Record sales are tanking, and there's no hope in sight: How it all went wrong

[Farid]

http://www.rollingstone.com/news/story/15137581/the_record_industrys_decline/1

Overall CD sales have plummeted sixteen percent for the year so far -- and that's after seven years of near-constant erosion. In the face of widespread piracy, consumers' growing preference for low-profit-margin digital singles over albums, and other woes, the record business has plunged into a historic decline.

The major labels are struggling to reinvent their business models, even as some wonder whether it's too late. "The record business is over," says music attorney Peter Paterno, who represents Metallica and Dr. Dre. "The labels have wonderful assets -- they just can't make any money off them." One senior music-industry source who requested anonymity went further: "Here we have a business that's dying. There won't be any major labels pretty soon."

In 2000, U.S. consumers bought 785.1 million albums; last year, they bought 588.2 million (a figure that includes both CDs and downloaded albums), according to Nielsen SoundScan. In 2000, the ten top-selling albums in the U.S. sold a combined 60 million copies; in 2006, the top ten sold just 25 million. Digital sales are growing -- fans bought 582 million digital singles last year, up sixty-five percent from 2005, and purchased $600 million worth of ringtones -- but the new revenue sources aren't making up for the shortfall.

More than 5,000 record-company employees have been laid off since 2000.

...

About 2,700 record stores have closed across the country since 2003, according to the research group Almighty Institute of Music Retail.

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To the dismay of some artists and managers, labels are insisting on deals for many artists in which the companies get a portion of touring, merchandising, product sponsorships and other non-recorded-music sources of income.

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"The record companies needed to jump off a cliff, and they couldn't bring themselves to jump," says Hilary Rosen, who was then CEO of the Recording Industry Association of America. "A lot of people say, 'The labels were dinosaurs and idiots, and what was the matter with them?' But they had retailers telling them, 'You better not sell anything online cheaper than in a store,' and they had artists saying, 'Don't screw up my Wal-Mart sales.' " Adds Jim Guerinot, who manages Nine Inch Nails and Gwen Stefani, "Innovation meant cannibalizing their core business."

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The problem the business faces is how to turn that interest into money. "How is it that the people that make the product of music are going bankrupt, while the use of the product is skyrocketing?" asks the Firm's Kwatinetz. "The model is wrong."

Great read, it really put things into perspective.

Personally, I'm not sure I would miss the majors if they were to fall down and crash. It would allow for a more symbiotic and adapted business model, driven by small labels or gathering of labels (could be downsized majors). The small nature of the labels should take care of the "cost or production/revenue" issues the majors have with their "marketing plans for their new products" by simpling promoting artists the old fashion way (radio, tours, word to mouth, small scale advertisment, getting some visibility from (online) retailers), without expensive promotions, nor million dollars videos.
The only negative side, to me, is that many folks will lose their jobs in the transition.

 

[Skrying]

Really wouldn't care if the majors fell to to pieces, around 85% of the music I listen to now is not associated with a major label, and those that are, are part of the smaller studios inside those who would probably survive cut away from the major... hell probably make more money that way.

 

[Rangers]

It doesn't matter, people will pirate so much, the label size is irrelevant. Artists just wont get paid much.

 

[tongue_of_colicab]

How the hell can they go bankrupt if those fuckers still dare to charge me 20 euros (27 dollar!) for a new cd? even 20+ year old cd's still cost 10 euros. Well, I suppose thats were it went wrong. After 20 years of ripping people off now they finally get it right back in their face. Oh not to mention that they actually charge 20 euro a cd for worthless artists. Where are the days when the majority of people used to listen to music like queen, pink floyd and stuff like that? and not rapper X, generic hardcore beat Y and lame pop idol Z.

 

[Rangers]

How the hell can they go bankrupt if those fuckers still dare to charge me 20 euros (27 dollar!) for a new cd? even 20+ year old cd's still cost 10 euros. Well, I suppose thats were it went wrong. After 20 years of ripping people off now they finally get it right back in their face. Oh not to mention that they actually charge 20 euro a cd for worthless artists. Where are the days when the majority of people used to listen to music like queen, pink floyd and stuff like that? and not rapper X, generic hardcore beat Y and lame pop idol Z.

So you'll get really rich as soon as you put your better model into practice, then.

Have at it!

 

[Skrying]

So you'll get really rich as soon as you put your better model into practice, then.

Have at it!

