You gotta do it all yourself these days

It’s all about the music, isn’t it? No-one needs to make money to make music, but it certainly helps. Modern music begs to be created by and channeled through increasingly advanced technology, to be heard on multifarious shores. Music is global, dispersed and, increasingly, non-commoditised. Some money is necessary to facilitate this, but there’s less and less of the filthy stuff around. In 2009 global music related revenues slumped 7%, continuing a decline that began in the early naughties when the digital revolution took hold.

But it’s not as simple a picture of piracy induced decline as the record industry would like us to believe. What’s most important to understand is that digital theft is only partly to blame for these financial woes. Due to the ease on distribution of the new digital formats, and the ability to buy single tracks off of albums without buying the whole thing, sales have migrated away from lucrative CD sales (which supports a massive production and distribution infrastructure) to considerably less lucrative digital forms starving both the recording and distribution industries of cash. The way people consume music has changed forever, but the music industry was slow to catch on.

There has also taken place a devaluing of the music. Because of the ease of distribution of digital media, and no tangible way of stemming the free exchange of digital music files, a key economic law has been violated: the law of scarcity. Put simply, a ‘commodity’ that is desirable but abundant or freely available has a low (or non-existent) intrinsic value. Musicians and the industry alike would probably balk at this, but it’s an immutable law of economics that everyone’s going to have to get used to.

That said, the digital market is thriving in almost every territory, and the music based revenues in Australia, Brazil, South Korea, Sweden and the UK grew last year because of this. But it still remains harder than ever to make money out of music, and as a result record labels (key for providing funding for bands to produce and market their wares) are less able to take on new acts. This is leading to an anti-diversification of the music that’s being marketed to the masses and a preference for pushing legacy acts. This trend is likely partly responsible for the fact that digital sales, volumes of streamed tracks and even those of pirated tracks are all trending towards the popular end of the market. The ease and low cost of production and distribution of music mean that there are more acts than ever competing for listener attention. These three facts, among many others, mean that it’s tougher than ever for a marginal/unsigned/independent artist to get heard, let alone make money.

As a result bands are having to become marketing/promotion machines on top of all the other diversifying tasks they are having to take on in the absence of labels. Some see this as bad thing, others see it as bands being forced into taking control of their own destiny – this may come with much more work, and countless pitfalls and gotchas, but for those successful the immediate rewards are much higher. Unfortunately, only bands with a lot of nouse, real dedication and a lot of luck are likely to make this a reality, which leads us back to the labels – the market needs for them to start taking risks again, and quickly.

Instead, the big players have been trying to litigate and legislate their way out of their deepening hole. The former has yielded little success and cost a lot of money, the latter has had some success with legislation passed in both France and UK. The UK’s Digital Economy Act is controversial to say the least (it gives media companies the power to request that repeat offenders have their internet cut off) and was rushed through in a potentially unconstitutional fashion. This legislation is unlikely to work, not least because it won’t grow any teeth for at least 2 years, by which point Plan B will (God willing) have taken hold.

What’s Plan B? Well it’s already happening around you and the record industry is only mildly less worried about it than they were when this pesky digital revolution thingy started happening in the first place: streaming.

Industry backed Spotify currently dominates the European streaming market and is already becoming ubiquitous. The last software update saw them integrating with Facebook and including listener’s own MP3 library in playlists – a move which should give iTunes pause for concern. However, Spotify isn’t making anyone much money at the moment, least of all the artists, and there’s a palpable sense of “when will they shut it down” in the air. Until that is rival little cousin We7, whose revenue and royalty payout model yields better results, posted profits last quarter apparently proving that an advertising based streaming service can be profitable. The market is really hotting up, and with Apple recently squashing streaming service Lala, rumours are rife that they are preparing an iTunes based streaming service in an attempt to muscle in on the party.

These streaming services will need to become truly mobile before they are a viable alternative to MP3’s (Spotify already are for paid subscribers) and even with We7 turning a profit, it’s unlikely that they’ll be really embraced by the industry unless they can turn over a bit more cash, most likely via mandating paid subscription. One way or another, streaming would seem to represent the future of digital media, and once firmly established should render filesharing redundant.

This being the case, the situation we’re currently in, where making money out of selling music directly is nigh on impossible, will remain so for the foreseeable future and probably forever. That’s not to say that one can’t make money out of music. Live music is a big growth area at the moment, with many record labels looking to monetise their acts this way. However, this is driving ticket and bar prices up which could have the effect of squashing this market too.

An interesting side effect of digital streaming is that it’s actually widening the music listening audience. 60% of people never buy music, however, services like Spotify are engaging these people into actively consuming music and converting them into potential revenue targets – they may not want to buy music, but they may well pay to see it, or simply swallow some advertising for the privilege. Understanding, expanding and exploiting this ‘new’ audience will be key to the evolution of the music industry.

So where does all this leave the music industry? Well there’s a bunch of people that don’t make music who probably will have to find careers in different industries, but the people who do make the music are likely to carry on doing so, regardless of the economic welfare of the music industry. The economic battle will be fought by suits who will utter the word ‘licensing’ a lot while worrying about the logistics of an increasingly complex royalty system. The music is thriving, even if it’s not as good at generating dosh as it was before, and thanks largely to the advent of digital distribution, there’s a larger audience than ever before. The music exists without the industry, and that’s what matters.

I was in the unenviable situation this past week of not having a copy of the new Baroness album. This sort of situation is not usually a big issue, but this particular time it left me in an existential quandary that lead me to yet more pondering on the nature of music retail.

