The Future of the Music Industry
"In the race to adopt new technologies, the music industry historically has finished just ahead of the Amish." - Stan Cornyn, former Warner Music Group executive
What is happening to the music industry?
In short, the traditional music industry has been beaten, battered and completely transformed by a perfect storm of new technologies. It actually started with the introduction of the CD back in 1982. Music was digitized and encoded on the CDs which we all bought to replace and enhance our vinyl collections. Then, along came the MP3 which enabled us to compress those CD song files down to manageable sizes and file sharing began. The next nail in the coffin of the traditional music industry was the emergence of MP3 players led by the iPod and digital retail led by iTunes. Once people became used to that, who wanted to carry around a CD case? Finally, the plummeting cost and decreasing technical knowledge required to make a decent sounding recording sounded the death knell for the major music labels, the backbone of the traditional music industry.
The music labels were society's music filters. They were responsible for finding the best talent, nurturing it, promoting it and distributing it all over the world. But the labels were also incredibly inefficient. For each act they successfully promoted and on which they turned a profit, there were dozens, even hundreds of failed acts and artists in whom the labels had invested and had lost money. Few industries would have been able to operate with such numbers but the music industry had thrived under this system; mostly due to the large amounts of cash that were made with every success. With new technologies affecting almost every aspect of the ecosystem (from song creation to mass distribution) the labels could do little to prevent the demise of their business. Seeing opportunity before them, entrepreneurs emerged with ideas about how the whole industry could be run more efficiently.
Today, music is increasingly sold as digital files that you download to your computer and then put on your mobile device such as your iPod. Other services are increasingly enabling you to stream music on demand. Under that arrangement, you never actually own any music. You simply have access to all of it all the time. Physical music retail stores are going out of business and soon won't exist as stand-alone shops.
Anyone can record and upload a song.
On the music creation side of the value chain, the cost of recording and producing a song has fallen through the floor. What used to cost tens of thousands of dollars and had to be done in a professional recording studio can now be done in a bedroom on a laptop computer. This is a great development that enables creative talent to emerge even in the absence of musical ability or even any musical knowledge. On the other hand, it has caused a veritable avalanche of new music to pour onto the web -- much of it of dubious quality. Even the largest physical music stores couldn't carry much more than 10,000 titles. That's nothing compared to what's now available at the click of a mouse. MySpace alone is said to host over 10 million acts. Other sites that cater to artists have hundreds of thousands of bands signed up to their services.
It is a jungle out there! How can the fans find the needles in the haystack they want to hear? How can the artists locate their future fans? It's the fundamental problem the labels were solving but now they can't do it effectively. There's too much music for them to even try to filter effectively and nobody wants to buy their CDs anyway, so how can that work even be funded? The sale of digital files isn't even coming close to compensating for the loss of revenue on the sale of physical goods so now there's much less money to compensate for the labels' inherent inefficiencies. In fact, most insiders believe recorded music will cease to be paid for by the end consumer. It will instead either be free (built into the cost of marketing other products) or built into the cost of other services you pay for such as your Internet and cable TV bill or your mobile phone service. It will feel free and the actual revenue generated from the distribution of recorded music will be a fragment of what it has been historically. So, where does that leave us?
Fortunately, it's all going to be OK. There are dozens of emerging companies that are taking on these challenges and there are some really good ideas. It's interesting to see the variety of approaches. Most agree that the currency of exchange for recorded music will be the attention of the fans instead of their money. If an artist can get attention they will be able to sell tickets to their shows, license songs to soundtracks and get money for endorsing products. The labels held the key to getting access to big opportunities but now the artists and their managers have to find other avenues.
In spite of the reduced barriers to music creation and access to easily have your song distributed to all of the digital outlets (see services such as TuneCore or The Orchard) it still almost always requires mass exposure in order for a song to really take hold and begin to earn some money. That means that once a song is created, it still requires enormous effort, time and resources to "push" and promote that song within the industry. Songs must still come to the attention of someone who has an opportunity. The gatekeepers, such as music supervisors in Hollywood, ad agencies, program directors and video game designers remain and will continue to remain in place playing a valuable role.
So, real change will come by leveling the playing field and by giving individual artists equal access to mass-exposure opportunities. This is the challenge we're trying to solve with our new Music Xray service. (Pardon the plug but I can't describe the solutions to the industry's toughest challenges without describing our own solution since it represents our best thinking and thus my opinion).
