Monday, May 16, 2011

When The Music Industry Changed

It's easy to think that the music industry underwent a wholesale change when digital music burst on the scene in the late 90's. While that certainly is true, the systemic change really happened in the early 80's when the suits took over. Here's an excerpt from Music 3.0: A Survival Guide For Making Music In The Internet Age that describes the era in detail, one which I call Music 1.5.
The era of Music 1.5 produced the greatest level of business that the industry has seen or is ever likely to see.

Record companies got a boost to ever greater profits in several ways when the CD was released in 1982.  Because the technology was initially expensive, the labels increased the retail price on each CD while decreasing the royalty rate to the artist because of the “technology expense”. While the retail price never decreased even after the technology was amortized (the retail price increased, in fact), artists eventually saw this royalty charge eliminated, but never saw another contract remnant from the past terminated. Breakage, a 10% charge against royalties left over from the days when vinyl records would break in transit and now irrelevant in the new CD age, never was deleted from typical recording contracts.

Perhaps the biggest shot in the arm to record labels was the ability to resell their catalog to a public eager to switch to CDs and buy a copy of an album they already owned on vinyl. Catalog sales increased profits due to the fact that production costs were minimal (just the cost of pressing the CD) as were promotional costs. Consumers bought the new and better sounding (to some) CD to supplement their newfound CD collections, thereby providing a financial windfall for the labels deep with older product.

Record companies now had a cash cow that shot profits through the financial stratosphere, which immediately gained the attention of Wall Street. Always the poor step-child of the entertainment industry, the record business was suddenly every investment banker’s darling, with the remaining 4 of the 6 major labels still independently controlled sold to a conglomerate during this period. Columbia was bought by Sony, Warners by Time Inc. (to become Time-Warner), Universal by Matsushita (later purchased by Vivendi) and EMI by Thorn Industries. Polygram was already owned by a conglomerate (the Dutch electronics company Philips), and BMG was owned by the German giant Bertelsmann AG (although it recently merged, then de-merged, with Sony). Now all 6 major labels were under conglomerate control.
The other big thing that happened was the compact disc. When it came along there was a big upsurge in the growth of the business and a lot of large corporations began to take notice. When CBS, who was the king of the business at the time, sold their record business to Sony - that was huge! It was a momentous happening because CBS decided they wanted to exit the music business , which they had been in for years.
Rupert Perry
With conglomerate ownership came MBA’s, accountants and attorney’s running the business, a major departure from the seat-of-the-pants, street-smart music men like Mo Ostin, Ahmet Ertegan, Jac Holtzman, and Howie Stein that could feel a hit in their bones.  Where a label previously would nurture an act through 3, 4, even 5 albums until they broke through, the new corporate structure demanded instant results “this quarter.” Artist development, so crucial for the stars and superstars that we know today, died, slowly at first, then faster and faster as bottom line results became the mantra.

About this time another unexpected boost came to the music industry in a small cable television network startup called MTV. Suddenly music was on television and a new level of exposure increased sales yet again. MTV soon had the power to “make” a hit, just like radio previously could, by the simple act of placing a video in heavy rotation.

Although no one expected it at the time, the Buggles song “Video Killed The Radio Star” (the first video played on MTV) actually came to pass. Image soon became much more important than actual musical ability. If you didn’t look appealing, you weren’t getting on MTV and if you didn’t get on MTV, your chances of having a hit diminished greatly. Quickly the new-found corporate culture began to shift gears to find good looking “musicians” to fill the bill. Artistry now became just a component of a new act (instead of “the” component), as image now became foremost in the label mindset.

To a non-record industry executive, art doesn’t make sense.  Academia demands repeatable outcomes and art (remember the phrase about art and craft at the beginning of the book?) is not a part of that equation. Craft was a big part of the corporate hit-making formula though. First, find an artist similar to whomever is the most popular of the moment. Then get a songwriter to write the perfect generic (usually Pop) song, then add a producer with a proven track record and record it all in a studio where big hits have been made with musicians who have played on those hits. The actual “artist” matters little in this corporate scenario. She better look great though, because the music videos (put together by directors, choreographers and stylists with recent hits on their resum├ęs) must project the image that Madison Avenue deems correct to sell product, because that’s ultimately who’s footing the bill.

To read more Music 3.0 excerpts, go to the excerpts section of the website.
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