Note: This is an article I wrote way back on October 7th 2009. The original site this article appeared on is no longer owned by me, but proof can be seen on The Way Back Machine’s cache of this post. Occasionally someone still reaches out to me looking for this, so I’ve decided to resurface it here. For my regular readers, sorry for the seemingly out of left field rant on the music industry.
Piracy didn’t kill the music business, the music business killed itself. Filesharing, also known as Peer-to-Peer Networking, has gotten a bad rap by the music business. When I say “music business”, I’m referring to a few people and groups. For one, the “Big Four” record labels, Sony/BGM, Universal Music Group, EMI, and Warner Music Group. Others lumped into the “music business” title include artists (mainly major headlining acts), publishers, advertisers/promoters, A&R departments, and pretty much anyone else involved in the process of releasing a major record.
The reason I say the music business killed itself is because the music business was in a major recession long before anyone had ever heard of “P2P” or Napster.
In the early 90′s the music business was booming. Record sales were through the roof and everyone wanted in on the action. Major corporations took notice, and record labels sold off to the highest bidders. The very same thing that caused the 2000′s dot com crash, the music business over saturated the market. No longer were businesses being operated by the people who loved the business, but now it was being run by men in suits who’s livings were based off profit/loss margins.
In the early 90′s, if you were an artist with a back catalog, you were an overnight millionaire. As the Compact Disc took off, people around the world were forced to go back and re-buy their entire catalog of music. Everyone, in a matter of two years was buying up the music they had been collecting over the previous ten. Buyers soon went back to their normal purchasing routine and caused the start of the downfall.
With national corporations running music, also came budget restraints, annual reports, and shareholders. Unable to meet the growing demands, major labels needed to cut costs. One of the first places to go was Artist Development, and Promotions.
Now instead of having a promotions department which was truly passionate about their product, now we had a bunch of businessmen trying to promote a product they had no relation too. This caused a major disconnect between the product and consumer.
This is when major record labels started depending on one-hit wonders and bubblegum pop to push profits ignoring their own rich history and tradition.
It’s expensive to develop an artist. It is common knowledge that for every 12 artists signed to a label, 10 lose money, 1 breaks even and 1 makes enough to pay for the development of all the others put together. It’s a really risky business. But, the small independent labels didn’t care because they wanted to discover the next Bob Dylan or Bruce Springsteen. They knew that one major success could make up for a string of costly failures.
Unfortunately, that equation doesn’t work in the corporate environment. You have to justify your budget every year, every quarter. The only way to do that was to release lowest common denominator music that would sell fast but fade just as quickly.
This caused major record labels to forget what got them involved in the first place, “heritage artists.” Tom Petty, Springsteen, Bon Jovi, U2, Metallica, and others were what sustained them over the long haul, not The Backstreet Boys and Britney Spears. Heritage artists were bands and musicians developed over years and they didn’t come cheap, but they made up for it in the long run.
For years, the way music got from artist to fan was the same. One department (A&R) would discover and develop artists helping them with everything from day-to-day expenses to making records. Another department (Promotions) would take the finished product and promote it using teams of college interns, radio promotions staff and others. They would pass the actual product on to distributors who would send their representatives to record stores to convince stores to buy records. The promotions interns would put up displays in the store and hold promotional events designed to help artist, distributor and record store. The employees at the store would talk to their customers and play the music in the store.
That system worked really well for a very long time. But, once again, the big corporations saw an opportunity to cut costs by making independent deals with big box retailers like Wal-Mart, Target and Best Buy. The result was the death of distribution companies and independent music stores and even chain music stores. This may have seemed like a smart financial decision, but they got it wrong again.
What the suits failed to realize was that the chain of people working on selling music for them was key to making sales. Even now in the age of blogs, people still listen to what others suggest when it comes to buying music. Prior to the internet, those people included DJ’s (we’ll get to them in a second) and record store employees. After your friends, these were the people you trusted to know music.
Even worse, retailers like Target only put about 300 titles per year on shelves out of 3000 or more possible releases, honing it down to ONLY the most demanded (according to them) artists and records. A good record store could not only steer you towards a great alt rock record, but also to a blues record that influenced that alt rock band you like so much.
I’m not naive. I realize that with iTunes and other forms of downloading, the days of the music store were rapidly coming to a close, but the labels, instead of acting as partners with stores as they always had, turned their backs on them prematurely before anyone had ever heard of an MP3 or Napster. It not only cost thousands of people their jobs, it placed limited stock on the shelves narrowing the choices for people even further. Like cutting development, they were forgetting that it takes more than just a pretty face and a catchy hook to sell records and the more options you put out there for people, the better your chances of developing artists who will sell for you for more than just a few years.
I think there is real truth to the idea that video killed the radio star, but the radio industry helped it along by killing off the primary link between listeners and stations: the DJ.
Much like the chain of distribution, there was a long history of record label staffs sending music to radio stations where program directors and DJ’s would play what they thought their audience wanted to hear. DJ’s took chances and, as a result, broke artists for labels and made them an awful lot of money. There was always corruption and undue influence exerted on DJ’s, but a large percentage were in it for the music.
When the Telecommunications Act of 1996 was signed into law, large corporate radio empires like Clear Channel destroyed the listener-DJ relationship by flooding markets with stations owned by a single entity with programming decisions made at a regional level, far removed from the DJ and his/her show. DJ’s were replaced with “on-air personalities” more about selling ad revenue than “spinning hot wax” as they used to say.
While the record industry may not have been directly involved, they sat by and did nothing and even encouraged the centralization of power because it made it cheaper for them to peddle music. They didn’t have to call or visit hundreds of DJ’s anymore. Now, they just went to a central nexus.
Just like destroying distribution removed variety from the shelves of retailers, centralizing programming ended variety as we once knew it on terrestrial radio. In the Steely Dan song “FM” they talk about how FM stations in the 70′s would play pretty much anything from reggae to blues to rock and everything in between. It was all about the relationship between DJ and listener, between people. Once that relationship was destroyed and stations began playing the same narrow play list, people began to abandon radio in droves.
Long before the record industry was, in their estimation, attacked by downloaders and people believing music should be free, the record industry itself compromised its own business through questionable decisions, corruption and the corporatization of music. Art and commerce always have and always will have a tenuous relationship. But, when the pendulum swings so far to one side, it is no shock when it eventually comes flying back the other direction. So, record execs, the next time you look into a camera or into a room full of onlookers and try to tell us that file sharing and video games killed your business, don’t waste your breath. Instead, take a look in the mirror and you’ll probably find the culprit.
As a business owner you are inherently a decision maker and it’s a function of your job to make consistently good decisions in critical moments. But no two decisions are exactly same. Having a deep understanding of how decisions are made and having the tools to create consistent decision making frameworks are necessary to make more rapid and impactful decisions on a daily basis.