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|Music Industry Trumps Record Industry
|For most people, music is an essential part of their daily lives. They listen to it in their cars, in movies, on TV, on the radio, and on the go. Ever since the digital age, the music industry has endured many rapid changes. The music industry has many new marketing tools to gain new exposure and reach a wider audience than they could a decade ago. The recording industry previously released music on vinyl records and CDs only. Now it must adapt to many new forms of digital mediums. Labels now have to worry about their music prematurely leaking online, and about illegal file sharing cutting down on album sales. Many new positive and negative aspects of the whole industry are quickly being introduced. As a result of the digital age, the music industry is rapidly distancing itself from the record industry. The recording industry must catch up with the rapid technological advances or there may be some major changes and further decline in what was once a prosperous business.|
Before the digital age, the record business was fully alive and was in no danger of failing. Why is the music industry unable to continue doing their business like they did back in the 1970ís and 1980ís? Before the CD was invented, vinyl records were one of the only ways to enjoy your favorite artist at home. The record business sold their albums at record stores, and consumers bought them to listen to their new purchase at home. The problem with vinyl records is that without proper care, the sound quality gets worse over time. Dust and other debris can get in the grooves in a vinyl record and produce static. James Russel, a physics major and inventor, sought out to make a better medium for distributing music that was less prone to errors. He decided that instead of using a needle to read analog sound, he would digitize the music and use a laser diode. An analog sound would be taken and recorded into millions of ones and zeroes. That binary code would then be translated back into sound when the consumer played it. Russelís patent was accepted in 1970, and the Compact Disc was born (Knopper 17). The CD, smaller than a record, allows for much greater portability. Since optics are used instead of a needle, dust cannot get into any grooves, and sound quality on a CD remains perfect every time. Because of consumer demand for higher quality sound, the record industry had to adapt to the new format.
To switch from selling vinyl records to selling compact discs, record stores first implemented a special CD case known as the longbox. Adopted in 1983, the longbox was a quick fix which ended up being a big problem. The longbox was introduced to prevent theft because of its bigger size, and to easily fit into the existing LP racks. The industry introduced the longbox without thinking about the consequences. The cheap cardboard ended up being a tremendously wasteful idea, and the public backlash was enormous (Kusek 152). The boxes finally died ten years later, much to the joy of consumers (Knopper 39). The delayed response to get rid of the very wasteful packaging can be compared to the major label's delayed response to the changing music industry. After the industry finally adapted to the changes, however, the popularity of CDs soared.
The introduction of the CD boosted record sales to new heights in the 1990ís. With the great improvements made by the CD, records quickly became obsolete. Many consumers had to adapt to the new technology, and many bought their record collections all over again on the new format. As a result, the record companies experienced a boom in sales that launched them into a massive industry (Knopper 35). Even though the CD greatly benefited the industry in terms of sales, it was actually a disaster in disguise. Corporations began to form and the record industry soon became less about the music and more about the profits.
Eventually big businesses began taking over the retail side of the industry, driving away the smaller record stores. With the huge surge in popularity of the CD, large retail chains such as Best Buy, Wal-Mart, and Target began selling CDs at prices that other record stores could not compete with. Often times, these big stores would sell CDs at below the suggested retail price to attract customers. Since independent record stores could not compete with the big retail chains, many went out of business (Kusek 7). The Targets and the Best Buys eventually controlled more than 50% of album sales, but each store's music section was used mainly as a gimmick to get people to buy other things. Chains began limiting the number albums they were providing, only stocking albums that sold the most copies and made the most money (Knopper 110). This was bad for the record industry, because the lack of choices made it far less convenient to obtain music. With the limited variety of music to choose from, customers began searching for other ways to obtain their favorite music.
While the nineties were the decade of the CD, they were also the decade of the single. Record labels, in order to make more money, made it increasingly difficult to buy singles separately. The record industry argued that the single was too expensive to produce and was cutting down on the actual album sales (Knopper 106). In the late 90ís, the only way to purchase a favorite song on the radio was to buy the bandís CD. Users began to see that they were paying the full album price when they only cared about hearing one or two songs (Hall). In 1999, Napster was created by programmer Shawn Fanning as a way to share songs over the Internet for free. Popularity soared, and in two years over ten million users were downloading and sharing their music collections through Napsterís service. Bands and record labels quickly caught on that Napster was cutting down on their album sales. On December 17, 1999, the Recording Industry Association of America filed a lawsuit against Napster for the facilitation and transfer of copyrighted material (Knopper 81). The RIAA won the case, but by that time, Napster was not the only place to obtain music illegally. The lawsuit did little to stop piracy, but it did publicize that downloading music for free was illegal. Currently millions of people are downloading music illegally every day, but the RIAA cannot sue everyone. The industry needs to spend less time trying to thwart piracy and more time on finding new ways to conduct business that meets the consumer's needs.
