Loverboy, one of the many Canadian pop rock bands that were popular in Australia when I were but a lad, always used to get my blood up with the rather explicit (for the times) lyrics of their song, "Turn Me Loose".
Mid-career, they were looking pretty tragic...
ARIA's latest figures show a 47% decline in CD single sales year-on-year.
The only really shocking thing: that so many Australian consumers are still paying through the nose for the physical music product when the identical track is available online for about a third of the price.
Anyway, there's nothing to wring your hands about (unless you own a CD pressing business) because sales of online digital single tracks increased by 64% in the same period, and at $8.38m in sales revenue is a little more than twice the value of physical single sales. Plenty healthy. Factor in the higher margins at almost every step in online versus physical production, distribution and delivery, and it's a healthy business to be in, as long as you're big enough to have a roster of successful artists and at the same time small enough to be able to keep up with the pace and true direction of change.
By "true direction" I mean where the industry is actually going, versus where some believe it can be steered. The former is entirely in the hands of the consumer, influenced by the content offerings available to them, how that content is priced and to what device it is delivered. The latter almost entirely the exclusive domain of large music labels and the industry bodies that serve them.
Evidence of a failure to keep up with the true direction of change: talk of prolonging the life of CD singles by including "ringles" - ringtone versions of the single - on the CD, along with software that will make it "easy" to transfer the ringtone version of the track to a mobile phone.
Please, don't let's pretend for a moment that this might have the slightest chance of widespread consumer adoption! Consider the "Sony rootkit" fiascos, and what might need to be installed on the consumer's PC in order to deliver a ringle from CD drive to handset. Better find a way to provide technical support for Windows '98, 2000, XP, Vista, OS X and Linux installation issues for product that retails for $5. Don't even start about what tiny percentage of mobile consumers ever successfully connect their handset to their PC, or want to do so for any reason.
Is it even possible to deliver a software application within the constraints of CD single data storage limits that might have a chance of being compatible with the diverse community of mobile handset operating systems, ringtone file types and carrier locks out there in the marketplace? I don't like the word "impossible" - it always seems to get me in trouble - but let's just say I'd be flabbergasted.
The only sensible way to deliver ringtones to mobile handsets is online, and for the majority of mobile consumers, the carrier - not the label, not the handset manufacturer - owns that pipe. No CD single "ringle" is going to influence that in the slightest. Labels: work with the carriers... or maybe acquire them. Carriers are to the future of music what radio broadcasters have been in the past, plus the entire retail supply chain. Getting out of that headlock they have on you is going to take more than a "ringle" or two.
Apple has launched three new widgets that let you show website/blog visitors what you've purchased, what you've reviewed, and how you've rated tracks in iTunes. Only really makes sense if you get most of your new music from iTunes, but that's looking more and more like everybody these days, and certainly includes me.
Check it:
My favouritest online music service, the ad-free, great-taste-in-grown-up-music, eclectic, Mac-compatible and beautifully-interfaced Pandora, has been forced to block international users because of dumb-ass US music industry licensing constraints.
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Mike Arrington in Techcrunch has it absolutely right when he heralds the news that CD music sales were down a further 20% in 2006. It is good news, and yes, it is inevitable. I've followed Mike's lead and posted a YouTube video with this post, for the same reason. The video is a fan-recorded excerpt of ‘Live In London’ by James Cooper and band, on Youtube. By putting it on this website am I breaking copyright law, or marketing an artist on my label? The answer is both.
What’s that? Shocked to hear a record label owner looking forward to the decline of CD music sales? Well, the massive changes currently affecting the music industry are why my label exists. In any moment of dramatic change there is an opportunity for small, fast-moving businesses to gain a competitive advantage. The bigger the changes, and the faster they occur, the better, for the artists the label represents, and for you the music-buying public. Why? Let me spell it out:
You don’t consume music the way you used to. The industry is still configured to cater to the way we bought music 20 years ago: you saved up all your pocket money for a couple of weeks so that you could buy one, or at most, two new albums a month. Because your purchase volume was so low, the investment you made in the purchase decision was enormous. Your purchase decision research was 90% of the time you spent as a music consumer. Everything from lavish stadium shows to million-dollar music video to double-album-insert-art-pull-out-poster album production extravaganzas were all aimed at you in your purchase decision research phase, to influence you to buy one album over another.
