Saturday, July 4, 2009

Question of the day - MORE OR LESS - July 4, 2009


Shauna Morgan asks:

Are the artists making less money now that its so easy to download music for free on the Internet? And, are they making less money because many people buy just the individual single on itunes rather than the whole album?

Hartmann responds:

The infrastructure of the postmodern record business was created from the excessive profits that record companies perennially squeezed out of the system. By maintaining tight control over the distribution of albums to brick and mortar outlets, the record industry consolidated hundreds of small labels into four monolithic music companies. The prevailing system was strengthened further by the "album" concept. In the 60s and 70s, music fans became accustomed to the idea of buying ten songs they didn't want, in order to acquire the single they heard on the radio.

The big four record companies added insurance to their survival process by imposing very severe recording contracts on the artist community. From the earliest days of the record business, labels have dictated a convoluted formula into the design and structure of their artist's agreements. The inclusion of a myriad of charges, withholds, reductions, cross-collateralization and dilutions, labels erode the artist's share in order to preserve their per unit profits from CDs and downloads.

All monies advanced by labels are recouped from the artist's share only. The labels make money from record one. Artists must pay back all applicable costs, from their relatively small percentage, before they make a dime. Music sales are in free fall. The easy access facilitated by peer-to-peer file sharing technologies has evolved an, "if its on the web, its mine," attitude among the fan base.

Most music in play is actually stolen. On line downloads provide the second most active delivery system. A majority of these purchases take place on iTunes with songs directly loaded into iPods or home computers. The cost to the labels is very low and yet the price remains virtually the same as the price of a CD. A dollar a track would be a great price point if the public would pay.

The record business is suffering from a lack of vision. The Recording Industry Association of America's decision to file lawsuits against their customer base destroyed what vestiges of a positive image may have remained. Not only are the record companies the long time enemies of the artists, but they have taken a very hostile posture toward the fans. There is no way they can survive in this environment. Without the excessive profit margins of the past, the game is over.

Major industrial transitions are never a "flip of the switch." Things change slowly. There will be a lot of scrambling to survive. The major labels will continue to huff and puff about their star making machinery. They will promise artists radio airplay, which even if "purchased," becomes less relevant as the digital generation ignores programmed formats in favor of "personalized" content. The fans will decide what songs are worthy and spread the word through the Internet.

The imposition of 360 degree record deals is a vain attempt by the industry, to gain back some control by demanding a bigger piece of the pie. These contracts are even more heinous than the form used in the postmodern era. The new form demands participation in all income streams. They offer less benefits, than in the past, and nothing additional in return for a virtual partnership with the act. Record executives realize that they can't sell CDs so they are grabbing at straws.

The talent community is already rejecting the 360 concept and choosing to retain the high profits in house by marketing directly to their fan bases. Ownership of master recordings and publishing copyrights provides permanent income to the artist's company. In the past, for an album to top the Billboard Magazine charts, sales of a million or more units was required. Today a top selling album can be achieved with sales under 200 thousand units.

Even though more music is being acquired than ever, the amount of cash in the market place is minuscule. Everybody in the game is feeling the pinch. The record industry is leaning toward talent TV and "celebrity" driven vehicles as the source of new product. Careers will evolve quickly and die faster. The long term survivors will build their careers slowly, from the grassroots up, through the live arena. With more music, and less money, in the game, business acumen will be as vital to the health of an artist's success as the quality of the music and his artistic integrity.

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