The music industry : From major to minor

The Economist ^ | Jan 10th 2008

[george76]

Last year was terrible for the recorded-music majors. The next few years are likely to be even worse.

IN 2006 EMI, the world's fourth-biggest recorded-music company, invited some teenagers into its headquarters in London to talk to its top managers about their listening habits.

At the end of the session the EMI bosses thanked them for their comments and told them to help themselves to a big pile of CDs sitting on a table. But none of the teens took any of the CDs, even though they were free. “That was the moment we realised the game was completely up,” says a person who was there.

In public, of course, music executives continued to talk a good game: recovery was just around the corner, they argued, and digital downloads would rescue the music business.

But the results from 2007 confirm what EMI's focus group showed: that the record industry's main product, the CD, which in 2006 accounted for over 80% of total global sales, is rapidly fading away. In America, according to Nielsen SoundScan, the volume of physical albums sold dropped by 19% in 2007 from the year before—faster than anyone had expected.

More worryingly for the industry, the growth of digital downloads appears to be slowing.

[Common Tator]

Since the begining of the recording industry, artists have not made much from their recordings. The royalties are small and many artists have signed contracts that deduct such costs as the actual cost of the session and the promotion costs from the royalties.

Artists have always made their money from personal appearances. Historically they need the records to get air play to gain the popularity needed to draw large audiences for their performances.

Most of the money made from records are made by those that wrote the songs. There are large amounts of money to be made from air play on radio stations. ASCP, BMI, and SESAC take about 6 percent of radio station revenues for authors royalties.

But the singers and players don't get much pay from recordings at all.

It occurs to me that artists could record songs and put them on the internet for free. Or even at a cost of 4 or 5 cents a song. That would pay them far more per song download than they get from each record sold by a recording company. If the internet delivers songs to listeners, then that is the artists only real goal.

If enough people hear and like an artists recordings they will come to their concerts. That is where the money is. I think recording companies are doomed. There is no more need for CD's than there is for 8 tracks.

Record companies are a middle man that is no longer needed or desired. They are history.

[3AngelaD]

Downloads are the wave of the PRESENT.

[Shooter 2.5]

If you love music, there’s a movie that was made for only 130,000 dollars. It’s called “Once” and the DVD was released this week.

You won’t regret it.

[whereasandsoforth]

Maybe we have enough music and don’t have a need for more of the same.

We have been bombarded with and overexposed to music for the last fifty years. It use to be exciting. It’s not exciting anymore.

Technology has replaced the absolute need for human talent in the recording industry. The art has suffered as a result. “Popular” music has become tedious, overproduced, and it lacks its basic ingredient, which is emotion.

If the recording industry wants to save itself, it should throw away the computers and hire musicians and vocalist who love to make music more than they love to make money.

[KarlInOhio]

At the end of the session the EMI bosses thanked them for their comments and told them to help themselves to a big pile of CDs sitting on a table. But none of the teens took any of the CDs, even though they were free.

Was that because the kids didn't like CDs or because the free ones were a bunch of dusty back of the warehouse crap that EMI wanted to be able to write off as a "marketing expense" at full price instead of dumping them in the trash and paying for disposal?

[Spktyr]

That’s exactly what the artists are doing.

See the recent Radiohead album that was initially released on the internet in MP3 format as “donationware”. Industry types pronounced it a “failure” when it failed to generate as much money as it would have if it had been released for pay or conventionally released on a CD. The problem with that assessment was that they forgot that the distribution price for Radiohead was... almost nothing.

According to the lead singer, “Radiohead had profited from their distribution of In Rainbows, making more money from digital downloads of In Rainbows than from digital downloads of all their other studio albums combined.”

Translation - they made more money than they ever got from their conventional record company for a record.

When *that* gets around, the big record companies are going to be in trouble.

[ichabod1]

Oh, no, the Dixie Chicks are more popular than ever.

[Spktyr]

On the contrary, the most popular music type in the world (electronica) uses computer technology heavily. See Paul van Dyk or Paul Oakenfold’s work, for example.

It’s not the tech that’s the problem.

[SunkenCiv]

"That was the moment we realised the game was completely up," says a person who was there... digital downloads would rescue the music business. But the results from 2007 confirm what EMI's focus group showed: that the record industry's main product, the CD, which in 2006 accounted for over 80% of total global sales, is rapidly fading away. In America, according to Nielsen SoundScan, the volume of physical albums sold dropped by 19% in 2007 from the year before -- faster than anyone had expected.

