State of Mind of The Art

Spotted on: Digital Music News, The Register, p2pnet.net

Here’s a news flash that hit the blogosphere en masse in the last few days. The Swedish Magazine Sydsvenskan recently reported that there is more to the original investigation of the Pirate Bay than meets the eye.

Mere months after the investigation began, officer Jim Keyzer, landed a job at Warner Brothers Film Studio. The question now is whether he was being considered for employment at the time of the investigation. Mr. Keyzer is set to testify in court about the Pirate Bay investigation, and one can only wonder how there is no bias in this case if his new job is as a representative of one of the plaintiffs.

A recent article on p2pnet.net pointed out that there is a large number of ex-police officers in the ranks of the Copyright Enforcement divisions of the RIAA, MPAA, IFPI, and other copyright enforcement conglomerates. Besides being a generous reward, it allows for a deeper connection between the MPAA, RIAA, and the law enforcement community.

Bottom Line: Can you say Conflict of Interest?

Spotted on: Digital Music News

It’s nothing new that the music industry is experiencing a steady downward trend in album sales. A few years ago, chart toppers were moving millions of albums a week. This trend isn’t just continuing, it’s advancing. For the first quarter of 2008, albums sales were down 10.7% from the same period last year, according to SoundScan figures.

As if that isn’t enough, last week’s sales showed an almost 25% drop from last year, and the number one album sold 166,000 copies. This is a very impressive figure for a mid level label, and indie labels would breaking out the champagne, but for transnational companies whose yearly sales are in the billions, these figures point a major crisis. The boat isn’t just taking on water anymore, it’s halfway under the waves.

It’s important to note that this measures only physical sales, and beyond that, only albums registered with SoundScan. While physical sales are traditionally the most lucrative part of the music business, digital sales are where the action - and the money - is at now.

People are still buying music, and billions of dollars worth of it. What’s shifted is the variety that is being bought is expanding at an exponential rate - an alarming development for the companies who invest millions into a single artist. The market isn’t so much evolving anymore, it’s already evolved. The focus around 360 deals is a perfect example of the shift the flow of money around music.

With the the combination of iTunes, Amazon, eMusic, and the army of other digital music sites that now dominate the market, the entry of Wal-Mart, Target and other major retailers into full scale album sales, and the diversity of music offered to people through social networking and file sharing, the business of selling music isn’t the same business it was five years ago; in many ways it isn’t the same business it was two years ago.

The issue at hand isn’t so much the collapse of physical sales as it is the diversifying of people’s tastes. Music is so easy to create and distribute now that the choices are nearly limitless. Anyone with a few ideas and a computer can have an album out on the web for sale, and even produce physical copies cheaply.

So how low can album sales go?

In my opinion, we’re nearing the bottom of the spiral. Physical sales may shrink a bit more, it seems that at this point the only people buying physcail albums are the ones who want the album, and fans can always be counted on to support artists.

I’m not a soothsayer, but I predict that 2008 is the year we see a major shift in the way major labels conduct business, adopting more elements of the DIY and underground communities in signing, developing and marketing artist.

Bottom Line: Sales figures measure something in reality. In reality, the music business is a brand new entity. Welcome to the Age of Variety.

Spotted on: Ars Technica

The major labels are very outspoken about the evils of piracy, and aggressively pursue those who chose to download music and not pay for it. That being the case, there is great ironyin the fact that up to 47% of Sony-BMG’s software is pirated.

Recently, a tech support call for a program called Ideal Migration (a Windows server management tool) was made by a Sony BMG employee, and the product code given was pirated.

The ensuing drama included a seizure of some of Sony-BMG’s assets.  Paul Henry, The CEO of the maker of the software, was quoted as saying “I think piracy is linked to the policy of a company. If the employee has the necessary funding to buy the software he needs, he will. If this is not the case, he will find alternative ways, as the work must be done in one way or another.”

Bottom Line: A company that is using pirated software should not be surprised when their products are pirated.

Spotted On: The Guardian

“When the history of our digital times comes to be written, one of the questions that will puzzle historians is why the record companies missed the significance of the internet.”

What a great thought (and a very catchy headline). Here is a summary of the article, with some commentary.

Since World War II, the record industry had a total monopoly on the recording, packaging, and distribution of music. They controlled the careers or artists, the way the music was disseminated, and dictated terms to music retailers. When the CD came around in the early 1980’s, and as the article says “recording studios converted the sounds made by musicians into bitstreams - long sequences of ones and zeroes - while, at the consumer end, CD players converted those bits back into high-fidelity sound.”

The sales model for this era was to create the plastic disks and packaging, ship them distribution houses, and then off to retailers. While this model proved to be profitable, the overhead costs were astronomical, with up to 50% of the retail price of a CD eaten up by production costs.

The internet was poised to change all of this for major labels. It presented the opportunity to drop production costs to the floor, while expanding profits. But the internet was ignored at first, and then it was treated as a realm for legal prosecution. Even bands chimed in, complaining about the evils of the internet. This practice got so widespread that the RIAA began prosecuting teenagers and single moms. And as the industry resisted the internet, CD sales bottomed out.

To put it simply, the major labels did not want to let go of CDs in the face of an evolving marketplace. Rather than adapt to the climate, they attempted to maintain the status quo. The writer of the article states “The obvious hypothesis - that the senior executives of all the record companies were idiots - has always seemed implausible to me. Or it did until I read the recent interview in Wired magazine with Doug Morris, chairman and CEO of Universal Music Group.”

Because CDs were so profitable, the music industry turned a blind eye to what was next, and settled into a short sighted approoch rather than looking at the big picture.

Bottom Line: The record industry can turn itself around virtually overnight by embracing and adapting to technology. Welcome to the Future.

Spotted on: Digital Music News

The folks at Forrester Research recently published an 18 page paper on the decade long decline in music sales. The article points to the idea that the shift in music sales is permanent, thanks to the Internet. I haven’t read the paper, but thanks to the blogosphere, information abounds.

The Forrester paper predicts half of all music sales will be digital by 2011, but that the boost will not make up for lost revenue in CD sales.

The paper predicts that subscription services will only grow “modestly”, and (no surprise here) that DRM will die.

In other words, technology is the future of the music business.

A synopsis on Cnet points to some of the concrete data in the report:
“A Q3 2007 survey of more than 5,000 U.S. adults with online access showed that 94% of them still listen to the radio, and on average spend 43% of their overall audio-listening time with radio–far ahead of #2, CDs, which occupy only 20% of listeners’ time.” - Radio and streaming audio are still powerful tools for listeners, and in the era of choice, people are exercising their freedom to choose.

“…the survey showed that 62% of the subjects listen to music files on a PC, while only 43% of them listen to music on an MP3 player. Even 48% of them listen to Internet radio.” - True convenience isn’t defined by product availability or features, it’s defined by the individual.

The paper also suggests that corporate sponsorship and advertising will become a major factor in platinum music success.

While this is a comprehensive analysis of the music industry, it’s not really new information. Technology has become the key to the future of music, and I believe that the future of music will be more artists selling less albums. Labels will have less investing in broader catalogs, and artists’ will become more business minded, using the resources of labels instead of being exploited by them.

Bottom Line: The music industry isn’t collapsing, it’s evolving. Welcome to the future.