I gave myself a little break from blogging for the long Labor Day Weekend, but didn't want to leave my loyal audience (Hi mom!) without anything to read for the shortened work week. Here's a story I wrote with the unfulfilled intent to publish:
Perhaps this story should start with a eulogy. We gather here today before God to remember the music industry. Born in 1914 when the phonograph first outsold the household piano, it lived a happy, wealthy life and flourished as it adapted to new technologies and grew to earn $38.6 billion by the turn of the century. Today, we mourn its death. Projected 2010 music sales in the U.S., according to Forrester Research, won’t reach $10 billion despite peaking at nearly $15 billion a decade ago. Record labels are scrambling for answers, producers are searching for jobs and profits are increasingly scarce.
To everything there is a season, a time under the sun. For the music industry the days became shorter and the leaves turned brown in June 1999 with the launch of Napster’s illegal file-sharing software. Fifteen months later Napster reported 28 million downloads of its software. Though U.S. courts eventually disbanded Napster, a dangerous precedent had already been set.
One no longer needed $19.95 to pay the retail price of compact discs. Music could be had for free. New illicit programs replaced Napster, and with the growth of high-speed Internet, downloading songs took mere seconds. By 2008, the IFPI, an organization that represents the global industry, reported that 11 million songs were pirated each day.
“Music is very much devalued,” said Drew McKinley, manager of the Deadly Syndrome, an independent rock act that released its second album this March. “People don’t even want to spend a dollar on a song because they know they can get it somewhere else for free. There’s such a plethora of music available now that if one band forces them to pay, they know they can just go to the next band and get music for free.” Morality and legality don’t stand a chance against the allure of free music.
Now don’t bury the coffin just yet. Sure, the days of paying for music may be over, but what if you harnessed the power of free music to become even more profitable?
McKinley and the Deadly Syndrome decided to try exactly that. The band dropped their independent record label, Dim Mak Records, and used widely available technology to record, produce, engineer and mix its second album, titled Nolens Volens, almost entirely on its own. It hired an outside publicity firm, but that’s it. No record label operated as the middleman. The band earned every last cent from the CDs it sold on tour or through their website (the band doesn’t have deals with any distributors yet, though it’s working on one with Amazon), and it collected the full 70 percent digital distributors—such as iTunes and Amazon MP3—pay for music. Meanwhile, artists signed to major labels typically take about $1.60 from a $15.99 CD sale, and $1.40 from a $9.99 album purchase on iTunes.
The downside to operating without a record label is the lack of easy access to traditional music outlets that build hype for an album. The Deadly Syndrome overcame this by giving away “Wingwalker,” the first single from their album, to anyone who logged onto their site and entered their e-mail address. “Music is becoming much more of a promotional tool,” McKinley said. “We use it to sell more concert tickets and more merchandise.”
Jason Karpf, a junior at Northwestern University, believes in music’s promotional utility from personal experience. During his high school days, Karpf rarely pirated music and most of his music knowledge came from his local popular hip-hop radio station’s playlist. In college he began to download music—sometimes several albums a day—and his music taste took off. Just about all of the 10,000 songs that comprise his iTunes library were pirated. But he still supports artists he likes.
“I do go to a pretty good amount of concerts,” he reasons. “I pay $40 for a ticket rather than just spending $10 for the album. But if I wasn’t downloading their music illegally, I wouldn’t know who they were and I certainly wouldn’t be going to their concerts.” In the past 12 months alone Karpf has attended some 27 concerts.
As a result younger bands are happy to see their music being pirated. According to McKinley, when members of the Deadly Syndrome saw the high volume of illegal downloads of their newest album “the guys were pretty excited about it.”
“Especially considering the Deadly Syndrome’s crowd skews a little younger, music piracy has definitely gotten the word out.”
Then perhaps we attended the wrong funeral. Maybe the music industry is alive. Maybe artists don’t need to be compensated for their recordings. Maybe they can survive through concerts as artists did for centuries before the invention of the phonograph. Maybe we’re really witnessing the passing of the record label.
The modern record label originated from furniture companies that recorded music to increase phonograph sales. Only later did they realize that these vinyl discs were the true commodities. Today, recording music is just part of the labels’ job. They scout for new talent, provide funding for recording sessions and match experienced sound engineers with artists. Once the album is produced, record labels reap royalties from the music they sell via long-established marketing and distribution practices and copyright law.
When music is pirated there is no return on this investment. Inexperienced artists in most need of financial safety nets, often earn the least money for labels as their music appeals to younger demographics (including Karpf) most likely to pirate music. Record labels are becoming increasingly dependent on their largest acts.
Alex Drake, a former employee of Astralwerks Records—owned by EMI—witnessed this trend when he worked for them in 2008. “It reached the point where if Coldplay’s new album [Viva la Vida] didn’t do well, the entire company might fail,” Drake said. “I saw first-hand the effects decreasing record sales, and a decrease in needing record labels to get your music out there, had on the market.”
Yet many independent record labels don’t have the benefit of a Colplay, a U2 or a Lil’ Wayne. Alive Records, for example, is an independent record label with 29 lesser-known blues-rock artists in its catalogue. It famously released the Black Keys debut album, but the band moved to a major label as they gained fame. Alive must adapt to the current music economy without an iconic act to keep its business afloat.
“Low sales have affected the entire production chain but, ironically, a new generation of consumers are now paying for downloads,” explains Patrick Boissel, founder and president of Alive. “Those digital sales have become very important to the survival of small labels like us.”
Outside of these sales, Boissel admits the future of record labels is tumultuous. He acknowledges that music piracy can eventually boost artists’ concert revenue, but his label earns nothing from those shows. So he must continue to rely on selling music, which, he insists, despite diminishing business, is a coveted skill.
It’s also a more complicated task than Drew McKinley would lead you to believe. His band is content to distribute solely through its website, iTunes and Amazon. But there are many more retailers. Legal online services, such as Spotify, Pandora and the current edition of Napster offer new ways of enjoying music with vastly different, and more complicated payment models. All of these sites compensate artists. So too do filmmakers that use a song for their scene. But it’s up to artists to negotiate with each outlet to maximize their audience and earnings.
This is where the future of record labels lies. Labels have negotiated on behalf of artists for years and have more leverage than a single artist might. “They control the market, distribution, promotion, marketing, access to mainstream medias, etc.,” Boissel said. “They won't disappear.”
“But,” he added, “I never plan too far ahead. This business is too unpredictable.”
A lot like death itself.