Music Business FAQ - February 9, 2010

HolodigmMusic.com

Cyber-Bucks

L. Grandy asks:

You mentioned in your blog in 12/10/09 that, "The big four stalled at Napster and allowed download distribution to be developed by others. By trying to preserve the highly lucrative CD market they let the big cyber-bucks get away." Do you think there is any way for the 'big four' to regain the cyber market? or are they doomed to control the less lucrative CD market?

Hartmann responds:

The Big Four record companies attempted to destroy Napster before they understood what it was truly all about. The governing executive corps of the postmodern label system lacked the long term vision to imagine a music world without plastic and paper. RIAA lobbyists attached the appellation "theft" to the file "sharing" process and sued their customers. The backlash from this futile tactic ensured their eventual demise. By the time the dust settled, Napster was a shadow of its former self and various similar systems took up the slack and made music free for the taking.

The old paradigm could only have been preserved if the global fan base embraced the idea that sharing was stealing. However, that did not resonate with the cyber-youth culture that simply and irrevocably considers the information super highway their indomitable domain. If it is on the web, its free for the taking. This is demonstrated millions of times a day, as music lovers explore the myriad of genres and styles instantly accessible and forward their discoveries to their friends.

Never in recording history has so much music been available to so many people at such a low cost. The obligation to pay lays between the mind set of the consumers and their affection for the act. Everybody under thirty knows how to load a song on their iPod or install it on their computer. They can stream it any time they want and pass it on at will. There is no guilt or hesitation involved in the exchange. The participants recognize that they are supporting the artist by distributing their music to a wider audience and no power on Earth can stop this practice.

This places the advantage clearly in the hands of the musicians and bands that are willing to recognize the Internet as the new radio. Except the airplay is free and record companies have no control over the system. The power now belongs to the artists who accept the challenge to create their own business enterprises, without investment from third parties. In the end, ownership of their masters and copyrights will far outweigh the value of a label's contribution to a band's career development. A tight bond with the fan base is all their survival will recquire.

The artist + fan connection is forged in the crucible of concert performance. Without a strong and entertaining live show an enduring relationship between the two will never form. When it does happen, it must be nourished and maintained through direct communication on the Internet. A band's fans are the lifeline to their survival. Once acquired a fan must be invited to join the act's support mechanism. Membership should be valued and specific. Symbols of partnership and specific identification of status and priority must be awarded to the most ardent supporters.

No major paradigm shift happens in a vacuum. The transition out of the postmodern era into the music renaissance will not be accomplished by the flip of a switch. The major labels will endure for another decade as digimodernization slowly swallows their extant catalogs. The older generation might repurchase their favorites for awhile longer, but in the end downloads will be the only delivery system for music. The artists will market their CDs and ancillary products directly to their fans from self owned and operated web sites and at live events. Only the most talented will make a profit and survive. The less talented will give up and join the army.

Thousands of laid-off record company employees will lead the vanguard of entrepreneurs who will attempt to revive the old way or try to invent the new paradigm. The Big Four have the most incentive to create a new system, but are not likely to accept the loss of high profit CDs as part of their formula. This lack of imagination will precipitate their downfall. The concept of 360 degree participation is a good idea, but an act doesn't really need a label to establish such a program.

The artists will be better served to create their own record companies dedicated to their success. New bands will be built one at a time by managers in partnership with the act. If the CEO's survival depends on the artist's success a band's business will be assured of full time attention.

The labels are the traditional enemy of the artist and they are not going to have a long term place at the table. The subscription and advertising based distribution models being devised today will slip away and artist direct streaming will dominate. The labels will die off because of their failure to engage in artist development and the participation of big business will fall to the ISPs and telephone companies. The big winner is the music fan who will decide where it all goes form here.