Hmm. The audience for hip-hop (irrespective of the line on the color bar) pirates music and video, and yet the morons who run the companies still plough money into putting out titles by no talent trash. Doing the same thing over and over and expecting a different result each time is evidence of mental illness.

Y'don't suppose that one reason CDs don't sell better is that, for the demographic which doesn't pirate everything on the market and has money to spend, most of the radio they listen to is talk? Duh.

My biggest gripe about CDs for years now is that, when I go to one of the big retailers of new (not used) copies, a CD costs nearly as much as any movie I'd want to buy. If new CDs cost, say, $5 -- which is obviously more realistic -- there would be no market for pirate CDs, assuming the touch-holes who run the industry sell acceptable titles.

Thanks george76.

[Mr. Blonde]

Vinyl is making a comeback actually. Almost all indie labels produce vinyl in addition to CDs and digital downloads. And the factories that make vinyl are all producing as much as possible. Vinyl is still considered to produce the best sound.

I got a turntable for Christmas and am beyond excited about it. My mom said the salesman told her they had sold three of the same model she got me that day.

The problem with downloads are that mp3s are really not high quality facsimiles of what was recorded. And this is having a negative effect on music.

[SamAdams76]

Indie music is great. I downloaded over 1,000 songs off eMusic last year and discovered some great bands like The Shins, Yo La Tengo, Of Montreal, My Morning Jacket, The Good Bad And The Queen, Deerhoof, Grizzly Bear, Matt Pond PA, Kaiser Chiefs, etc., etc.

If you still listen to FM radio, STOP! Get Sirius or XM and tune in to stations like Left of Center (not referring to politics but to the fact that most college stations are on the left hand side of the dial.)

[napscoordinator]

It occurs to me that artists could record songs and put them on the internet for free. Or even at a cost of 4 or 5 cents a song

This is eventually going to happen, but it will start with smaller band just starting out who will offer for free at first and then the mid sellers will start with four cents or so and then finally the big groups will jump on the bandwagon. The musicians will eventually do away with the music companies which just steal their money anyway. I say go for it, but I would also tell you to cut and past your suggestion so that you can get in on the action when this thing happens and you can say you thought of it first. lol.

[Lancey Howard]

lol

[Sir Gawain]

All the good music has already been downloaded.

[RichInOC]

The record company exec’s lament...

Every Time We Say Goodbye
(Cole Porter)

Everytime we say goodbye
I die a little
Everytime we say goodbye
I wonder why a little
Why the gods above me
Who must be in the know
Think so little of me
They allow you to go

When you’re near
There’s such an air
Of spring about it
I can hear a lark somewhere
Begin to sing about it
There’s no love song finer
But how strange the change
From major to minor
Everytime we say goodbye

There’s no love song finer
But how strange the change
From major to minor
Everytime we say goodbye

[proxy_user]

“Strange to think that CDs might be the end of the line for physical formats. I wonder if there’s a new format in the works to replace them, or if it’s just accepted that downloads are the future and CDs are the last of the physical Mohicans.

Well, SACD and DVD-A failed in the marketplace.

However, LP sales continue to increase. So perhaps the LP will be the last physical format sold.

[steel_resolve]

And at the end of the century, your beliefs will be thrown on the junk heap of history along with the others who bet against America.

[steel_resolve]

lets not forget Tiesto or Ferry Corsten!

[proxy_user]

“Sony has tried to introduce a successor format in Super Audio CD (also known as DVD-Audio), but it’s never went anywhere. The last big push for it was last year.

SACD and DVD-A were two competing formats, not the same thing.

SACD format is 1-bit wide with 2 million samples a second - DSD streaming. DVD-A is just a disc format on which you can put any of numerous bit rates and word sizes, such as 24/88.2, 24/96, or 24/188.

While SACD is still limping along, DVD-A sank like a stone.

[AnotherUnixGeek]

Strange to think that CDs might be the end of the line for physical formats. I wonder if there's a new format in the works to replace them, or if it's just accepted that downloads are the future and CDs are the last of the physical Mohicans.

On a related note, I won't be buying a Blu-Ray player. The writing is on the wall for HD video at home, and it reads "digital transfer over fast Internet connection". What has happened to the recording industry is also happening to the video industry, albeit at a slower pace due to the larger size of video files.