Defining The Music Industry Crisis

WWhen a crisis occurs a council of thought leaders are appointed to define the problems, develop a recovery strategy, and carry out a comprehensive action plan for restoration. The Restoring Music Foundation (RMF) was created for this very purpose. The RMF’s mission is to restore the value of music all across the supply chain.

With that in mind, let us identify the main problems that have threatened to destroy the vision that was born on the streets of Tin Pan Alley. Here they are, finally all in one place and in no particular order.

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1. Internet Radio

Internet radio providers can not sustain growth due to the growing licensing fees for streaming music and a lack of clear revenue models. New distribution outlets could provide a new paradigm in radio as a whole if revenue models could be clearly defined.

2. 360 Deals

Music industry sales are down more than 50% from 1999’s record breaking year. Labels, publishers, managers, and other funding partners have adopted a new model of business, The 360 Deal. With this new model, one partner does the job of many, most of which only have experience in one field. The result is less money for growth and less focus for individual partners. In the end, 360 deals strain everything and everyone causing countless problems, yet they are a necessary evil for struggling funding partners.

3. Web 2.0

Social networks such as Facebook, Twitter, YouTube, ReverbNation, Myspace, Ping, and other web 2.0 outlets provide easy and personal access to fans, yet the growing number of networks dilutes the overall marketing message and dramatically increases the time spent marketing.

4. Apple

Apple has been an incredible innovator in the quest to a brighter music industry. We owe them a great debt. For the sake of being thorough however, their unprecedented market share in digital music sales mixed with their unwavering business models leave no bargaining room for funding partners (labels, publishers, etc..). Growth and innovation in this important industry sector (digital music retail) is therefore stifled without the ability for competitive trials. In addition, Apple’s 30% take on each track sold leaves little for artists and songwriters.

5. Physical Music Sales

Physical Retail stores have lost the ability to turn a profit unless attached to a one stop business model (i.e Walmart, Hastings, Best Buy, etc.). As a result the true music pushers, independent music retail stores, are almost extinct.

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6. Traditional Radio

Traditional radio, though still an important promotional front, has lost much of its glory to the on demand world of iPads, iPods, satellite radio, and Internet radio. It has therefore become increasingly more difficult for music marketers to predict buying trends without a standard radio format to follow. The result is a much higher risk/return ratio for funding partners (Labels, Publishers, etc..), which in turn limits the number of acts that ever see a major market entry.

7. Live Music

The recent merger of Live Nation and Ticketmaster has once and for all centralized the live music industry into what could become a monopolizing empire. This kind of power is usually never a good thing, as it limits the market’s growth potential and provides the opportunity to gouge prices due to the simple science of supply and demand. If they account for 90 per cent of the live music business revenue, they control the market. We are not pointing fingers yet, but this music juggernaut could prove to be a problem if left unchecked by a lack of competition.

8. Lawsuits

The RIAA in an attempt to combat the growing number of music pirates, proclaimed war on piracy by means of civil suits with individual copyright infringers. Many average American citizens were made an example of with outrageous and bizarre settlements. The music industries’ minds were in the right place. They had intended to create the perception of risk for stealing music and in turn, change consumer thinking. In the end however, it only generated the image of a “Greedy Recording Industry”. This wall between the consumer and the industry has instead furthered the cause for this viral pirating trend.

9. Media Sharing

Video and audio sharing networks act as a breeding ground for the spread of illegal music in the form of audio and videos. These new networks cut into the profits of funding partners (labels, publishers, etc.), yet act as a wonderful way for independent artists and major artists alike to receive viral promotion. In addition, simple mathematics states that all of the illegal media sharing portals can not be shut down. Lawsuits cost money and the recording industry doesn’t have much. Instead, the industry goes after the major outlets one at a time. But for every 1 that is shut down, 7 more are built in its place. Let us just say that this fire is out of control.

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10. Piracy & Value

Let us not forget that stealing music is still more convenient to the average consumer than buying music. A Twitter search for “pirating music” will result in hundreds of tweets (from just the past week or so), broadcasting their illegal violation to the world. People simply DO NOT think music has any value, they DO NOT feel bad about stealing, and they DO NOT care that it is illegal. The true battle lies in this dilemma.

In addition, the only way to fully shut down music piracy would be to turn on “Big Brother” and violate very important privacy privileges. Therefore, it can never truly be stopped as long as we live in a democratic society. The solution must lie in the consumer’s thought process. Though it may appear that the RIAA is doing more harm then good, they have it right. The battleground is in the mind.

11. An Unclear Future

The music industry is now intimately and infinitely tied to digital and to the Internet. The systems that govern digital music across the web are not yet fully realized by the core of the music industry. A clear vision for the future of these newlyweds (music and Internet), has not yet been defined. The marriage is still rocky and working out its kinks. Without a clear understanding of this it is hard for any organization in music to effectively plan for the future.

12. The Product Of Music

Music has evolved in the US from the Jubilee singers at the turn of the 20th century, to the discovery of jazz and blues across the southern US, to the Rock and Roll King at the center of the century, to the British invasion in the 70’s, to MJ’s invention of the pop machine, to U2’s purification of LOVE from the 80’s till today. In 1999 the pop machine was FULLY realized with record high sales by N’Sync, Britney Spears, and the lot.

Maybe the majors simply lost sight of this rich history of music. They began generating factory made pop revenue vehicles out of highly conditioned Mickey Mouse Club alumni. The industry hit a record high and the system simply broke. “But alas, to err is human.” Let us not make the same mistakes again and remember that music is art before it is a pay check. 1999 is also the same year the market was freed by Napster. Ironic? Maybe…

Also, the masses need to be educated on our country’s rich history of musical genius. The average listener has very little knowledge of what GOOD music sounds like. Help us educate them!

Conclusion

We in the music industry are battling consumer thought. The public opinion has shifted to a place where music simply has no value. The average Joe feels no fear or remorse for breaking copyright laws. People buy bottled water, even though they can get it for free, because there is a value proposition; it’s clean, cold, and portable. We aim to rebuild the value proposition for buying music. At the Restoring Music Foundation, we are not disillusioned by the loftiness of our goal, but rather reconcile with the notion that for every problem there is already a solution. They say it takes 8% of the public to agree on something new to shift the entire pubic opinion in a new direction. We intend to be the catalyst.

Now that the crisis has been defined, let us no longer talk about the problems; let us instead talk of solutions.

By Chris Purifoy, Co-founder of the Restoring Music Foundation, and based upon a crowdsourced research document titled, “Defining the Music Industry Crisis“. Since the start of the project in 2007, the issues have been discussed all across Linkedin in numerous professional music industry circles (most notably within the well respected Music and Entertainment Professionals group). In the end, after thousands of comments and 6 subsequent editions, this article represents the 7th and Semi-Final edition.