For those who are not familiar with the "Long Tail" theory it is one of the most persuasive theories in the economy of the entertainment business right now - that the infinite shelf space of the internet will cater to so many more tastes and demands out there than before, that the small amount of "hits" and "hitmakers" traditionally responsible for the bulk of profits will see a decline as tatses diversify amongst the infinite range of whats now available.
Here's an update from author and editor of wired magazine Chris Anderson on the state of the music industry.
October 19, 2007
Everything in the music industry is up! (except those plastic discs)
At a speech last week I was asked a question that has come up every day since the Radiohead (and Madonna, NIN, Prince, etc, etc) announcement: What's going to happen to the music industry?
To which I answered "Which music industry?" You don't mean just the one that sells CDs, do you? Because it's a big mistake to equate the major labels and their plastic disc business with the industry as a whole. Indeed, when you stand back and look at all of music, things don't look so bad at all.
Indeed, it appears that every single part of the music industry except the sale of compact discs is up.
* Concerts and merchandise: UP (+4%)
* Digital tracks: UP (+46%)
* Ringtones: UP (+86% last year, but probably just single-digit percent this year)
* Licensing for commercials, TV shows, movies and videogames: UP (Warner Music saw licensing grow by about $20 million over the past year)
* Even vinyl singles (think DJs): UP (more than doubled in the UK)
* And, if you include the iPod in the music industry, as I'd argue a fair-minded analysis would: UP, UP, UP! (+31% this year)
Only CDs are down (-18%). They're around 60% of the industry not including the MP3 players, but just around 25% if you do include them.
So the problem with the music labels is not that music is an industry in decline, but that they have a too-narrow view of what business they're in. Madonna's switch from a label to a concert promoter should be a clue. This quote from an excellent article (it's worth reading it all) in Entertainment Weekly says it all:
''Soon a lot of these companies won't define themselves as record companies,'' says Steve Greenberg, the former head of Columbia Records who now runs the independent record company S-Curve. ''They'll define themselves as artist development companies. If you're involved in an entire career with an artist, then everyone's interests can be aligned."
I think most music will soon be free, as artists give away the product as marketing for their performances and licensing, and as a celebrity accelerant that creates more opportunities to make money than just from the sale of a record.
And for those who say that this avenue is only available to artists at the head of the curve, such as Madonna and Radiohead, I'd point out that the other group poorly served by the labels are those at the bottom of the curve, the many thousands of bands who fall below the radar of the hit-driven majors. I'd argue that they, too, have nothing to lose by letting their music go free, nothing to lose but the prospect of becoming indentured to companies stuck in last century's model of monetizing music,
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And, for what it's worth, down here in long-tail retailer land at CD Baby, even physical CD sales are up 35% over this same month last year. I suspect that part (not all) of the decline of the top-40 CD sales are people buying more CDs directly from independent musicians and alternative outlets.
Posted by: Derek Sivers October 19, 2007 at 11:07 PM
Then there's the content. I'd bet that # of bands, # of musicians, # of tracks being made and available somewhere, # of venues are all up as well. My gut feel is that there are more people making more music than ever before. Then how about streaming; Last.fm and Pandora up. P2P sharing; Up. Number of shoutcast servers; Up. Digital radio and radio over cable/satellite stations are Up.
It's highly likely that more people are listening to more (and more varied) music than ever before.
It's not really CD sales that are down. It's the Music Major's profits.
Posted by: julian bond October 20, 2007 at 01:46 AM
The EW article is extremely interesting, just read it last night. Of particular interest are the "360" deals which include concerts, merchandising, etc. (all forms of revenue, not just CD's). These all-inclusive deals should be the logical progression for the music ologopoly. They clearly need to hedge their bets and diversifying is the answer. These big companies are also much better suited at trafficking in the short head rather than discovering talent in the long tail. Increasingly, technology is facilitating the discovery of longtail artists.
Perhaps this will evolve like the financial markets have. Large labels can start acting like investment banks rather than VC's or seed financiers. They become more transactional in nature and only deal with artists with a lower risk profile (guaranteed revenue stream). Technology will facilitate the viability of smaller unsigned artists getting discovered, and music labels will play less of a role in that process. Perhaps there is still room for labels to take risks and "make" unknown artists into superstars, but maybe it's time they embraced their future in "buying" artists rather than "building" them?
Posted by: Ryan October 20, 2007 at 08:08 AM
Sharing music to promote concerts has been going on for over forty years. The Jam Bands, specifically The Grateful Dead starting allowing their concerts to be taped and shared from their beginning. From this grew a fanatical group of concert goers that follows the band in it's various incarnations today.
They have now spawned a new genre which is instant high quality sound board mixes of the concerts that they do. At $10.00 for an MP3 it makes it worth while to purchase directly from the band online. I expect you'll see more of this as the "real" music companies catch on.....even if it only took them forty years.
Posted by: Josh Patrick October 20, 2007 at 08:38 AM
Sharing music to promote concerts has been going on for over forty years. The Jam Bands, specifically The Grateful Dead starting allowing their concerts to be taped and shared from their beginning. From this grew a fanatical group of concert goers that follows the band in it's various incarnations today.
They have now spawned a new genre which is instant high quality sound board mixes of the concerts that they do. At $10.00 for an MP3 it makes it worth while to purchase directly from the band online. I expect you'll see more of this as the "real" music companies catch on.....even if it only took them forty years.
Posted by: Josh Patrick October 20, 2007 at 08:39 AM
I'm still in shock that the RIAA is running such a gangster outfit... and the government is standing by them as well as the justice system. When more money is spent on lobbying than on marketing, you should take a hint that you're in a dying industry.
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