The music industry’s problems are bad relationships
Instead of my usual German music news post, I thought a brief chat about the music industry in general would be more gratifying tonight. As I’m sure you know, record labels have been falling apart ever since the internet made MP3 file sharing easy. But that’s not their only problem. If anything, file sharing was just the jumpstart the world needed to start thinking more closely about the music industry as a whole. The biggest topic in the news lately involves the terrible relationships between labels and their musicians. Bands around the world seem to be looking for any opportunity to leave their label behind. It’s easy to see why after reading this enlightening article.
A clip from “The life and crimes of the music biz” by Simon Napier-Bell from Guardian.co.uk.
A contract with a major record company was always a 90 per cent guarantee of failure. In the boardroom the talk was never of music, only of units sold. Artists were never the product; the product was discs - 10 cents’ worth of vinyl selling for $10 - 10,000 per cent profit - the highest mark-up in all of retail marketing. Artists were simply an ingredient, without even the basic rights of employees.
Imagine the outcry if people working in a factory were told that the cost of the products they were making would be deducted from their wages, which anyway would only be paid if the company managed to sell the products. Or that they would have to work for the company for a minimum of 10 years and, at the company’s discretion, could be transferred to any other company at any time.
Any suggestions? I have one, but it’s not going to be easy to swallow. Continue reading to see what it is.
Currently, just about every record label in the world, including those that have emerged in recent years with alternative revenue models, still operates in essentially the same way. First, they form a contract with a musician in which the label becomes the legal owner of the rights to the music their signed musician produces. This establishes an asset for the record labels. And then later on, they use this asset to generate income either by selling the music to fans, or in some very recent examples, by creating corporate sponsorships for the music. Essentially, record labels use their rights to the music to directly drive revenues.
These are the two key aspects which are causing the record industry as we know it to crumble. When you zoom out to take a look at the bigger picture, you notice that the music industry is made up of three entities. They are the record labels, the musicians, and the music fans. Each one is linked with the other two, forming a hypothetical triangle of relationships. The strength of these relationships is critical for the health of the music industry. However, two of these three relationships are falling apart before our eyes.
There is hardly a day that passes that you don’t read about a musician or band that is protesting their relationship with a record label. At many record labels, musicians have almost no choice in deciding how they want their music to be distributed and sold. Oftentimes, labels go so far as to tell musicians how their own music should sound for optimal sales. And let’s not forget that they don’t even own the rights to the music they spend months and sometimes years producing. This unrest among musicians seems to be growing as more of them speak out, too. Under contract, thousands of musicians are held at the mercy of a giant, lumbering record label with an outdated ideology, unable to change as fast as their musicians know they need to. And for those lucky enough to find a loophole or who happen to be at the end of a major label contract, they often vow never to return to such an out-of-touch organization. Clearly, the relationship between record labels and musicians is weak, at best.
Music fans are also at odds with most record labels, due to the changing environment that music is surrounded by. The biggest argument by far is that of digital file sharing. Millions, probably billions, of MP3 files have been traded online for nearly a decade now, creating the impression among the majority of consumers that music has little monetary value. Naturally, this is bad news for record labels because it means that their assets, the copyrights to all that music, are being stolen on a large scale and are being perceived as being less valuable than they ever were before. In response, the Recording Industry Association of America (RIAA) with the support of the “big four” major labels, has filed countless lawsuits against file sharers. They have glorified their victories in court and threatened similar treatment to anyone who attempts to share digital music files illegally, acts that have essentially been interpreted as a declaration of war against music listeners. The relationship between record labels and music fans is definitely broken.
The only relationship that is still strong is the one between musicians and their fans.
Now that we have a better understanding of the bigger picture and what is really causing the problems the music industry is experiencing, it becomes painfully obvious that simply introducing a new revenue model like sponsoring musicians or expanding existing contracts to include new features like concerts is not going to solve anything. The solutions that have been proposed so far equate to taking a pain killer to treat a flesh-eating virus. These critical relationships need to be nurtured back to life, but that is clearly not going to happen with current thinking. What really needs to be done is a complete overhaul of how the three entities that make up the music industry interact with each other. Roles need to be changed. New terms need to be established. Relationships need to be redefined.
Nobody seems to have been able to put these relationships back together in a meaningful way because nobody has looked at the issue from this angle based on relationships. And now that we have found the real problem through this process, it is natural to use the same manner to resolve it.
