Wednesday, June 9, 2010

Who Controls The Music Industry?

Sometimes you just have to wonder exactly who's in control of the music business. It used to be that the record labels owned their business, but as the years past, they let it get away from them. This fully manifested itself in the era I call Music 2.5 although it really began back in the late eighties. Music 2.5 (M2.5 for short) really began in 2003 with the advent of iTunes when digital downloads could now be monetized. That being said, many major medias companies were still living in the past then, as many are today.

Here's an excerpt from my Music 3.0 Internet Music guidebook about the real power behind the throne of major media. Yes, I know Steve Jobs has a huge say in the music industry today, but the excerpt is about the unseen hand that guides what we hear on radio and television, which was a lot more important in the last era of music (Music 2.5) than in our Music 3.0 era that we now live in.
Although it may not be readily apparent, Wall Street and Madison Avenue indirectly control the M2.5 music industry through their tremendous influence on the financial bottom line of record labels, record stores, radio and television. If you’re owned by a publicly traded conglomerate (as all major labels, radio and television stations are), then you’re in the business of selling stock, not servicing the consumer. What that means is that nothing matters more than quarterly earnings. In order to keep those earnings as high as possible, Wall Street turns to Madison Avenue to devise the best marketing strategy to keep the profits high. Madison Avenue (in the form of the major advertising agencies) can bring in the big ad dollars, but only under certain content conditions (like programming tailored around the advertising), and the process repeats itself over and over. The advertising industry (Madison Avenue) therefore drives the music cycle in the U.S. and not the music industry.

In M2.5, it’s all about passing focus group tests, which has separated listeners into the distinct demographic groups that advertisers are able to tell stock analysts they have micro-marketed their products to. As a result, radio, television and live performances are no longer about aggregating and entertaining large audiences, but just a group of market niches. The bright side to this is that there's one heck of an opportunity opening up for folks who don't get hung up in trying to sell advertising.

Wall Street and Madison Avenue have tried to redefine what music means to people, but most people are voting with their wallets by refusing to buy any new recordings. The view of the vast majority of consumers is that very few new recordings are worth buying compared to a couple decades ago, and this has become the dilemma of the industry. You have to sell product to survive, but it’s impossible to develop that product while trying to please your corporate masters. It might work when selling soap or clothing or any other consumer product, but a creative endeavor like music just doesn’t work that way. It’s too personal both to the artist and the consumer to be a mass-market product.

In Music 2.5 (as well as now) you'll find:
1) Wall Street and Madison Avenue control the media
2) Record labels needs to keep stock price and quarterly profits high
3) Radio and television only play what appeals to advertisers
4) Consumers divided into demographic groups
5) Music becomes devalued

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