The Real Power Behind The Music Business

I had an interesting discussion with a group of readers at the recent ASCAP Expo in Hollywood over the weekend that kind of opened my eyes a little. I thought that most young artists were of the DIY mindset, but there's still a sizable contingent that believes that being on a major label is still the way to score in the music business.

Their opinion changed when I described the real power behind the throne of the music business, which brings us to today's post. It's an excerpt from my Music 3.0 guidebook regarding who actually pulls the strings of the music business. Be forewarned, it's not who you think it might be.
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Although it may not be readily apparent, Wall Street and Madison Avenue indirectly control the remaining M2.5 music industry through their tremendous influence on the financial bottom line of record labels, record stores, concert promotion, radio, and television. If you’re owned by a publicly traded conglomerate (as all major labels, major concert promoters, and 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. To keep those earnings as high as possible, Wall Street turns to Madison Avenue to devise the best marketing strategy for keeping 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 that is tailored around the advertising), and the process repeats itself over and over. The advertising industry (Madison Avenue), not the music industry, therefore drives the music cycle in the United States.

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

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