Tag Archive for 'Business'

In getting a picture of what’s next for the music business, let’s take a moment to look at reality right now. There are a few reports from mid-2007 that CD sales are way down (15% from the first half of last year), while digital sales are up over 48% (If you find any more recent industry sales reports, I invite you to post them as a comment to this post).

CD sales are dropping, set to be a small fraction of overall sales – and sooner, rather than later. A recent survey of high school students showed that there is a downward trend in music downloading in that age group. This is the next generation of music buyers. Perhaps their actions are pointing to something.

The Freakonomics blog posted an editorial recently with analysis of the record industry by five people who ought to know. Koleman Strumpf, an economics professor at the University of Kansas, had this to say:

“If file sharing hurts record sales, then albums that are more heavily downloaded should experience lower sales than comparable albums that are less downloaded. But, after controlling for the role of popularity, we found that downloads had little effect on album sales.” He wrote a whole paper on the subject, if you want to find out more.

In other words, file sharing is not the source of the drop in album sales. A powerful insight like this is the last word on file sharing for me (although not for the RIAA).

Audioholics.com posted a great editorial on whether CDs are approaching the event horizon of obsolescence. They include a buffet of statistics showing that while physical sales are slumping, digital sales are growing with velocity.

As the digital music market overtakes physical sales, CDs will become less available (relegated to major chain stores like Wal-Mart). We can see this shift with the demise of? Tower Records. When people can get all the music they want without going to overpriced record stores, they will. This trend has yet to infect mom and pop record stores, like Orlando’s own Park Avenue CDs, and since most of these stores are seen as boutiques rather than purveyors of the lastest industry tripe, most of them will likely survive (don’t forget that most small record shops deal with smaller and indie labels, and used CDs and vinyl).

People are still buying tons of music, and if digital music sales are any indication, music will continue to be a commodity. Although most commentary is still focused on what major labels can do to revive sales, the real issue is becoming what can artists do to empower themselves in this new realm.

People are exposed to a larger variety of sounds than ever before. Demand for music has skyrocketed, while profits are shrinking. The idea that music has lost much of its monetary value in the current market is a two fold effect: the novelty of file sharing and mega hard drives, and the price difference between a digital single or download and a CD.

We live in an era of convenience, and audiences consistently choose the format which is most user friendly (think audio tapes in the 80′s). The shift toward digital libraries has been predicted for years, and even with DRM, digital is already the industry standard. I’m still surprised that such a well-known and predicted phenomenon can cause such panic among executives. It’s almost as if upper management in the record industry has been ignoring the experts.

The quality of the music is a major factor in sales when people have access to massive catalogs, too. Hip Hop is a great example of this trend. Collapsing under the weight of violence and misogyny, some hip hop artist still enjoy huge mainstream and underground success. And the cause of this slump seems to be the choices made my industry executives over the last ten years.

The reality is this: The fate of major record labels has nothing to do with whether or not musicians will be able to create fulfilling careers, absolutely nothing. With unlimited access, people aren’t compelled to buy any album unless they absolutely want it.

And in case you wanted to know the secret to success in the music business in any climate:
Make Great Music!