Think of Music Xray as a kind of YouTube for songs in that each Music Xray represents one song. Each Music Xray get s a unique URL (just like a YouTube video) and each Music Xray can be embedded elsewhere around the web (again, just like a YouTube video). But that's where the comparison with YouTube ends because a Music Xray is more than just an embeddable song player. Each Music Xray comes with a stack of modules that open and close (see here) and each module contains specific information about the song, such as its lyrics, how many times it is mentioned on Twitter, in blogs, how many times it is traded on peer to peer networks, what it's market potential is, what kind of license under which the song is available, what other songs it sounds like, among much other information. 
In addition to providing all of this information to the song owner (and anyone else they want to share it with), having so much information on each song allows us to provide a free filtering engine to the entire song buying music industry.
Imagine you're an advertising executive and you want to license a song for your next ad campaign. You want something that sounds like "Brown Sugar" by Rolling Stones, which has 130 beats per minute, has the words "Russian roulette" in the lyrics, that has at least a 50% chance of becoming successful in a particular market, that already has a growing number of fans and an available license. The filtering system at Music Xray will soon provide that level of detail and that level of filtering ability. It will be a revolution in how that part of the business operates.
The important thing for artists is to have their music in databases of this sort. The one at Music Xray is particularly attractive because it will be open to anyone in the industry who wants to leverage Music Xray's search capabilities. For a song owner, having their song in the Music Xray database will make it discoverable by anyone and reduces the work artists must do to promote their music within the industry once they've recorded it. It also reduces the work that music supervisors have to do when filtering hundreds of songs for each opportunity.
How will music consumption work?
From the music fan's perspective, music recommendation engines will become a ubiquitous part of our lives, and not just for music and entertainment products but for many consumer goods and services. You've seen the ads for Angie's List which compiles and features customer reviews of household and professional services. Amazon has been recommending books and other products for years based on what others with consumption habits similar to yours have purchased. This is just the beginning of where recommendations and "relevancy filtering" is going.
The best recommendation systems will be very sophisticated. They will expose you to enough of the "familiar" for you to feel like the system "gets" you and understands your tastes. They will expose you to enough of the "new" for you to feel like you are growing and evolving in your own unique direction. They will also keep you sufficiently in tune with your peers and with those who are like you for you to feel like you belong to a larger collective. They will know the difference between you at age 25 and you at age 45 and they will know which products you buy for yourself and which you purchase as gifts for others -- an important distinction for companies when making future recommendations.
There are a number of problems for the music industry to sort out but things are taking shape. One thing for certain is that the fans will not suffer. There is now and there will continue to be more music available than ever before and it will become easier to find and enjoy. It will cost less and more artists will earn a living making it.
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For those who are still following this string, you can see Part II of the future of the music industry here: http://www.huffingtonpost.com/mike-mccready/the-future-of-the-music-i_b_182444.html
Full comment here: http://www.theflyingchange.com/2009/04/04/irresponsible-sentences/#comment-7902255
But, honestly, the irresponsible part of the sentence was when you
write "more artists will make A LIVING making it." You wrote "LIVING"
In your comment below you don't address that critical point. This is
a lie. More artists WILL NOT MAKE A LIVING. LESS ARTISTS WILL MAKE A
LIVING. That is fact. There are no two ways about it. The long tail
is no place to make a living. It's a couple hundred bucks a year and
that's not a living and nothing that you had written supported the
notion that more artists could make a living making music in your
previous statement.
Here is my view: If the pie is smaller, the pie is smaller. Less
money means less money. There are no magical ways to make less money
equal more money. Even if you cut out the middle man and the long
tail of artists earn more than 0 from licensing, the fact is that the
music industry is shrinking. Revenue is shrinking. So distributing
out less revenue to a vastly greater number of constituents doesn't
seem like an argument for more people to make a living and that's what
you wrote and, as I said and stand by, the article loses credibility
for making that claim.
First, let's define "lie" as something someone says when they know it not to be true. Accusing someone of writing a lie doesn't usually go over well when they're honestly espousing a point of view they believe to be true.
Furthermore, I did not say that more artists would make more money from the "sales of recorded music." which is what you seem to be understanding. Overall, when you include all revenue streams, the music industry and the pie is growing.
Those who are suffering the most are those who depend on the sale of recorded music, which include non-performing songwriters. That part of the business still needs to be addressed.
Music and prono are the avant garde of a transition that will make the economy, as we know it, obsolete. We are in the process of providing endless information to everyone, for next to nothing.
Next, as robots get better and learn to build themselves, services will follow and unemployment will skyrocket. The future is maximum unemployment and we will need to learn how to provide for everyone in that environment. This will result in more freedom, with it's benefits and challenges.