Relationships of any kind are fundamentally built on trust and respect, and there are specific elements missing from each side of the relationship. The first problem is that most record labels don’t respect musicians. They craft contracts in such a way as to maximize their own profits while passing the risk on to the musicians, not to mention that they keep the legal rights to the musician’s own work. Record labels do, however, usually trust musicians because they know that they are eager to get their music out to fans in a big way. This results in the second problem. Musicians don’t trust record labels because of all the focus on units sold and profits rather than the music itself, but respect isn’t as much the issue here. Most musicians do respect record labels, or at least acknowledge that they are helpful in providing services and performing tasks that they otherwise would have lots of trouble doing themselves. Understanding this, we can restore the record label’s respect for the musician and bring back the musician’s trust for the label. All we have to do is ask what each other wants, because the other key ingredient in building relationships is value. Value never really went away, and it is probably the only reason the industry hasn’t collapsed entirely.
Musicians just want to make music. They want to be treated fairly, and they want their fans to be treated fairly, by record labels. A little help spreading their music and making it a worthwhile endeavor is all they generally ask for. On the other hand, a record label’s desire from the musician is to have enough talent and gain enough fans to sustain a solid revenue stream. After all, a label is a company and exists to make money. And that is fine, except they forgot that they make money by providing valuable services to musicians, not by ruling their career. Both record labels and musicians do want to work together to some degree because they know they can both benefit from it. But for many musicians, the benefit is beginning to outweigh the costs. When you start to think about it, much of what a record label does is actually not helping to improve sales. Owning the rights to a band’s music does not help sell it. Neither does “owning” a band in an extensive multi-year contract. So let’s get rid of all those outdated ideas. The real assets that a record label has, and the ones they should be focusing on, are their skills they possess in getting things done. They are the people in the business, they have the connections, and this is what they should be charging for. Yes, charging for.
Now that we have determined that musicians should be keeping the rights to their own music, they control their own legal assets and can use them to profit however they wish. In order to do this, the musician can then freely go to a record label and pay them for some services like selling merchandise or distribution or artist development. This gives the musician much more freedom to do whatever they want. They essentially become musical entrepreneurs and the record labels become their providers and support. Perhaps, since the lack of money is often a big issue for musicians before releasing an album, record labels will also be able to provide specialized loans to musicians so they can get themselves up and running.
This is a complete shift from what we currently know of as the music industry, but it is a hell of a lot better than what exists today. Do you agree? Could it work? Let me know.
I will be posting my ideas about resolving the label-fan relationship sometime in the future.
January 23rd, 2008 at 1:44 am
I’m a little too dopy to write a long, coherent post with my thoughts right now (though you know some, at least, from our prior conversations on this subject) but I think you’re definitely on to something. Even bands which had previously been thought to have a good relationship with their labels have started talking about what a shitstorm it’s been (I’m thinking primarily of Turmion kätilöt right now, who’ve announced that the only reason they haven’t released a new album yet is because Spinefarm is screwing them around) The established Canadian musician Matthew Good has been quite vocal in his dislike for most major labels, if one reads through the back archives there are some pretty horrible stories, as an example after the last album his band released prior to its collapse didn’t sell nearly as well as previous albums, and Matt alone was told to fly to Toronto so that th label heads could berate him for not making a commercial enough album.
And of course as a music fan myself, I loathe the way that I’ve been treated in some cases with regards to albums and what I can do with music which I’ve paid for. Anyways, like I say these are just a few reactions, I’ll take some time in the next day or two and write up a more complete version of what I think
PS This is a great idea Greg, as just one reader’s opinion I’m enjoying these interactive columns.
January 26th, 2008 at 9:54 am
Well, first of all, I really admire what you wrote, awesome!! But, at the end: “Perhaps, since the lack of money is often a big issue for musicians before releasing an album, record labels will also be able to provide specialized loans to musicians so they can get themselves up and running.” Well, I know that is slightly different from what is going on now but… I think there is still a large window for abuse there… the same that is going on now… though at least the band would have rights to their music anyway… I do think that is important… well, I don’t know, but it’s a good idea that probably just needs to be looked into more..
January 26th, 2008 at 8:46 pm
Mikki, I understand what you mean about the whole loan thing, that is somewhat similar to what happens now. The reason record labels currently take so much of a band’s profits is because they are the ones who fund it to get made. Nobody is going to give a band money to make an album and then not want to get paid back. The label is a business, they make an investment, and they reap the rewards when it pays off. I think it is in any band’s best interest to fund the album production themselves. The band in essence becomes a small business, they make the investment in themselves and they reap the rewards themselves, paying for help from a label just like any company pays for supplies and services.
Thanks, Paul. I am eager to hear your thoughts. I am working on a proposal (which may or may not be related to Germaniac) that should be able to help bands in the way that I am envisioning, so all points of view are greatly appreciated.
