06/21/2008 01:50 pm ET Updated May 25, 2011

The Business Of Music

Do you have any friends in the music business? If so, right about now would be a good time to check in on them. Stress is high, physical sales are low, downsizing is imminent. In the past, the industry weathered hard times and slow growth by toughing it out. But the business of selling and distributing music is currently in the process of reinventing itself, and this time, it's harder than ever, like turning around a battleship in an hour. The search for clues on how to proceed wisely might begin with reviewing the industry's post-vinyl history which has seen a lot of experimentation and proliferation of formats as well as mixed results.

The music business took its first steps down the digital road a few years ago when it finally embraced the concept of downloading, despite arriving late to the game. Though the credit goes to iTunes, you can't leave out Napster and its cohorts from the story. Sure, when they introduced the new paradigm, they did so illegally by utilizing the industry's assets, and the labels lost it in more ways than one. Right or wrong, this seems to have been the necessary evil that forged a path of progress for the industry.

On the other hand, aesthetically, this inevitable format was a bit of a step backwards in terms of sound quality and its ability to deliver complete artwork. It also eviscerates crossfades that are the intention of the artist or that naturally exist in live concerts, and the only way to get around that is to download the full album as a bundle. DRM also has complicated things. However, it seems like no one is really complaining--well, maybe Baby Boomers, Gen-Xers and anyone who misses the tactile and emotional connection they had with 12" albums and CDs--but other than that...

Another clue might exist in the direct-to-consumer model such as what Rhino Handmade or Hip-O Select developed, two online labels that have been set-up to serve niche markets with premium or rare releases. Taking that one step further and going beyond the niche, when using a label's website to buy, let's say, a box set, why can't a consumer also have an interactive experience as he or she is shopping, maybe surfing on a virtual '60s California beach, skateboarding the streets of a virtual New York City or doing something relative to a purchased download? Yes, I hear you, lots of investment. Still, if every label reclaimed their assets and built their own interactive virtual stores, it could be a first step towards digital independence. Initially, sales would plummet without iTunes to market tracks from its traffic-heavy hub. But during the re-routing process, new loyal fans and casual consumers might proliferate in much larger numbers than expected, seduced by the website's killer interactivity, with its preferable virtual lifestyle being a sexier choice than lifeless generic screens on competing sites.

USB flash drives--the mini-storage, musical delivery system which is small enough to be banded around a body part of your choice--might hold a clue, it being another good use of a new format that takes lifestyle into consideration. Its gold standard is the Radiohead model that collects hours of music, is encased in a rubber-ish head and has the feel and look of a hockey puck with ears. Did I mention how cool it was?

Successful revenue generators to be reviewed include the videogames Rock Band and Guitar Hero that saved the day by incorporating various labels' most rocking musical assets. These virtual worlds took a cue from their thousands of videogame cousins who first integrated music with interactive experiences. Film and TV have become essential for showcasing both new and classic recordings. Can you imagine any current movie or CW television show that would be complete without a parentless house full of angst-ridden songs playing in the background emphasizing plot lines while promoting new artists' singles? Ringtones, Ringtunes and Ringbacks are a given. 180 gram vinyl made a surprising comeback, though no one is predicting how long its return will last. And look out world, here comes Blu-ray audio...but we'll save that discussion for another time, probably dragging an unsuspecting Neil Young's catalog into the mix.

The industry also needs to look at its missteps: Consider your average Joe CD--not the gold or SACD or DVD-A variety, but the faithful yet neglected 16-bit version, complete with generations of kids who won't buy it. It's never been upgraded with the exception of its storage capacity increasing from 72 to almost 80 mintues and that's it. And speaking of SACD and DVD-A, by competitively pitting one 24-bit format against another, labels created something akin to the costly and annoying VHS/Beta war. The predictable result? Both formats failed, cancelling each other out, this time leaving no VHS-type winner. Adding insult to injury, the disc players had almost no promotion nor consumer education, though that was the fault of another industry.

As for those previously-mentioned doomed formats, let's look at SACDs. For the car? Terrific (especially if you drive from the middle of your vehicle). At home? Just as amazing. Who is able to sit in that exact 5.1 "sweet" spot for longer than five or ten minutes before cell phones, kids, etc. drag your attention and body away. Sure, it was the Beta of sound delivery; sonically, it was the better format. Still, for the home, DVD-A seemed more logical since it had the visuals that helped you stay seated for a slightly longer duration. And when Dual Discs arrived, it was as if everyone was so burnt out by the previous adventures (including the consumer), that it was game over before it started. Plus it didn't help that the discs stuck in car players which, of course, brings us to the MiniDisc... And yes, there are issues I selectively have left out such as pricing and promos because they invite too intense a discussion for this particular piece, though they deserve a righteous revisit.

The good news is that there currently are more positives to examine than negatives; just look at the above list of ideas that once were considered out of the box. Regardless of the problems, there are growing opportunities to solidly integrate music into the culture. There is a lot of incredible music being created, and more of it now than ever before, so the state of the art remains in good shape (though I guess this is where "taste" come in). But the reality is Tower's gone, Virgin's shrinking and yet another distributor is going the way of the "78" (you know, great-grandpa's records?) and we've got to deal with it. Maybe it'll take a little more than an hour, but this battleship can be turned around. With a little luck, the music business will get past this current set of challenges and put the focus back on the business of music.