If you still pay for the music you listen to (vs downloading it free via P2P or sharing burned CDs with friends) you don’t buy albums anymore because you can trial each track on an album and download only what you want, busting the album-sized products into EPs or single tracks. Smaller sized purchases and cheaper music online means that instead of 90% of your month spent researching and 10% spent purchasing, you spend 90% of your month making little nibble purchases, and almost none of your time researching.
Record labels can’t invest all that money trying to persuade you to buy one product anymore, because they can’t be sure when you’ll buy. You don’t make the same investment in researching your purchase, because if you don’t like what you’ve bought today, you can just buy something new tomorrow. So all the massive promotional and media infrastructure aimed at changing your album-buying decision is wasted.
The same internet technologies that changed the way you consume music have also changed the way music is produced and marketed. While its still possible to spend millions of dollars in a recording studio, that investment has no greater chance of breaking-even than a music which is created in a bedroom with a Mac and some midi software. Music’s marginal production costs are approaching zero.
Record labels used to be able to ‘gate’ the supply of new artists and music by forcing all aspiring artists through their production systems; systems that had evolved to extract the maximum profit for the label while minimising risk, leaving the artist saddled with the maximum risk and minimum share of profit. Now artists can exist entirely without a label, or do an end-run around the label production system - coming to meet the label only at the point at which their completed debut album has already sold a few thousand units, has been reviewed everywhere that matters, and has been played to a large and growing fan base online and offline worldwide.
A larger number of artists inevitably means much lower sales for each artist, as the music buying volume is shared more broadly. The old Top 10, Top 20, and Top 100 charts used to track the success of an artist will become meaningless because the market is changing from the Top 100 making 99% of the revenue to a market where 99% of the revenue is made by artists that don’t even appear on the chart.
The days of the music megastar are fading, and in a decade or so will be just a memory, replaced by ‘entertainment megastars’ of whom Paris Hilton is an early prototype. They will be wealthy from the proceeds of a variety of media, one of which will be music. These megastars will still be created by entertainment companies, but not record labels. Instead they will be owned by vertically-integrated media empires like News Corp.
For music artists, there will still a reasonable living to be made from music, but it will come from performance, not from the sale of recordings. For most of the history of popular music, this is how artists made a living, and its to this market we must now return. Because your recorded music will continue to decline in value until most of it is effectively free, it’s not something you can make a living from directly, but it remains the best tool for promoting your live performances and finding new audiences. The early signs are already here - while sales of CDs continue to dramatically drop, it looks like the revenues from live performance (these are US figures) were up 35% in 2006, and that mostly includes large shows - nobody yet tracks small venues.
You won’t be aiming to live in a mansion and drive a Ferrari anymore, but it will be possible to own your own home and put your kids through school, as long as you adapt to these changes as quickly as possible and develop the ability to engage and entertain a live audience through performance.
In Australia and elsewhere, there’s a lack of live performance venues, but this can be solved in a variety of ways; artist collectives investing in venues, labels investing in venues, and savvy investors investing in venues when they see how live performance will be the next big growth area in the entertainment industry. For the last 50 years we’ve believed that popular music must be performed after 9pm, on only a few nights of the week, only on premises licensed to serve alcohol, and they should preferrably be hard to find, smoky and dirty. That belief is as old as the Prohibition Era, so you should expect all that to change too.
Labels like Littoral which are small enough to adapt will start to focus on marketing the live performance of artists using recorded music and other means, such as managing the online presence of an artist, and the way we share profit with an artist will necessarily change too.
While nobody will be a megastar in the future of the music industry, many more artists will be able to make a good living from performing live, and more profit will be returned directly to the artist when the large record labels start to splinter and collapse - that’s the best news of all.
