that contribute, I think good music is far less the focus, and so far less frequently sees the light of day, and instead it’s far more ”important” (i.e. beneficial) to push ”music” by pandering, or push someone who does pander, to the commons well. And why would they want a quality piece of music and artists when instead they can have entertainment and performers. Bring on the circus, the ringmasters like yourself now presenting …, the lady with a third ear, but oh if that’s not for you then just wait for the next act who is just like you (no, they can’t say they’re more talented, that would alienate the commons). Nineteen-hundreds Soviet communism or 21st century world capitalism … it’s all the same … placate the commons, and those willing to, like yourself I assume, well, there’s money to be made. Who wants the best music (and while the product should be able to be separted from person – maybe not for payment, but at least for consideration of quality of product – I would take the added benefit of it comming from a person who doesn’t bend to their target audience) when you can have noise with pandering. Maybe the world wasn\’t much more right, but with no incentive for the best when associating with the masses is what pays, it’s a definate race to bottom and the extinction of art. Also note, this doesn’t mean I think I’m above it, only that what I wrote is correct. Yes a rant, but there\’s no way to fight effectively when the best pander to the worst, and it’s twitter and facebook where the mindless can cluster, so I might as well stand foolishly and at least try to be a small thorn.

  4. Pingback: Guest post: Eric Tobin, VP of Hopeless Records « KMGMT

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