Finally, a way will be found to convert energy to matter and back and a way to harvest unlimited amounts of energy/matter will provide all goods and substances at near nothing. Money will be obsolete.
This WILL happen unless humanity destroys itself, the machines replace us, or a cosmic event takes us out. It is just a matter of time.
I thought I made a relevant comment regarding music distribution outside of the label infrastructure.
This included a link to my blog as a relevant example of a musician self-promoting and distributing their work outside of the industry. Because that included a link to my site "Pen & Mallet" where I do just that, the comment was rejected by the moderator.
So I will make my point again.
The point is this. Record labels grew because artists needed a way to distribute their music.
Now they can do it on their own, at the level of commitment that they are comfortable with.
It is good for the artists, for the arts, and for the fans.
It is only bad for the out of date distribution system.
I stand corrected.
Seems like a thread for shameless self-promotion.
Go to http://penmallet.blogspot.com/
Music distribution outside of the label system puts control back in our hands as artists.
I'm loving the death of the record labels.
I really am.
I worked for them for decades.
They REALLY REALLY REALLY deserve what's happening to them now.
p.s.
in all these years i've never posted this here, but now what the hell:
http://www.myspace.com/thetemplefire
Good way to start.
Click on my profile for a link to my site where I've got my own music posted.
It is a "personal blog" so the moderation rules won't allow a direct link.
Odd that...
lotta material there... i'll check it out
*salute*
Canuck27:
"I was a professional musician through most of the 60's, 70,s and 80's and experienced something like a Canadian version of 'Almost Famous. I watched the music business go from it's exciting and creative beginning to the bloated , boring orgy of greed it devolved into."
i was a sound engineer through the 90s into 2000. dying throes.
my perspective is that label greed (frustrated musicians working at labels) ruined everything. they would offer the WORST contracts to unsigned bands, and would only sign the bands that were dumb enough to accept the terms. quality decreased dramatically after nirvana.
the lack of quality contributed to video games and computers becoming more worthwhile than music.
i always respected PJ for poking at the labels - and whacking ticketmaster's knees with baseball bats.
i quit the road and working for other bands. i started playing again, in a band. just for fun. i think the future of the music biz is local gigs and $5 homemade cds.
Absolutely agree! At least with the local acts part, tho I do think that digital media has a stake in this. Also music festivals. Bring it on for more summer music festivals!
yeah - festivals are the x-factor... it's bizarre to consider paul mccartney and nine inch nails in the same environment... i guess it's not a bad thing...
:)
-part 2 of my previous comment...
-- offer high-quality recordings via Bluray and download. in order to have music that is loved and valued, it has to sound great and not be as disposable. MP3s for the quick listen, disposable stuff, Bluray/HD for the stuff you want to keep.
The 1980's and CDs were a boon to the music industry -- artists were selling music that was already sold a decade or two earlier. Poor early recordings were cleaned up and sounded better than ever. But let's face it -- those days are over.
i agree with some who've posted that the last several years has seen very spotty amounts of talent surface. Whereas in the 70's, 80's and 90's, great talent surfaced inspite of the major labels, and because of great independent labels -- now it seems harder to find great artists. It could be that the talents of good producers and promoters are needed more now than before -- not at big record labels, but at websites and search engines.
I hear these types of comments a lot.
They baffle me.
I am a voracious consumer of music and I have seen the opposite trend.
There is more exciting, creative, high quality music available now than there has been at almost any time in my life.
I don't find it baffling.
The problem is outlined in the article above. While there is lots of great music, it's increasingly difficult for people to find it. Joni Mitchell and Bruce Springsteen might not even get signed by a major label now, and discovering artists like that when you're busy with a million other things is pretty hard. I discovered a fine indie songwriter this tear (Levi Weaver) and bought a CD from a personal favorite (Jason Isbell). I stumbled upon both by accident and I can't help wondering how much more music is is out there that I just haven't been lucky enough to stumble upon.
Great discussion about the pitfalls and future of the music industry. The digital revolution has overthrown some of the big label homogenization and poor taste. Unfortunately it has also left us with millions of "artists", bad recording quality and a mentality that music is free.
Some concepts that might prove valuable to reestablishing a sense of value in music:
-- artists and music providers should settle on a new distribution model that regards internet sellers of music not as threats, but as one of a huge number of "record stores" or opportunities to sell. Start distributing as many digitally signed copies of songs to each legit site as possible and watch sales skyrocket. If an LP sells for $ 3, but sells 100x more than before -- isn't that worth it? The crappy model of subscription music that dies when you unsubscribe, or downloading for $15 or more isn't cutting it.
