It is interesting to see younger folks involved in the music industry try to deal with the new reality that they face. Most of these people don’t have much experience to draw upon. Since they have only been in the business for 10 or 12 years, they don’t know what it was once like and therefore have no means of comparison. They don’t realize the vast amounts of money that flowed to labels and artists. They are looking for something to hold onto in the hopes that their careers in the industry which they love can continue.
They are hoping that streaming music will be the savior of the business. They are putting their faith in the wrong place. There is probably no bigger a proponent of streaming than myself. I say this as a fan, not as a businessman. I love Spotify and Pandora. It gives me the ability to discover a lot of music, both old and new and to pick the music to which I listen. However, as a manager and consultant I don’t see streaming as something that will line the pockets of artists in the future. There is no guarantee that streaming services will be able to last long enough to have a significant impact. There have been some recent articles in publications such as the NY Times and the Wall Street Journal about streaming. No doubt, these articles come as a result of a PR campaign launched by either one of the streaming services or by NARAS. NARAS (National Association of Recording Arts and Sciences) is an organization that is supposed to improve the qualifty of life for artists and producers and other members of the recording industry. They have done a miserable job. They sat back and allowed copyrighted work to be stolen from artists. You can blame it on technology, but I blame it on NARAS, politicians, and record labels for allowing this to happen without mounting any ANY RESISTANCE.
The New York Times article http://http://www.nytimes.com/2013/12/13/business/media/a-stream-of-music-not-revenue.html?hpw&rref=business&_r=0 raises the most realistic point. Though the number of people using streaming services is increasing, all the services are having great difficulty in converting these people into subscribers. Approximately 85% of Pandora users, do so on a gratis basis. There are subscription services which charge a nominal fee each month and there is a free service that has commercials. The numbers for Spotify are similar. Unfortunately, for the most part, the public has grown to feel that music should be free. ITunes, download business is down significantly and its decline can’t directly be attributed to streaming. People just don’t feel they need to OWN music any more. This is a very troubling issue and one that is not easily corrected.
Both Spotify and Pandora are in very difficult financial shape. Spotify, which works diligently with artists, labels and managers to obtain rights to music is cash strapped. They pay millions each year to obtain music licenses. The income they have derived from their subscribers is not enough to pay the bills. So the question remains, how much longer can they stay in business. Pandora has a different issue. They have chosen to work from “outside” the industry. They are clearly viewed as the “opposition” by many artists. They get little or no support from established artists and labels. Independent artists with much smaller followings see the benefit to Pandora, but then again they have virtually nothing to lose. Pandora’s biggest issue is that the government considers them an internet radio station. Therefore they pay a crippling royalty rate for the music they play. Pandora has worked hard to get “re-classified” and lobbied Capitol Hill to no avail. Some critics blame the problem on a bad business model on the part of Pandora and obviously the politicians see their point. It is difficult to say how long they can hold on.
The Wall Street Journal has another approach to the future. http://http://online.wsj.com/news/articles/SB10001424052702304020704579276123352482930They claim that the important thing is that good songs will continue to earn revenue from streaming for years to come. They present this idea as if it is something new. They point out that Pop Music has a shorter shelf life, but that in the end great music will pay dividends long into the future. This has always been the case. Less experienced parts of the industry see this as a “light bulb going on moment”. The success of the music in the past has been based on current product and a strong catalog base to supply income each year. Hit music has paid the bills for labels and supported artists for decades. For example, Greatest Hits collections from James Taylor, Journey and other artists sold hundreds of thousands of copies each year for decades. Bringing these artists and their labels many millions in income at virtually no cost to the labels. However in the late 70s and early 80s the industry was seeing a leveling off in sales. Then came the CD. Music fans substituted their favorite albums for CDs therefore giving the industry unprecedented growth. MTV was also in its infancy during this period and literally had no old videos to play. As a result teens and young adults (the most active buyers) got a steady diet of new music. The benefit of this was even more growth for the industry and the development of many new artists. The invention of the iPod with the simultaneous birth of “free sites” such as Napster brought with it the beginning of hard times for the industry and the artists that earn their living from the production and recording of music.
While I admire the persistence of young “media mavens” in looking at the bright side of things by saying streaming is just the beginning to get started. They are not seeing the forest for the trees. It is akin to asking Mrs. Lincoln if she liked the play. I said this to one of these self-crowned experts and he didn’t seem to get the joke. This may not be the beginning. It could as easily be the height of the trend. Hopefully I am wrong, but most likely the revenues derived from the need for people to OWN music will never be matched by streaming. As a result labels will slowly dwindle down to skeleton staffs.
The music industry has always been run on the principle of “Trickle Down Economics”. The labels had money to invest as a result of the tremendous revenues they generated from selling product. They were more than willing to invest it in young artists, who they saw as their future. Unfortunately, the labels don’t have the luxury of looking at the future any longer. They are having enough trouble worrying about the present. If streaming services survive, then some of the revenue will start flowing in the right direction, even if the numbers are a fraction of what they once were. We have to come to grips with the reality that the paradigm is permanently broken. Remember, there used to be guys that drove around in carriages with blocks of ice in the back. They would sell them to people to keep their food cold. Then some “nitwit” went and invented the refrigerator.
In the past industries have been able to adjust to the changes in technologies. That is not necessarily the case any longer. The music business has been decimated, the broadcast industry is about to go through sweeping changes in the way users access the content. Nearly every industry has had to evolve when faced with technology that has changed the way they have done business in the past. Most industries have cut their workforce and adapted to the changes in technology. The music industry has done that, but it has yet to find its way out of the forest. Maybe they never will without help.
The so-called media experts are looking for answers in the wrong places. One of our culture’s greatest assets is in big trouble. Music is an integral part of our culture and our lives. Our government seems to be able to throw money at nearly every humanitarian cause imaginable. We also waste money by the billions on stupid insignificant things. The answer to the problem within the industry is money. Artist’s, especially new artists are literally starving. Eventually the supply of new talent will be choked off. The next generation of artists will decide it is simply not worth the risks involved in pursuing a career in music. Right now you have to be a few sandwiches short of a picnic to decide to be a musician instead of learning another trade in college or elsewhere. The internet is cluttered with so much content that it nearly impossible to find the cream amongst the shit. As a result, the possibility of reaching a critical mass of people is nearly impossible. It once took talent and persistence to become a well-known artist. Now it takes a miracle.
It is time for our government to get involved. It turned its back while our nation’s musical landscape has been devastated. Step in and support artists as well as the mechanism. Other governments around the world invest in their new artists. The United States has grants for the arts. If you are a ballet dancer from South Central LA you may be able to receive financial assistance to help you pursue your career. But what if you are a great songwriter and guitar player from HIbbing, Minnesota or Freehold, NJ. There is nothing for you.
The government has to support artists, streaming services and perhaps even find ways to bail out record labels. Not to the extent they bailed out the auto industry. But help these labels re-staff and re-dedicate their profits to developing new talent. This is a bigger issue, but one that must be explored. Certainly the government can’t condone 7 or even 8 figure salaries to dinosaur-like label heads. But, money going in the right direction can certainly help. We seem to find money to support causes less dear to us than our musical heritage.