The music industry’s problems are bad relationships
The music industry’s problems are bad relationships. Well, at least the ones involving the structure of the industry. This is a re-post of something I wrote a few weeks ago on my Germaniac.com blog, but I thought it would be valuable here as well. Here is a link to the original post and lots of comments.
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 Under contract, thousands of musicians are held at the mercy of a giant, lumbering record label with an outdated ideology, unable to change as fast as their musicians know they need to.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.