The record label has to change though. Ipecac Recordings comes to mind in the way it handles artists. They only sign one album deals, print only 20,000 units at a time, and there is no money towards unnecessary promotional material like music videos. Instead it lets the artists do their own promoting (like for instance, using youtube and other such sites). In this since the label provides the artist with what the artist wants, not what they're forced into.

 

[Bouncing Zabaglione Bros.]

How the hell can they go bankrupt if those fuckers still dare to charge me 20 euros (27 dollar!) for a new cd? even 20+ year old cd's still cost 10 euros. Well, I suppose thats were it went wrong. After 20 years of ripping people off now they finally get it right back in their face. Oh not to mention that they actually charge 20 euro a cd for worthless artists. Where are the days when the majority of people used to listen to music like queen, pink floyd and stuff like that? and not rapper X, generic hardcore beat Y and lame pop idol Z.

Record companies got used to massive profits by reselling their old stuff over and over. Getting everyone to buy their back catalogue on CDs, and whole albums to get a few good singles was a great trick. Since then record companies have not revised their expectation back down and still expect to make massive profits, even though there are many more hobbies vying for our money today than ever before, and people have all the music they want. You don't need to buy, or even listen to new music when you've already got all the thousands of songs you like on your ipod.

They failed to see the future of music sales in the form of online and electronic downloads, much as they did with tapes, CDs, VHS, DVDs, etc. They were dragged kicking and screaming into those markets that eventually made them loads of money. However, this time the market moved on without them. DRM interoperability, high cost, low quality pushed people away from legal product. Attacks on file-sharing generated bad will from the digerati, and forced the evolution of unstoppable internet based sharing networks. Even with Apple showing them the way and building a successful online music business for them, all the record companies can do is bitch and moan and try to figure our more ways to screw the customer.

The big five (soon to be four) became more interested in "product" than in music as they consolidated in the 90s. Small labels and small artists got pushed out, including via illegal payola to radio stations. Publishers are set up to screw as much money from the public, while screwing their artists over too. That's why we're seeing very little in the way of new talent. Sure we've got people who can sing and dance a bit off the latest reality show tie-in, but they won't have the longevity or selling power of true musicians who write their music and play their own instruments.

So in summary, the music industry does need to change dramatically. They completely misread the direction of their industry and what the public wants from it. They got greedy and refused to let go of the status quo, thinking they could control both the artist and the customer from the position of the middleman, while forgetting that people want music, not "product".

Publishers will go the way of the buggy-whip maker unless they find a new business model, but I doubt the old men and accountants who run the industry will be able to do so. I think a new industry will rise online where the publisher is cut out as a middleman. Artists and smaller labels will sell their albums direct to fans in an electronic format for a fraction of the cost of a retail store, and the artist will still make more money than the record company that gives them a couple of pennies per sale - after they've repaid all the "marketing expenses" incurred by the record company.

 

[Zaphod]

In 2000, U.S. consumers bought 785.1 million albums; last year, they bought 588.2 million.

And, yet: DVD sales have kept growing throughout the same period. Surely, it couldn't be that media and entertainment expenditure are closer to a null-sum game than the growing product niches like to think, and at the same time far from as declining as the record companies would like us to believe?

Now, I don't doubt for a second that music piracy has cost the business revenue, but blaming it all on 'The Internet' is like herbivore dinosaurs making a big number about them dying out due to excessive predation after the comet struck...

No? Oh, well... Piracy it is, then.

 

[3dilettante]

There's also the factor that digital sales make picking a few singles a lot easier and cheaper than buying a whole album.

No more paying an album price for one good song and 11 tracks of the band being "artistic".

 

[zed]

yep without piracy is the major (sole) cause of the reduced sales

now what can they do to recoop sales

*concerts, im going to bob dylan next month ( where a single ticket == 4-8 of his albums )
*make the music cheaper ( dont know if this will work though, say $20->$5 would ppl buy 5+ times the number of cd's? i dont think so ), one of the great things about liking classical is u can often pick up cd's for 50c -> $1

 

[Skrying]

That's a major rip off on tickets, so ironic being Bob Dylan... the last concert I went to featured five bands, three good, one AMAZING, and the ticket cost me $10.

 

[_xxx_]

Pirating is definitely not the reason.

There is simply NO justification for the prices upwards from 8-10 €/$ for a CD. No way in hell. A raw CD costs what, 10 cents? Add another 20 for the inlay and packaging, another 50 for the artist (and his/hers management). The rest is just for the greedy record company. The amount going into ads, promo etc. is maybe 1-2€ per album, about as much for the salaries and expenses.

So that leaves us with huge earnings of about at least 15€ for a CD costing 20€. This is sick and I'd rather die than support that blatant ripoff.

