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.

An interview with the Flashbulb about his recent calamity with iTunes, and putting his album up on BitTorrent. It turns out iTunes is selling his albums without permission, and not paying royalties.

The Flashbulb (Benn Jordan) has been releasing albums for 14 years, the last 5 have included various commercial endeavors. The label deal he has is a 50/50 split, but he hasn’t been seeing the money. Benn says he has no agreement with iTunes to sell his music, and many of his fans have told him they bought his music there. When he investigated the issue further, his label asked him to drop it, and his calls went unreturned.

Here’s a great quote from Benn: “Who’s the pirate I should go after? A kid who downloads my album because it isn’t available in non-DRM format and costs $30 on Amazon? Or a huge multi-billion dollar corporation that has been selling thousands of dollars worth of my music and not even acknowledging it?”

Benn is being labeled in the press as pro-piracy, but his true stand is that people buy what they like. “What I’m promoting is the artist’s freedom to choose what can and can’t be done with his/her music, and more importantly, the listener’s freedom to do what he/she wants with their own computer, MP3 player, or internet connection.”

Benn makes a poignant case that the RIAA has spent so long dictating people’s taste and choices that they are now threatened by the opportunity for people to choose the music they want. He suggests that “music will be judged by it’s content again and will be subjected to it’s own Darwinism.”

Bottom Line: Where are all those billions in album sales really going?

This article looks at the impact that huge MP3 collections has on our perception and enjoyment of music, and really got me thinking.

Music has value because it moves us. That special album that takes us back to some magic moment, or the songs we love to dance to. What has people by albums us the love of the music.

MP3 collecting is similar to collecting baseball cards. Grab an artist’s entire discography, and trade among your peers. Our music collections expand almost as fast as the national debt, and often music sits on our hard drives unlistened, unappreciated, and unacknowledged. We become overwhelmed with the amount of music we have to listen to, and start to lose our love for the music that touches us.

When music is downloaded and listened to only once or twice, it becomes a single serving item, like a hamburger. The joy of music is in the artistic expression, and the way we are moved when we hear something we love.

Could the current frenzy of MP3 downloading (both legal and illegal) be eliminating our love for music? There’s a phenomenon known as information overload. One way to look at the current consumption of MP3s is that music is in an information overload stage.

With so much music to choose from, both free and bought, and huge MP3 collections, the line between having music we love and having music because its there is getting blurred.

Most of the time, we relate to this in terms of album sales, and the music industry. What if we looked it as a shift in the perception of music? While music is always special, it’s apparent that we are now starting to view it as a thing to have. What effect this will have on our appreciation of music is anybody’s guess. Based on the habits of the general public, music is losing it’s intrinsic value as art, and becoming more like a piece of furniture.

Bottom line: We used to buy CDs because we loved the music. It is starting to appear that we now collect MP3s because they’re accessible.

Here are some of tasty quotes :

“it’s always very difficult going from something that’s free to an industry to something that has a cost to the industry.”

“I think what we have to do is far more flexible about price. The industry has been very bizarre over the years – it’s essentially a one price industry.”

“I don’t want to destroy physical sales … We find physical and digital are both viable markets that people enjoy using. But clearly, there’s an opportunity for music on tap, and as a service, and it’s something we should explore.”

“I would like to see copyright modernized in 2008, with people enabled to do what they want to do, and those who profit from it allowing the practice [third parties] to be monetized. I’d like to see barriers taken away from the enjoyment of music.”

“I think P2P does have a discovery element to it, and it you may discover something on P2P that makes you buy a product. CD burning is much more domestic piracy, and is much more somebody avoiding paying for something.”

“I think the whole “DRM as a policeman” policy was doomed to failure – the independent companies never supported it to any extent whatsoever. We have never believed in putting obstacles into what the consumer wants to do.”

“We inhabit a mature industry that’s grown on a multi-territorial basis. And, frankly ,if you were reinventing it today you’d reinvent it way differently. It would be global, not territorial.”

“…[T]he market is in the control of one or two parties, and we don’t think that’s healthy.”

“The patrons are going to be largely commercial so brands that see an advantage to a certain kind of artist, and that is putting art far to close to commerce. That would mean marginal music wouldn’t exist, you’d only have music that had a commercial upside for sponsors. That’s a world none of us really want to see.”

“Music publishers, the record labels and digital music distribution outlets began a three-way legal wrestling match Monday over just how much songwriters and the publishing houses should get paid for digitally delivered music.”