Ever since the introduction of Napster, the record industry has been chasing after illegal downloading. The record labels have always wanted a way to copy-protect their files so they cannot be shared or traded to anyone without a price. In the late nineties, the Secure Digital Music Initiative was formed to restrict digital audio. Their goal was to create hardware that would only play SDMI-approved content. If a pirated file was detected, the hardware would not play it. However, due to many holes in the system, the SDMI technology faded away by the year 2000 (Knopper 151). As with any restrictive technology, the consumer will soon find a way to bypass the system. Users will always find a way to get what they want. The old record industry needs to learn to go with the system, and not fight against it.
One of the only things keeping the record industry alive is digital sales. iTunes, introduced in 2001, has sold close to ten billion songs globally (Arthur). Its huge success relates back to the price of a CD. Instead of paying up to $18 for a CD, users on iTunes pay 99 cents per song. Labels make 67 cents for every 99 cent song downloaded (Knopper 178). Although labels make a considerable amount of money compared to illegal downloading, they are still making far less money than they did with CD sales. Each song on iTunes essentially acts as a single, which is exactly what the record labels fought against in the 90ís. From 2006 to 2007, 500.5 million physical albums were purchased in America. In the same time, 844.2 million digital tracks were sold on various sites such as iTunes and AmazonMP3 (ďU.S.Ē). Trends show that physical sales will continue to drop while digital sales will continue to rise. Unless the record labels do something to increase profits, they may be in trouble.
The record industry is losing money is because the introduction of piracy has also introduced music leaks. When a song or an album leaks, it is released onto the internet before the intended release date. As Daniel Ramos, manager of independent record label Ignite Records, puts it, music leaks have, ďtaken away the element of excitement for people to hear a new album or to see a release date and be excited forĒ it (Ramos). The internet is full of websites dedicated to posting leaked albums. It is practically inevitable that an album will leak before its intended release date. Some argue that leaks take away from the element of surprise, while others say that it acts as a trial run before the release date to see if the album is worthy enough to purchase. The music leak cuts down on a lot of potential sales for the labels, but it makes sure that consumers arenít being tricked into buying something that they wonít like.
While the recording industry is fighting illegal downloading and piracy, the music industry has realized that the Internet is a valuable marketing tool. Bands can gain significant amounts of exposure over the Internet and develop a loyal fan base using social networking sites such as Myspace and Purevolume. The internet has made it so bands have to develop a relationship with their fans before people will buy their merchandise. Band members will periodically update social sites, like Twitter, to give fans a quick update on tours or the recording process. Music blogs post reviews of albums and suggest new bands. While the record business and CD sales are dropping, the music business is at an all-time high (Kusek 6). Many new bands get discovered and signed to record labels based on how many fans they have on different social networking websites. The Internet has become a huge resource for bands to get their word out to the public more efficiently.
At one time, the radio was one of the only places for bands to gain exposure and branch out to new potential listeners. Radio has, however, quickly become run by corporations. Only a handful of companies own the majority of the stations across the United States, and one of the most prominent is Clear Channel (Kusek 60). The problem with corporations owning all of the radio stations is that it is suddenly only about the money. In order for labels to get their songs played on the radio, they must pay for placement. Radio promoters took hold and used massive amounts of money to get their music onto the radio and urge the program directors to make their songs hits (Knopper 74). Even though this process was eventually made illegal, it had a damaging effect on radio stations. Since not everyone had money to spend on promotions, only music from the major labels was played.
The acquisition of most of the radio stations in America by only a few companies has critically limited the variety of music on the radio. As Tourť, MSNBC contributor and TV host explains, "By any normal standard, it's a monopoly. So instead of having lots of program directors and, you know, maybe the guy in Philadelphia's a little crazy and he'll play a record nobody else would play, and people start hearing it and requesting it, and the record takes off by itself. No more. Clear Channel is in control. If they don't want it played, it doesn't get played" (Kirk). Radio has decreased in popularity as a result of not enough choices, the same way as the big retail chains such as Best Buy have gone. People are rapidly going to the internet to get their music because it offers an unlimited number of options for music discovery and variety is not limited or controlled by a single corporation. People turn to the internet to discover new music now, not to the radio.
One light at the end of the tunnel rests on independent labels. Indie labels, unlike the major ones, do not focus as much on the money and instead concentrate on the actual music. There are over ten thousand indie labels out there, and the number is growing (Kusek 111). With the rise of independent labels, the old philosophies of the major labels will give rise to the new business models for sales coming from the indies. Indie labels can test out artists that the major labels would be afraid to touch. Independent labels have less to lose than major labels do when testing out new models because they care more about developing their artists instead of making as much money off of them as possible. Independent labels are becoming more and more widespread because they are smaller and can better adapt to the changing industry
One of the reasons why indie labels are shining over major labels is because major labels do not put as much value into their music. The major labels only focus on the CD itself. They don't care about anything else. Most labels cannot just make hits anymore. They need to find new marketing tools to branch out to potential buyers. They just want to get the music out there to consumers, and that simply isn't enough to entice customers anymore (Kersnar). People are not going to go out and buy a CD when they can get the same thing for free online. Major labels do not spend as much time on the packaging or extra perks included in the purchase of a CD than the independent labels do (Kirk). In order to entice people to purchase the CD, it needs to come with something else that can't be downloaded. If purchasing a CD came with added incentives like autographed booklets, concert tickets, or coupons for other merchandise, there would be more reason to purchase them.
