Suicide’s killing the music industry, not pirates
January 25th, 2011ReadWriteWeb‘s Audrey Watters, on news that the music industry has lost a third of its value over past 7 years, says:
It’s a familiar refrain from the music industry: revenue is down and piracy is to blame. That’s the gist of the the International Federation of the Phonographic Industry’s (IFPI) annual Digial Music Report, which points to a slowdown in the growth of digital music sales.
It’s piracy, not licensing, that the IFPI cites as the major obstacle to a thriving music industry, citing job losses and “victimized” developing artists. Addressing this, according to the report, is the government’s responsibility, and it argues that as such it can “turn the tide against piracy in 2011.”
But I say there’s a longer-standing, more potent reason the music industry is in tatters.
Back in its hey-day, music companies gave music to radio stations around the world, in the form of albums and singles. In return, radio stations promoted the label’s artists and created buzz for them. The radio industry could ‘chart’ a new act to national fame and fortune in weeks. Every successful artist earned millions for the music labels. This is how the Beatles, the Rolling Stones, Abba and Stevie Wonder were made.
But the music industry got greedy. They decided to start charging radio stations for the right to play their music. In doing so, they forced the radio industry to adopt two new strategies that would ultimately damage the entire music value chain:
- Radio stations pared back their playlists to a small range of cheaper ‘back catalogue’ songs. Stations became ‘golden oldies’, ‘hits of the eighties’ or ‘classic rock’. No new acts were broken, because no new tracks were licensed. The music labels had effectively begun starving their own pipeline.
- The stations increased the ratio of Advertisements & Talk Vs Music in a two-pronged approach: to reduce the number of tracks they played (thereby reducing royalty payments); and increase ad revenue in order to afford the royalty fees on those tracks they did play. Audience numbers suffered, as listeners grew frustrated at the lack of music played. At around this time Apple released the iPod, delivering a completely ad-free music experience to consumers.
Without radio stations curating or commercialising acts, discovery of new artists is incredibly difficult for the average consumer. iTunes and Amazon endlessly rehash Justin Timberlake, Kanye West and Shakira because they simply don’t have the means attract attention to new acts. They can only sell the artists who have already generated buzz elsewhere.
The music industry will continue to blame piracy for their declining sales, but the reality is that they started suffocating themselves years ago by closing off their most effective avenue to market.
(I followed the link that you left on my blog over here.) This is an interesting article, but I’m going to disagree with it partially.
Not with the part that says piracy isn’t killing the music industry, but with the part that suggests the RIAA is. Your headline is actually correct, I’d submit: suicide. i.e., the radio industry itself.
I think internet partisans (of which I suppose I am one) tend to conflate the RIAA, the recording industry group, with BMI/ASCAP, the artists’ rights groups, but they’re two separate interest groups who are sometimes at odds. Radio stations have *always* paid compulsory license fees to BMI/ASCAP, since the dawn of radio. They’ve never been charged to play recorded tracks, though. And they still aren’t. I think what you’re describing above is the RIAA-backed Performance Rights Act which *would,* if passed, require radio stations to pay record labels to play music. But, that act is quite new, only introduced in 2009, and hasn’t been signed into law.
http://en.wikipedia.org/wiki/Performance_Rights_Act
http://www.noperformancetax.org/
http://en.wikipedia.org/wiki/American_Society_of_Composers,_Authors_and_Publishers
What you’re describing with shrinking playlists and increasing advertising time isn’t the RIAA’s doing. The past two decades have been ones of consolidation of all kinds across the industry: fewer companies owning more stations, fewer stations programmed at a local level, and very by-the-book demographic programming. You see radio stations called “Mix [number]“, “Kiss [number]“, “Star [number]” in nearly every major metro market now; every station with the same name has the same playlist.
At any rate, I’m not sure how relevant radio is becoming to people who are in high school and college today. It’d be nice to see terrestrial radio rescued from Clear Channel, but it’s more important going forward to protect internet radio — which actually leads us back not to the RIAA, but to BMI/ASCAP again, who want internet stations to pay the same compulsory license fees that terrestrial stations do.
You’re absolutely right that discoverability of new artists is a Really Big Unsolved Problem in the great new post-radio age, but it’s at least worth noting that when I open up iTunes’ music front page I’m not seeing Kayne West and Justin Timberlake, I’m seeing Iron & Wine, Amos Lee and Talib Kweli, none of whom are Billboard Top 40 artists. Whatever iTunes’ flaws are, being beholden to radio charts doesn’t seem to be among them.
Okay, thanks for clarifying.
There are a number of chicken and egg aspects to the changes occurring across the music industry – eg:
o Has consolidation of radio station ownership driven replication of by-the-book programming, or did other factors drive margins down to the point where syndication was necessary to survive?
o Are high school and college kids inherently uninterested in terrestrial radio, or is it just that terrestrial radio in its current form is failing to connect with them?
Perhaps the industry would be better served by a set of across the board guiding principles, rather than a unique commercial licensing approach to each separate digital or analogue channel – again, eg:
o For broadcasters who back-announce a song, a reduced (or no) royalty, in recognition that they are promoting the artist.
o For broadcasters who hyperlink a song to an online music store, a reduced (or no) royalty, in recognition that they are directly promoting sales.
o For broadcasters who charge subscription fees to listeners, a higher royalty.