Music industry turmoil watch

Couple of interesting articles about the state of the music industry and how some people are looking for new ways to do business in it. First, from the Chron, this piece on all-digital record labels.

In 1978, Devo frontman Gerald Casale spotted his band's debut LP in a record store bin for the first time. He was struck by an undeniable thought: The band had made it.

"It's what you've been busting your butt for, and finally it happens," Casale said.

Seeing the latest release by his new group hit a virtual bin as a digital file on Apple Computer's iTunes Music Store was less than exciting by comparison.

"This time it's like window shopping," Casale said.

His new music is distributed by Cordless Recordings, a new breed of label that has dumped CDs and other traditional formats in favor of offering music only online. The strategy is meant to cut the cost of catapulting a new artist to fortune and fame by tapping the medium where young fans are finding music — online.

"When you look at the cost of a major label signing an artist, it costs about a half-million dollars," said Jac Holzman, who founded Elektra Records in 1950 and now oversees Cordless, a unit of Warner Music Group. He said Cordless does it for "significantly less," but wouldn't be more specific.

[...]

Since its launch a year ago, Universal Music Group's UMe Digital has put out several online albums, extended play recordings and singles by artists such as Posies co-founder Ken Stringfellow and singer-songwriter Will Owsley.

"The philosophy is to get artists who have a fan base and continually tour and just give them an avenue where they can release music on their timetable," said Jay Gilbert, senior director of new media for the label.

The thought that went through my head as I read this story was "You mean, the major labels are just now doing this sort of thing?" Who knows how far along this concept could have advanced if the industry had recognized the change in market conditions and worked to adapt their business models, instead of suing their customers as a last-ditch effort to keep doing what they've always done.

Over in the NYT, there's this article on independent labels and how they've largely weathered the slowdown in CD sales.

Exploiting online message boards, music blogs and social networks, independent music companies are making big advances at the expense of the four global music conglomerates, whose established business model of blockbuster hits promoted through radio airplay now looks increasingly outdated.

CD and digital album sales so far this year are down 8 percent compared with the same period a year ago, according to Nielsen SoundScan data. And while sales of digital tracks through services like iTunes have risen 150 percent, to well over 320 million songs this year, that rise is not enough to offset the plunge in album sales. Overall sales are down less than 5 percent if the digital singles are bundled into units of 10 and counted as albums, according to estimates by Billboard magazine.

Still, despite the slide, dozens of independent labels are faring well with steady-selling releases by, among others, the Miami rapper Pitbull and the indie bands Hawthorne Heights, Bright Eyes, Interpol and the Arcade Fire. Independent labels account for more than 18 percent of album sales this year - their biggest share of the market in at least five years, according to Nielsen SoundScan data. (If several big independent companies whose music is marketed by the major music labels distribution units are included, the figure exceeds 27 percent.)

The surge by independents comes as the four dominant music conglomerates - Universal Music Group, Sony BMG Music Entertainment, Warner Music Group and EMI Group - find themselves hamstrung in their traditional ways of doing business by an array of forces, including a crackdown on payola (undisclosed payments made to broadcasters in exchange for airplay).

In a world of broadband connections, 60-gigabyte MP3 players and custom playlists, consumers have perhaps more power than ever to indulge their curiosities beyond the music that is presented through the industry's established outlets, primarily radio stations and MTV.

"Fans are dictating," said John Janick, co-founder of Fueled by Ramen, the independent label in Tampa, Fla., whose roster includes underground acts like Panic! At the Disco and Cute Is What We Aim For. "It's not as easy to shove something down people's throats anymore and make them buy it. It's not even that they are smarter; they just have everything at their fingertips. They can go find something that's cool and different. They go tell people about it and it just starts spreading."

What a concept, huh? They always told me in economics class that full access to information is a necessity for a truly free market. Nice to see it in action here.

Posted by Charles Kuffner on December 27, 2005 to Music | TrackBack