Maybe album sales are down, but the music industry is by no means dying. The record industry may be failing, but musicians are finding other ways other than through physical CD sales to make money. Physical and digital sales combined make up around $12 billion annually. Compare that to concerts, touring, merchandising, and live entertainment, which makes more than $25 billion globally every year (Knopper 21). Sales and marketing need to be reworked to promote merchandise other than albums, because those alone do not make money anymore. With all the new marketing techniques, people are able to buy merchandise such as shirts and posters online. Consumers can easily track when their favorite band is going on tour and attend their shows. Because the record labels take such a large cut from the musician's album sales, artists now rely mostly on merchandise to make money. Some artists have even given up on album sales entirely.
Many bands are now taking the pay-what-you-want approach to their albums, made popular by band Radiohead in October 2007. On October first, Radiohead announced that their new record would be released in ten days, not on any record label, in a pay-what-you-want model on their website. Consumers could pay anything they wanted for their CD, even free. They also offered a box set for $82 that included bonus tracks, booklets with exclusive art, and more (Tyrangiel). Despite Radiohead offering their album essentially gratis, it was a commercial success. Even though a third of their fans downloaded the album for free, Radiohead sold over 3 million copies and 100,000 box sets in under a year (Sherwin). The band released the album with very short notice, which prevented any leaks from popping up before the release date. The free cost of downloading the album was enough marketing to get the word out to everyone, and those who could manage to pay a few dollars here and there did so. The box set made a large amount of money for the big fans who wanted something exclusive. Radiohead successfully combated almost everything wrong with the record industry's outdated strategies.
Radiohead's demonstration shows that music will sell as long as it is convenient for the consumer. By allowing people to pay what they think an album is worth, more people will buy it. If the normal $15 asking price of a CD is too expensive, someone could instead pay $7. If someone does not want to spend any money at all and just wants the music, they can not pay anything and get the songs for free, and still give the band exposure and motivate them to make other purchases on merchandise later. The record companies desperately need to follow the path made by bands like Radiohead to change their business models and find a way to work with the consumers, or else they won't make any money (Kusek 168). With the rise of the Internet, exposure has become the new business model for musicians. Technology is advancing at a much faster rate than the record industry can catch up. The record industry needs to start realizing that they aren't in the CD business anymore. The industry needs to branch out and sell more mediums, but the record industry will not prosper if musicians do all of this on their own.
One reason why bands do not need their record labels anymore is because the technology required to produce albums has simplified drastically. Trends show that more and more bands are leaving their old major labels to form their own labels. This way, they can enjoy all of the profits and not have to give royalties to the major labels who only care about money. The average musician on a major label makes around $30,000 a year, but that number increases drastically when bands have ownership of everything (Kusek 108). By removing the middleman, the relationship between musician and consumer is much better. Bands can listen and adapt to their fan's needs without it going to a large corporation where fans from hundreds of different bands get piled together. Since the majority of bands care more about the music than they do about making money, the music industry is still alive and well, while the record industry is slowly dying out.
With the record industry going downhill, they need to start looking into new compensation models for artists that benefit both the musician and the consumer. Several people, such as Harvard professor Terry Fischer, are proposing new systems which would collect money from monthly fees or through taxes, other than per album. Fischer suggests that musicians would get paid from a large pool of money based on how popular they were on the network. The more plays an artist gets, the more money they get (Kusek 131). This system would greatly benefit everybody involved because it would allow the musicians and labels to get paid for their work, and it would also be more convenient for the customer. Consumers are willing to pay for things that are convenient for them, so a system like this would be greatly beneficial. Labels need to embrace new pricing models like this if they want to survive, because album sales are rapidly declining with no sign of improvement.
Although the recording industry is beginning to take steps in the right direction, there is still a long way to go. The digital age has made acquiring music much easier for the consumer, and it has allowed many new ways for bands to get exposure. The music industry is as big as ever. Since the popularity of artists is more spread out, the record industry can no longer thrive off of album sales alone. The major labels are doing anything they can to try to find the next big break and keep surviving off what their old business practices rely on. With the internet, popularity has spread and huge rock star profits are becoming hard to make. The internet has made the playing field much more diverse, and the type of music that consumers get is no longer limited to what the major labels want. Technology has made it much easier to create music, so there are more choices than ever before. The internet has made the ways of the industry more transparent. The major record labels just cannot keep up with consumer demands, and thousands of independent labels are taking over the marketplace. The music industry can change easier if the big four major labels no longer control the majority of the industry. The reason the record industry is so far behind is because the big four labels are so far behind in the times as well. Once the music industry breaks free of the record industry, musicians and consumers alike will prosper. The recording industry may be in trouble, but the music industry isnít going anywhere.