-- there is need for filtering, identifying, grouping, evaluating. Search engines and recommendation bots don't cut it -- I can't tell you how many times i've been recommended things I've already bought or things that are nowhere close to my taste. More focused searching and filtering definitely is needed -- especially on internet music sites.
-- forget DRM restrictions. Price songs and music cheap enough so millions of downloads will mean decent money. While there will always be bootlegs and pirates, the majority will buy the music if its priced reasonably enough.
And you dont think that certain artists or labels will misuse the "fans count" software? You dont think that they will shower the web with mentions of their act on twitter and other sites by dubious software means to inflate the worth of certain acts?
I get spam, and this site has been hit by comment-bots at times to promote a point of view. I hope you keep in mind the intrinsically creative nature of people motivated by greed.
Yes. There will always be people trying to "game" the system regardless of the system and the controls that are put in place. All we and others can do is our best to guard against that.
You skipped a step (or two) in the death of the music industry. They wanted to sell us a new medium since everyone kept their records and records can be kept for a long time if treated right. So came 8-tracks and cassettes - the crappiest medium, moving parts, and flimsy magnetic tape. Those were guaranteed to break or fade in a short time so we'd have to keep shelling out money for the same stuff over and over. With that tech came the cassette recorder, mix tapes, and taping the radio. The walls were crumbling because the industry got too greedy and overplayed their hand.
Then CDs... that were supposed to last forever, play perfectly, and not take the space tapes did. Except that they cost $20 to start and faded and scratched. Consumers saw physical holes in the discs. We forget about the class action suit where companies admitted they overcharged for cds. They admitted their greed, and lost the suit.
The war about music is really about longevity of what we buy. Tape backups sounded horrible and were about as long lasting as the originals. CDs we found scratched and skipped more quickly and noticeably than vinyl did. We created the tech to digitally back up our purchases because every medium was flawed and radio since the FCC capitulation is garbage.
The consumers have gotten the upper hand over their purchases. iTunes jettisons the DRM protection of what they sold. Consumers wont put up with protective limits.
The industry never intended to sell you the rights to the music you buy "forever". The fine print always said that the music was yours for as long as the medium on which you bought it lasted. If your tape player ate your cassette you were out of luck. You had to buy another cassette.
Granted, this probably made a lot of people cynical about the industry and I don't deny you that point.
I heard about a scientific study done a while back, where two groups of subjects had the ability to listen to and rate songs on a web site. The difference between the two groups was that one group only knew their own ratings; the other group could see everyone's ratings on all songs. Trends and group opinions could be seen.
In the first group there was no consensus; some songs were liked by some, others by others. It was all very random - there was no telling what could/would be a hit or a miss. But in the second group, songs that were marked as popular sometimes gained momentum through increasingly large positive ratings until they were -- wait for it -- HITS.
The conclusion: what we like is often influenced -- sometimes heavily -- by what we think everyone ELSE likes. This makes sense; we're social animals, we want to be part of a community.
Software/databases/services like what you describe will be a vital part of this community-building and hit-making process in the coming years. We can't all have our national moment of unity at the TV any more - the days of the entire country watching the Beatles on Ed Sullivan at the same time on the same night are long gone.
Yes. One of the researchers is Matt Salganik, a smart guy I've had lunch with a time or two. There are a lot of factors that go into determining a hit song and social perception is definitely one of them that should always be taken into consideration.
My belief is that the music industry is suffering because technology has finally allowed us to pick and choose the music we want to listen to, instead of having to buy an entire album just for two songs, or an overpriced "single" with a throwaway B-side track. Now, people can just download that one or two songs that they actually enjoy, and the chaff gets left behind. The best way the industry can rebound is to produce good albums, not just singles.
Yes. It is increasingly becoming a song driven market and the choice to buy single tracks is certainly decreasing the revenue labels counted on when they were selling mostly albums.
This article is a great read and raises some good points. As music consumption has changed, so has music discovery - from the radio disc jockey (often controlled by the major label's marketing budgets) to a whole wealth of online systems such as Pandora, Beatport, Last FM and so many others.
A result of the overwhelming amount of music available is that people will need and use filters a lot more. This may be something like online store recommendation systems, the iTunes Genius bar, Twitter updates and more. I also see a return to trusting 'music tastemakers' again, albeit in the form of a friend's CD or a music blogger, and without the corporate ties of commercial radio and their freedom to explore infinite music from around the globe.
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