At stake in this debate is mechanical royalties for internet streams. Major labels, Apple, and Yahoo want the royalty rate for artists to be lowered. The big publishing houses are currently promised nine cents a song, a figure that often gets negotiated lower, and the consortium against them wants that rate moved to 8%. Apparently, publishing revenues are up, while major label revenues are down. The Digital Media Association is upping the ante, pushing for the royalty rate to be dropped to 4%.

On the other side of the fence, the National Music Publishers Association wants the rates raised to 12.5%.

The driving concern here is the financial ‘burden’ that paying these royalties puts on the large companies that offer music. The claim is that streaming media should be treated like terrestrial radio.

Bottom Line: Without content, there is nothing to stream.

The RIAA’s head, Cary Sherman, wants to put encryption on our computer that will force us to decrypt music before listening to it. In other words, the filter will scan all your incoming data and then either allow or deny your ability to listen to it. since this idea likely won’t be popular (who’s going to willingly put a filter on their computer that blocks the files they are downloading?), the next suggestion is to put the filters in our modems.

Despite the predictable public backlash against these tactics (in an environment where the RIAA already has public approval that rivals the US Congress), some ISPs are moving ahead with these filters. The technical specifics are a bit thick, suffice it to say that various file encryptions can bypass these filters unless entire protocols are blocked.

Here’s a video of Mr. Sherman lauding the glories of filtering:

Bottom Line: Being out of touch with your consumers’ needs does not improve your financial picture, or your credibility.

Here’s something novel:

Dependent Records recently uploaded their entire catalog on Pirate Bay (Dependent specializes in aggrotech, electro-industrial and futurepop). Well, sort of. Apparently a group pretending to be Dependent posted the albums on the p2p site.

The quote from label head Stefan Herwig – well, an impersonator – is “I closed down my record label Dependent Records for good. But since I want my music to be heard by the people out there, everything I have ever published is now available on The Pirate Bay.”

While artists are turning to file sharing networks for promotion, it;s unusual to see a label do this (although there are some net labels giving away music, such as Kikapu and Lacedmilk).

Herwig (or his imposter) feels that p2p technologies are killing labels, not boosting sales. However, this article claims file sharing is a boon for new music. Perhaps availability adds to desirability.

Do you think file sharing is boosting or dropping album sales?

Here’s a great article about the new marketing methods we’ll be seeing in 2008.? We will begin to see large scale experiments in subscription based music distribution and other models which eliminate a pay by the track model (such as Imeem).? The death of DRM may come this year, as three of the Big Four labels are already in the process of abandoning it.? There are rumors of deals in the works between major labels and ISPs (internet service providers) to offer unlimited downloads or more bandwidth, and we can expect to see multiple collectible versions of albums released.

As the shift in music sales hits overdrive into the digital realm, 2008 is shaping up to be the year the major labels begin to adapt to environment.? The big question left is: how will artists break into the big time?

Bottom Line:? The Big Four are finally entering the digital revolution.

Mega online retailer Amazon is preparing to offer their MP3s in every language.? The company cites an overwhelming demand from customers for their DRM-free music downloads (which includes titale from all of the major labels).

Given the size and power Amazon carries on the internet, they are poised to set a new precedent for selling music digitally.? The largest online retailer of music by far is iTunes, and it will be interesting to see how Amazon’s shift to DRM-free music changes the playing field.

Bottom Line: Amazon offering their MP3 catalog worldwide will shift the landscape and methodology of digital music sales.

The way the major labels are adapting to the transforming music industry is strange. Somehow, the four largest music labels in the world seem to be the last ones to understand what people want. From the perspective of an onlooker, it seems like they wait till the last second to adapt to everything.

DRM is officially becoming a thing of the past. According to Business Week, it appears that Amazon’s DRM free service and billion MP3 Giveaway has brought the Big Four around to a DRM free world (at least for some albums). Sony BMG, the last of the big four labels to cling to DRM like a liferaft, has announced they will stop using it sometime early this year.

This is the magic moment when the major labels have all given up on the wildly unpopular copyright protection. Sony is using a gift card service, where listeners can buy cards at retail outlets (such as Best Buy and Target) and then redeem them for MP3 albums online.

Considering the 15% drop in CD sales last year, it’s refreshing to see that the major labels are adapting to the desires of their audiences, even if it is forced by pressure from iTunes and Amazon. DRM was instrumental in iTunes gaining dominance in the music download market, and now even they are beginning to offer DRM free tracks, and at the same 99 cent price tag.

Bottom Line: DRM will finally be relegated to where it belongs, on subscription services.