-Greg
January 27th, 2008 at 12:48 am
Alright, let’s see if I can put down a good summation here…
Basically the problem lies on all sectors, to my mind. Here’s how I see this break down…
The companies suddenly have access to numerous new, cheap technologies for creating music. This music also becomes portable in a way that it never has been before. As a result, the companies can charge basically what they always have, but with the cost of a CD being well under a dollar, their profit increases exponentially. People start to realise they’re being charged too much as personal computing technology advances, and access to programs which will put music onto blank CDs becomes readily accessible. To help out friends and share music they love, people start copying albums for friends and family members. As this becomes widespread, new technology is created which allows people to share music on their computer harddrives with others, thus dropping the overinflated profits companies have become used to, as less people buy albums, and instead just download the song(s) they really want. The companies and certain bands react too strongly and create a huge press storm over this, which in turn results in prosecution of the average music fan. This puts a huge wedge between music fans and those who create and distribute the music, and in the long run really only creates a horrible reaction among the average person to those trying to prevent sharing (which at this point is inevitable) with (in one extreme case) a child being sued for more than a million dollars for downloading music. Eventually companies start to realise that this technology is here to stay, and try to tap into the potential profit by legally selling music online, which while cheaper on average is still overcost.
Now that I have that out of the way, what exactly would I propose to fix it? I understand very well that for the people involved in the creation of this music to be able to make a living off of it there has to be a fairly large cost, with mixing fees, producers, studio time, instruments, etc. Or do they? The technology now exists to create a professional quality recording in one’s own home for much cheaper than some albums. Take a look at the higher profile bands or singers involved in popular music right now in the West, do you ever wonder just how much money is spent bringing in big name producers, buying time in the most well known studios, having it mixed multiple times? While this can result in a great sound, some of my favourite albums were mixed by the artist(s) themself, and for cheap. You don’t need to fly to Hawaii and record in a famous studio with the best producer to have a great album, and often all this effort WON’T make a great album. The best of the new audio programs cost somewhere in the range of a few thousand dollars, which while expensive, can result in studio quality. I think I’m rambling a little, but the core of this argument is that the band should essentially be obliged ONLY to themselves. It’s only really the bands that are starting out which need money, and I’m not honestly quite sure the best way get around the initial momentum problem, aside from the old fashioned method of recording some songs, playing live to gain a bit of an audience, and mail the music to the local radio stations. Beyond that, the band should sell the album directly. For the smaller bands, it will mean that the profit will go primarily towards them, and I suspect most people would be willing to pay a little extra to get a hard copy of the album to support the band if they’re fairly new. To use an experience of my own, when I bought the band Treibhaus’ two albums, I dealt directly with the singer Curt Doernberg, and when I did pay the $45 or so including shipping from Germany, I knew that everything outside of shipping went direct to Treibhaus. I enjoy their music, and I had such good service from Curt, that I had no problems with paying that extra money, ESPECIALLY knowing that the lion’s share wouldn’t be going to some producer or executive or..whatever. As a side note, Curt even wrote me a little note thanking me for the support.
Basically I see the future of the music industry as being primarily run by the artists themselves. I think that the whole existence of major labels is unnecessary as the technology begins to be available for an artist to create fairly decent sounding recordings with cheap, readily available software. The Canadian artist Matthew Good (www.matthewgood.org) is a big fan of GarageBand, and will occasionally put up little demos of songs done entirely with it. While obviously not studio quality, they are certainly impressive in quality for the cost behind it.
Okay, well, that was rambly, so I’ll move on to the last point…downloading. I know Greg and I differ somewhat on our views about this, but I think it really needs to be addressed. Obviously, despite extensive efforts on the part of labels and other agencies, online trading of music is here to stay. And I really think that the industry has gone about this trading with the wrong attitude. Because they persecuted music fans so extensively for using this, they lost the oppurtunity to use it as an advertising tool. Think of radio stations. Essentially, they share music for free with the average person, or consumer. If the consumer likes what they hear, sometimes they will go out and buy a copy of the album the song is from. But what happens if they don’t like the other songs? This just means that they will be less likely to buy an album the next time. Nobody likes wasting hard earned money. But, say, the consumer didn’t hear the music from a radio station, but instead had it available to him on the band’s website. And, not just the one song, but 5 or 6, full length? Suddenly, spending the money becomes a little more feasable, because the consumer is now assured of a return on his investment in the music.
Now, the counterargument goes that it’s more likely he’ll just listen to the songs for free and never buy the album. Frankly, with some people, this is true. But these aren’t people that are likely to go out and buy the album anyways. There will always be some way to get it for free, either from a friend, or from the internet, or..wherever. A way will be found. But then think of how many potential buyers are lost, who wouldn’t have taken the chance without the samples? There will never be a way to completely remove the people who just take the music from the system, they’ve existed for as long as popular music has. It’s time to accept this and stop letting them block up the whole works.