You see, I want the physical copy. Specifically I want the CD. This CD would immediately be ripped directly to MP3 and unceremoniously injected onto my iPod. But having a physical copy is still important to me. I place a certain value in this, not least with a band like Baroness who have such delightful artwork.

So having not had the forethought to pre-order and finding the HMV cupboard predictably bare I was left either having to wait a couple of days for a copy from Amazon, listening to it on Myspace, downloading from iTunes or ‘borrowing’ a copy from one of those lovely fire-sharing sites. Now, I don’t want to pay twice, and I simply cannot wait. Myspace isn’t an option as I need it on my iPod so I can listen on the go. Spotify is potentially an option, but I’ll have to use my iPhone for that, and the battery only last 73 seconds, and I need that for the making/taking calls. So I’m left with the prospect of having to ‘borrow’ it for a few days while ordering off the web. What sort of a situation is this to find myself in in the digital age?

What would be really handy is if someone would sell the CD online and then give me the MP3’s to be getting on with while I wait. I don’t want to be charged extra for this, I’ve already paid for the music. However, decoupling the music from the physical product has some interesting theoretical consequences. Let’s deconstruct this situation a little.

Basically, what I want is the music. To accompany that music I would like a physical item. In this case it’s a CD, but it could be a record, tape, USB stick, a tuneful midget with the music memorised, whatever. In the modern age, there’s no real need to have anything actually contain the music for an individual. The vast majority of people don’t need CD’s any more than they need the bottle containing the beer, it just so happens to be one medium for transporting the stuff inside.

So the situation that we’re in is that people choose to ‘attach’ a CD to their music purchase. Or put another way, they buy a CD which comes (conveniently) with some music on it. But why are obsolete (in the practical sense) music containing objects the only choice of ‘thing’ that comes as an accompaniment to the music? Why not t-shirts, posters, books, shoes, branded luxury leather recliner etc.? The record companies have a vested interest in getting you to buy stuff from them, and especially walking-billboard/culture items like t-shirts. This way they incentivise people to buy from them (rather than ‘stealing’ the music) as well as getting that person in a purchase cycle with them – which is potentially the most valuable aspect here.

So why not offer MP3 + CD packages? (and thus solving my immediate need) But also offer MP3 + t-shirt packages, or with records or hats or hat stands or gig tickets or books or comics or all of the above in a single transaction. Why not sell t-shirts in shops with a memory stick with the music. Hell, give the actual CD away with the t-shirt, but without the cover or any fancy packaging.

People could just go to iTunes and buy the album, but why not just buy a t-shirt and get the album for ‘free’? Of course you could make more money by selling both, but don’t kid yourself on how many folks would bother buying a t-shirt once they’ve bought the music, and if you ask me, a t-shirt sale is more valuable than a music sale.

In the end I ‘borrowed’ the music and the bought the album on vinyl, which costs more than the CD that I would have otherwise bought. I’m struggling to see where Baroness lost out here….

Apparently there are trace elements of metal in bottled water...

Still the filesharing battles wages on, despite the fact that there is no war. Dom Lawson’s entertaining article on this subject apparently fell foul of Metal Hammer’s editorial scythe. We can only assume that they didn’t want to fall on the wrong side of this prickly debate. And who can blame them, why risk pissing off your superiors over a war that’s apparently being waged elsewhere?

I do wonder though, how many folks out there who are earnestly ‘trying’ before conveniently ‘forgetting’ to buy. Is this costing the music industry money? Maybe. However, that’s largely beside the point. The issue here is that music is no longer a commodity that can be contained and rationed. The commodities are the physical items that accompany the music – the CD, the cover, the box – these are tangible goods that should be exchanged for money.

It’s because music is freely available that this situation exists. I’m sorry to restate the obvious, but it’s worth thinking about this. Water is ‘freely’ available in the UK. We pay for that by way of taxes (rates). The only time you pay at the point of receipt of water is when you buy the bottled stuff, and then what you’re actually paying for is the container and the convenience (plus the mark-up of whatever establishment you purchase it from). The future model of music will resemble this, and take a look at Spotify to see this in action. The music industry already knows this and the majors all own a stake in Spotify. The problem with this is the margins are much lower with models like this, and until the majors can shuffle their operating models to account for this and pacify the investors, they’re going to carry on chasing rainbows with lawyers and politicians.

By the way, the words on this page are not a commodity either. By the time this piece makes it onto the blog it will have eaten at least an hour and a half of my time. This blog probably eats more of my time per month than your average unsigned band does of the band members’ time. Should you wish to take these and consume them in any way you see fit then please feel free to do so. If you want me to save them onto a CD and send them across to you I’ll charge you for the CDR, postage, packaging, and round that up for my efforts. If more people start to read this blog, maybe I’ll put some advertising on it and try and cover the cost of the server and maybe I’ll even get a bit extra. If you want to take any of my articles and make money out of them (god knows how you would do this) by posting them on your own, commercial, website, then you will have to pay me. If you do not I may take legal action. Will I try and charge you for simply reading this article/blog despite that is takes time, effort and money to run? Hell no! Readers are more important to me than profit, and without them I stand no chance of making any anyway. The printed media industries learned this years ago. These days, some newspapers are moving to models that they no longer charge even for the physical product, and make money from the extra advertising revenue gleaned from the larger distribution.

I don’t know why I’m telling this to you lot – you already know this. I also don’t know why I bitch about the fact that this debate is still happening, I actually quite enjoy it.

This is perhaps the best summary I’ve seen on the file sharing debate. As I stated previously, there really isn’t a debate at all, merely those who are adapting to the changing environment and those that aren’t. This is perfectly and amusingly encapsulated in this video – at the end of the day, it’s all about money. The way people view and consume music has changed folks, get over it already, PLEASE!