Also, I don't pirate music. I mostly buy used CD's or from abroad where the prices are still somewhat acceptable.

And to the big record companies: suck my balls, you greedy f'in idiots!

 

[Gubbi]

Two other problems:
1. The shite they try to peddle as music nowadays. Artist's looks having more importance than how they sound (play/sing).
2. The mangling of the sound quality that all new CDs experience. (including all "remasters")

Cheers

 

[nelg]

Two other problems:
1. The shite they try to peddle as music nowadays. Artist's looks having more importance than how they sound (play/sing).
2. The mangling of the sound quality that all new CDs experience. (including all "remasters")

Cheers

Add to that..........

3. Distributors becoming more important than publishers.

 

[Maintank]

Anybody who witnessed the popularity of Napster in the late 1990s knew the music industries model was broken and ready to crumble. Sure a lot of people were using it to outright steal music but I think a lot of the undelying theme behind what people were doing is what we are winessing today. People were back then sick of paying 15 bucks for a CD with 1-3 good songs and 10-12 worthless songs. The result was people being able to pick and choose which song they wanted.

Apple's itunes is a model of this being implemented in a legit way. 500+ million singles downloaded vs 500 million entire albumns? Hmm something seems similar.

Anyways these big music companies alienated the avg joe with their aggressive behavior towards the customer. The pirate wasnt going to pay for their music anyways. I honestly think the worst thing the music industry did was put Metallica up as the poster child of what piracy does to artists. You really couldnt pick a worse band to make the victim. It really turned people against them in a big way.

 

[Zaphod]

Also, possibly the whole copy protection nonsense. I think it's quite possible that casual consumers having learned how to make a copy for the car or rip a CD to the computer (even my mother managed that) found the whole buying music business becoming too much of a hassle. Thus, hurting sales more than 'casual piracy' (sharing among friends and family, which, by the way, are entirely legal in many countries) ever would. I.e. the desire to turn one sale into two or three may have cost them the one they already had.

 

[Sonic]

I wouldn't say the problem is is that there's so much crap on the radio and in music in general these days, because those same arguments were around when I was listening to grunge in the early 90's and what not. The problem I see is consumers being more aware and tired of paying 10 - 20 bucks for an album with only a few good songs and the rest being crap, as was staed by more earlier this thread. I wouldn't mind if if the RIAA went away entirely and they took clear channel with them. The artists themselves end up getting the short end of the stick for their own work. Artists often time get an advance for an album but with that have to pay all the engineers, producers, and whatever staff is needed to make and record the album. They then have to pay the record company back form the sales that are made form the album. But in a way, this lets the record label have some control over the artist and the direction they take.

I would be happy with a model that let's the artist directly sell the work to us. I would pay $10 for a good album from a band I really liked if I knew that five of those dollars were going to the artist or band.

Ticket sales and concerts are another big problem. Not all the people who like the music are rich and $100 for a band is a bit steep. And with companies like clear channel controlling many of the places bands can play they get a big chunk of the change.

I'm freakin excited with my favorite band playing a residency in San Francisco later this month. It's at a small venue called the Fillmore and tickets were only like $20. And yes, it is the Smashing Pumpkins.

 

[3dilettante]

Another big thing for me when it comes to digital sales: no checkout clerks to judge me on my purchases.

No awkward banter while we pretend I'm not buying something emasculating.

Screw you Mr. Snotty Judgemental Indie Band Fan, these Pat Benatar and Heart albums are going to get me laid!

Someday.

 

[AlphaWolf]

I haven't bought an album since about 1998, I haven't pirated any music either. Once the record industry chose to make DRM mandatory I made a conscious decision to find other forms of entertainment.

Nothing would make me happier than to see the big music companies all go belly up.

 

[zed]

Pirating is definitely not the reason.

There is simply NO justification for the prices upwards from 8-10 €/$ for a CD.

piracy is the main reason for the reduced sales (which is what this thread is about), in fact ild state that cd's in real dolar terms are cheaper now than they were ~10 years ago

though i agree 100% that cd's are priced way way to high.

(the following concerns real musicians or bands, ie not ppl that perform other ppls songs)

People were back then sick of paying 15 bucks for a CD with 1-3 good songs and 10-12 worthless songs. The result was people being able to pick and choose which song they wanted.

how do u know what are the 1-3 good songs?
true for pop acts the 'good' stuff is what gets the airplay cause some guy in a suit ;+) has deemed it as worthy, but what if the song doesnt fit the 'standards' eg not 3-4 minutes long etc