I had something to say about music from other countries, but I need to take a breather…
January 27th, 2008 at 2:45 am
Wow, quite an impressive comment! What do we disagree about on music downloading? I think we are pretty close in opinion, actually. I have to say that I completely agree downloadable music is overpriced. The whole 99 cents per song idea is roughly based on the old model of selling CDs. But you know what, a download isn’t a CD and costs far less to make, distribute, stock, etc. Individual songs aren’t worth even 50 cents now… they’re probably somewhere between 10 and 25 cents I would say.
This isn’t just me being pessimistic about the value of music. In reality, the value of music has actually decreased in real terms. Why? Anyone who has taken a basic Economics class can tell you that an onject’s monetary value is derived from its scarcity. The objects that are most difficult to find and reproduce are the most expensive, and the things that anyone can make and trade with relative ease are cheaper. And now that the MP3 and the internet have made copying music just about the easiest thing in the world, music is no longer scarce. At all.
There’s nothing stopping someone from making a million digital copies of an album that otherwise would have only sold 100,000 copies. If each of those 100,000 copies sold for $15, then 1,000,000 are only going to be worth $1.50 each if you assume the total value remains the same.
You can’t fight technology, it can’t be uninvented. When the game gets tough, you have to change the rules and take advantage of the problems, because fighting them is hopeless. For starters, bands need to sell more stuff that IS scarce, which does retain value, so they can focus making money on that. And use their music at a very fair, low price (perhaps even free) to stimulate sales of the money-making things.
Another thing you mentioned… mailing CDs to local radio stations. In today’s world, this is just stupid if you ask me. Bands should be mailing their CDs to the people who talk to the masses on the internet. For example, a CD sent to me would do a hell of a lot more for a band than sending one to their local station. With the radio, you might have 1 or 2 people who really get interested in it, but if a band is German and sends a CD to a site like this, and I write about it, they are reaching out to way more people than they could on the radio. The whole idea is that you send your promo stuff to the place where your fans are gathering, and usually that’s not the listening to the radio. Especially because the radio exists in a single moment in time. The chance that a potential fan is listening to the exact radio station at the exact time when your song gets played is so tiny compared to the text of a blog or website which remains online basically forever.
Just a little bit of clarification on one of the things you mentioned, the cost of producing a CD. You said it’s well under a dollar, when really it is pretty close to a dollar (around 80 cents) for a major label which can produce the CDs and print the inserts in massive quantities for cheap. If a band were to go to a CD manufacturer themselves, the prices will easily be over $1, and can even reach $2 to $3 in some instances for fancy packaging like a multi-fold digipack with a large booklet and stuff like that. Another major cost is actually distribution, because shipping out tons of CDs to stores (and back, if they are not sold) can get very costly. So if we go back to our example of that CD which was valued at $1.50, it is unlikely that you could produce and distribute an album that cheaply and make any significant profit on it.
Here’s an interesting question… Would anyone buy a CD that was $8 or $10 when the band also offers MP3s to download for free?
January 27th, 2008 at 1:02 pm
I must’ve misunderstood a few things in the past
And one other bit of clarification on my part: I’m not talking about packaging when I said it was under a dollar, I meant solely the disc itself. If I remember right, a pack of those usually averages out to about a quarter per disc. Naturally, packaging will get more expensive past that
And also, pretty much that whole comment was meant to be about North American bands trying to promote themselves in their own cities and communities, rather than German or other nationalities trying to promote themselves outside of their own country. I completely agree that a place like this site would be a much better place for a German band to promote themselves than trying to get it to radio stations.
And I certainly have and will continue to buy $8 or $10 or $15 CDs despite having the MP3s for free, provided that I like the music. For me, the actual act of buying the album is my showing support for the band. I know of others who are like this, too
January 27th, 2008 at 8:38 pm
Yes, that’s true. The individual discs are quite cheap, especially when you’re a record label buying thousands and thousands at a time.
Another good point you brought up, my question was kind of pointless because people do it already. What I meant was if the band themself offered the music in MP3 format for free, would people still buy, but I think the answer would be the same. If you’re going to buy a CD, it’s going to happen regardless of the cost of the MP3s.
January 28th, 2008 at 2:05 am
What’s funny is that I actually ended up in a conversation with a customer about this at work this evening, and actually sitting down and writing this really helped me out while dicussing it for a second time.
Looking forward to your next post about this sort of thing Greg, this has been really enjoyable
January 28th, 2008 at 3:24 am
I’m glad our little discussion helped you at work. Clearly, that is proof that Germaniac.com is helping the world become a better place!
The next segment is about music fans and the value of music. It’s not done yet, but I am aiming for right around Wednesday or so.
January 28th, 2008 at 3:36 am
One satisfied customer at a time
Well, suffice it to say there wil probably be a long reply at some point from me on that one as well
February 12th, 2008 at 10:50 pm
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