Out With The Old, In With The New: How Innovation Has Completely Changed The Music Business

Music Industry

from the big-changes dept

Jeff Price, who was recently pushed out of TuneCore after building one of the premiere new tools for musicians to take control over their careers, is continuing to think deeply about the state of the music business, as he figures out what’s next. He’s penned a really fantastic piece that explores how technology and innovation have completely disrupted the old recorded music business hitting on a few key points. I’d recommend reading the whole thing, but I’ll highlight a few key snippets. First up, he notes the general shift in the music business from a world where artists were completely at the mercy of gatekeepers to one where that’s no longer the case, almost entirely due to technology.

Until recently, the music industry provided artists one path, and one path only, to reach and connect with their fans and monetize their pre-recorded music. Artists had to sign to a record label, transferring ownership of copyrights, relinquishing exclusive artistic control, and giving up most of the revenue from the sale of their recordings. Fans could only buy pre-recorded music in physical form from retail outlets from the limited number of artists that labels chose to anoint. Labels were aware of their unique position and took full advantage of it by gouging both artists and music fans.

He goes on to point out that the reason the labels were able to do this was because of four key factors that only the major labels could really provide:

Four main reasons: barriers to recording, manufacturing, distributing, and marketing music were virtually insurmountable.

However, he notes that all four of these areas have been disrupted by new technology, and that process is continuing, such that the key advantages that the major labels have continued to rely on are slowly disappearing as well:

First, it’s far cheaper to record now than it ever has been before. In addition, the level of expertise needed to record has dropped considerably. With a laptop, some one-time purchases of software and some hours to learn how to use it, a home recording studio can be created for the cost of one day’s recording at a high-end studio.

Second, in the digital world there is no up front cost or risk to manufacture inventory. The music is available in unlimited quantity as a digital file that replicates on demand only after it’s bought or accessed to stream.

Third, music fans have shifted from buying CDs in stores to buying/streaming music on-line. Now an artist, for a nominal fee and the click of a button on a website, gets an unlimited amount of self-replicating inventory with no up front cost into the world’s largest music retail stores (i.e. iTunes is larger than Walmart ever was), all while keeping their copyrights.

Fourth, there is now equal access to music discovery outlets – YouTube, blogs, Slacker, Pandora, Spotify, digital music stores’ discovery features, Twitter, Facebook and other social networking applications are open to everyone, not just the elite few artists signed to labels. The only media outlet not open to everyone is commercial radio, but with that going the way of the 8-Track over the next few years, the last stranglehold of the traditional music industry will be gone.

Because of this, you no longer are required to deal with a major label. The majors do still dominate radio play, but the piece also digs in (in great detail) as to why Price thinks terrestrial radio is about to be completely destroyed by technology as well (think: once interactive streaming is standard in cars and on phones…). But the major labels haven’t done that much to adapt to this pretty massive change to their market. And that’s caused them a lot of problems (as seen in their bottom line). Of course, rather than admitting their own failures in adapting, they’ve basically tried to blame pretty much everyone else. Price highlights the ways in which they’ve tried to cope:

• Sue music fans for copyright infringement
• Create more onerous agreements between labels and artists requiring them to give up even more of their copyrights, not fewer (the infamous “360deals”) while providing less value.
• Use antiquated royalty accounting systems and provisions to slow down or reduce royalty payments owed.
• Stifle innovation under the guise of “protecting” copyright (As one example, the majors made it a condition that they must own a piece of Spotify in order for Spotify to have access to their music).  
• Killed artist development and long term careers in a mad dash attempt to make money as quickly as possible.  
• Feed the media as much false information as possible (i.e. the entire music industry is dying) in an attempt to discredit, slow down and delegitimize the new emerging industry. 

Of course, almost every one of these moves actually does more to hurt their longterm sustainability than to help it. Basically, every one of these moves has been bad for both consumers and artists — and that’s no way to adapt to the digital era. Price notes that the transformation from the old era to the new digital era is now “complete,” as the key things that made the old record labels so powerful is almost entirely whittled away by technology. That doesn’t mean that innovation is over, by any means. As is typical in times of disruption, many many artists are still struggling greatly to figure out how the new world works. The rules have changed drastically (with many new ones being written and rewritten on the fly). There are plenty of failures, but a growing number of success stories. And that should only increase as more people learn to harness these new technologies and services, realizing they’re not quite as scary have some have made them out to be. But there is a learning curve and it’s a painful curve for some.

Either way, it’s great to see Jeff lay out all of this in one place, and it shows that he’s still thinking about the nature of the industry and where it’s heading next. While many from the old industry still look at the future and try to figure out how to hold it back, more and more are realizing that the right play is to move forwards, quickly.

Filed Under: changes, evolution, innovation, jeff price, music industry