Music Costs Too Much

Well, we have really screwed things up.  Music is essentially worthless today.  There are so many streaming services that in a relatively short period of time, the CD will cease to exist.  The idea of buying music may disappear altogether.  There are a number of reasons why selling music may soon become a thing of the past.  But the biggest reason is that it is too expensive. 

I worked at Columbia until 2002.  At that time the label had raised the list price of top line acts to $18.98.  It was insane, but the logic as explained to me is that books cost over $20 and people only use them once.  People use CDs over and over again. 

We have essentially killed the era of the album.  Thanks to the ability to download a single track on iTunes there is relatively no one that downloads entire albums any more.  Look, this has been coming for a long time.  Even the format that used to be called “AOR” (album oriented radio) had stopped playing albums.  It had become a format that played one rock single from an album after another.  So, the concept of making a great album seemed outdated.  Anything but one great rock single was superfluous.  After the first single, everything was gravy. 

But to me the real nail in the coffin to the album format occurred about 12 years ago.  I am not well versed on the original agreement with iTunes. If someone knows more about this subject, please let me know.    But, whoever it was that allowed iTunes the ability to let users download individual tracks made an enormous mistake.  Greed was the motivating factor.  Some folks must have believed it would revive the practically non-existent singles medium at the time.  Instead they killed the album.  For people who are fans of “Hunt for Red October” it was the equivalent of when the Russian submarine commander fired a torpedo that was active at too close a range,  only to have it come back at him and blow up his own sub. 

A few acts have seen the light.  I have to give it to Kid Rock.  When his hit song “All Summer Long” was released it was unavailable on iTunes.  The only way I was able to get it was to actually go out and buy the CD of the album.  It may have been the last CD I bought at a retail outlet.  There also was only one good song on it.  Kid Rock sold millions of albums, because this was a great song.  The song is now available on iTunes, but because it was unavailable in its normal lifespan he sold albums, not singles.  Justin Bieber, and other “Tween” acts don’t sell anywhere the number of albums they would sell, if their singles were unavailable for download.  It has cost Bieber millions. 

When iTunes came along the industry should have had the vision to realize what a threat it was to the business.  I don’t claim to be a genius, but I remember after seeing it for the first time telling Jim Guerinot and another friend Peter Baron, that we’re done.  I turned out to be more of a visionary than I ever imagined.

The proper strategy (easy to say in hindsight) would have been to set the price of digital album downloads  at $3.99 or $4.99.  Then, reduce the price of CDS to $10.99 (which is what they were selling for at places like Tower).  The digital era would have evolved even quicker and by now the digital market would probably be something like 80% of the market or more, not where it currently sits. 

If the market became nearly all digital and the album had retained its integrity, we would not be in the shape we are in now.  People would not be buying CD singles for $2.99 or more when they could download an entire album for $3.99.  There will always be piracy, but if the music was cheap enough the impact would have been less significant.  How many people would have preferred to buy a digital download of an album for $3.99 as opposed to “stealing it” for free?   Some would have preferred to steal it, but more would have  be willing to pay to keep their conscience clean and to avoid the viruses that often came with tracks downloaded from services like Kazaa and Napster. 

I come across many young artists interested in self-releasing their first album.  I tell them not to waste the money.   It can easily  cost between $2500 and  $5,000  a track to get a well-known rock producer to work on your album.  How many new artists have ten great songs.  The answer is zero!!  If they are really good, maybe they have two or three.  Only one artist I have worked with over the last few years, Megan McCormick, had enough quality material to make an album.  A label agreed and she got signed.  But most often there is one track that is good or even great and then a lot of other stuff that is just okay.

If I ruled the music world, I would stop making big money deals for any acts.   Major labels are unnecessarily paying extraordinary amounts of money to produce albums.  Producers have two costs.  One for labels and one for people self-releasing.  Labels should pay producers less, lower the price of albums and stop making CDs.  That may be the only way to get control of their music again. 

If there is ever a chance to re-do the deal with iTunes someone with enough courage needs to rollback the deal.  iTunes is likely going to head into a death spiral when streaming becomes the way of the world.  Once more people are mobile with services like Spotify there won’t be a reason to download anything from iTunes.  So, ultimately it will die, if it does not evolve into a streaming service.  Why not just hasten its demise?

I don’t buy into the current thinking that the record industry has hit bottom and is rebounding. Based on this year’s numbers the industry rebounded slightly.   I think there were just a couple of artists who made extraordinary albums, such as Adele, that helped the numbers.  In general, the CD is dying and so is the heart of the label business. I also believe that in just the same way that the government “spins” the unemployment numbers the music industry has “spun” the numbers on this year’s sales.

If the industry as a whole is not ready to bury the CD, it needs to reduce prices drastically.  They need to sell music very cheaply.  This Christmas I actually saw the prices of major acts on iTunes actually going up.  This makes absolutely no sense to me. 

If there is any chance of surviving, the major labels have to get costs under control.  Ridiculously exorbitant salaries are still being paid to execs whose labels lose hundreds of millions of dollar each year.  How can you justify that?  Outside of one or two guys, is there any head of a label that could or should not be replaced. You can easily hire someone at a fraction of the salary, to do the same job or perhaps even better. 

One of the reasons why some of the “old school” label heads could justify their salaries was because they could actually relate to the artists on their label.  Ask artists on Columbia when they last had a pleasant night out with Steve Barnett. The personal and creative aspect of a label heads job was at one time essential to the success of the label.   Don Ienner knew how to get the most out of the acts on Columbia.  There are a number of acts who were forced to go back in the studio to make better a better album.  Train is a perfect example.  “Drops of Jupter” a Grammy-winning song, was not on the band’s second album when it was delivered.  The band complained and even threatened to leave the label, but eventually they went back in the studio and wrote the song that literally saved their career. There are similar stories involving Mo, Clive and others.  Outside of one or two label heads that have great relationships with their artists and can motivate them to make better music, there is no one capable of doing this anymore.  So, as a result, people have jobs as label heads because they are good at cutting costs, not making music. 

So, if you eliminate the excesses in production costs, senior executive salaries and expenses you might have a fighting chance to reduce the price of music.  Some label heads still fly on private planes.  If your company is losing $100 million dollar a year, is there a really a reason that the Chairman  of the label get anywhere fast and in luxury.  He can still lose that much money and fly commercial.  I don’t know how many execs still have car services taking them to and from work.  Would the experience of taking the subway to work again be too much for a Chairman to endure?  Cut expenses not jobs.  The marketing and promotion jobs are still critical to the success of projects.  But you need to give the staff money to work with. 

To this point labels are trying to make a profit by maintaining the price of music, maintaining the lifestyles of senior management and cutting heads when they have to. They are banking that they can stem the tide long enough to get back to the point where they make a profit.   It is totally the wrong approach. 

Back when the industry was very profitable, senior executive salaries were a fraction of what they are now.  Labels were a haven for creativity and the people who worked there were not in it for the money.  Somehow that changed in the 90’s.  It was fine at the time, because we were making record profits.  But now it is time to rollback the clock to the 70’s financially and creatively.  Hire creative people, not people who are in it for the money.  Hire people who love the music and the artists, not the lifestyle.  Find artists who are stars, not executives who believe they are the stars.