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February 17, 2011

A Business Chart for Music Fans

With the Grammy’s behind us, I thought music fans might enjoy mulling over this chart, which came to my attention courtesy of Bob Lefsetz, a music industry blogger.  It falls into the “a picture is worth a thousand words” category.  

Revenue from digital music is growing, but not enough to make up for the decline in CD sales, which have fallen precipitously since the advent of digital music.  It looks like the music business should be in a state of emergency, yet new music is everywhere, from what I can tell.

 chart of the day, music industry 1973-2009, feb 2011

Lefsetz’ quote: 

“… the CD was the greatest invention in the history of recorded music”

And he is right, at least in the context of generating profits for the music industry.  Yet, while the gross margins on CD’s were massive, the margins on digital music should be even better.  Afterall the production and distribution costs on digital music are minimal.  Sure, the revenue of the music business is declining, but I wonder where the profits are headed.  Oddly, much of what I have read indicates that profits are headed down, under the theory that piracy of digital music continues to damage profitability.  While I am sure piracy has eaten away at music industry profits over the years, it is also true that modern technology has significantly reduced the production costs for making professionally recorded music.  To me it feels like there is more music, i.e., more artists and albums in a greater variety, than ever before.  If it is in fact the case that record labels cannot turn an outstanding profit under these conditions, the problem is more than likely poor management rather than piracy.

It also feels like music has transformed from a Superstar culture to a more journeyman profession.  We have a lot more music and many more acts, but fewer mega-acts and fewer stars.  And I think that’s okay.  It’s now inexpensive to make and distribute music, allowing anyone with creative impulse and ability to try to build an audience.  The barriers to entry are low, and it seems that a creative revolution should follow.  I definitely look forward to that.

I have posted on some interesting D-I-Y artists in the past, including Bon Iver, Animal Collective and the Brian Jonestown Massacre, and as I find more new acts that make great music outside the power base of the music establishment, I will definitely bring them your way.

In the meantime, as an example of where music might be heading, keep an eye on the new Radiohead album, King of Limbs.  It is coming out on Saturday, in all sorts of formats, released by the band itself.

http://www.thekingoflimbs.com/

The King of Limbs

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7 Comments »

  1. If we looked closely at the style of music the industry encouraged and how the wealth was distributed we would find that the majority went to “artists” without talent, I won’t go further. When Napster emerged I was able to hook into music I had forgotten and search the computers of like minded souls and if gave birth to an interest in music I had forgotten. I remember having this conversation with you at the time and I remain of the opinion that the industry that is in free fall should be in free fall. They did nothing for true musicians and subjected the listener to crap. Thankfully we are getting more diverse, interesting music and because the crap is losing its financial appeal hopefully we will hear more and more.

    Comment by Anonymous — February 17, 2011 @ 2:45 pm | Reply

  2. I love that the barriers to entry are almost non-existent. Let the talent shine, I say. I’ve been particularly drawn to the vinyl/mp3 combination (buy the vinyl, get the rights to download the mp3 for free). This way I have the pleasure of vinyl, which has by far the best sound, and also the ability to take my music on the road. If I were a record label, I’d aggressively price the vinyl/mp3 combination, and make it broadly cool for my fanbase to listen to vinyl. Digital compression sucks.

    Comment by Jonathan Har-Even — February 17, 2011 @ 3:06 pm | Reply

    • Radiohead is offering the following formats (vinyl, Mp3, wav and CD plus a massive artwork package) for the King of Limbs, priced to sell, individually, starting at $9.99 for the mp3 download. They must be listening!

      Comment by Steve Krupa — February 17, 2011 @ 3:17 pm | Reply

      • Yeah, I called Thom Yorke and implored him to make a package that works for me. Seriously, they’re the best in several respects. I love how they treat fans and their show at Lollapalooza in 2008 was off the charts, literally and figuratively. Just incredible stuff.

        Comment by Jonathan Har-Even — February 17, 2011 @ 3:50 pm

  3. Hello Anonymous!

    Check out Merge Records, home of Arcade Fire, recent surprise Grammy Album of the Year winner. Of course the Grammys showcases much of the crap you speak of, yet it was refreshing to see something more indie break through, and of course Arcade Fire is now on their way to becoming massive. Let’s hope it doesn’t ruin them!

    I am listening to Merge Radio as I write this. Definitely not mainstream. http://www.mergerecords.com/
    I think you would like some it.

    Steve

    Comment by Steve Krupa — February 17, 2011 @ 3:15 pm | Reply

  4. Thanks for sharing this chart. To me, the biggest surprise is that recorded music revenues grew so much in the CD era. While I would have expected a blip as people (like me) recreated their record collections on CD, I don’t get why the CD revenues so far outpaced prior technologies. Did everyone just start liking music more? Could it be that the CD era was a music-industry bubble, and music sales have returned to ‘natural’ levels?

    Comment by Jay Caplan — February 18, 2011 @ 11:54 pm | Reply

  5. Vinyl Records “Fastest-Growing Musical Format” of 2010
    Written by Pat’s Papers | Friday, 25 February 2011 9:48 AM

    Last year was solid gold for vinyl sales say USA Today. According to Nielsen statistics, 2.8 million LPs were sold in 2010, the most since 1991, when the tracking system was implemented. Records were also crowned the “fastest-growing musical format,” an encouraging sign for independent music sellers. Says one record store owner: “Vinyl seems to be the light at the end of the tunnel for those of us who have hung in there. It’s kind of a surprising light at the end of the tunnel.” Industry experts say the big number reflect a turn back towards analog music after decades of digital hegemony.

    Comment by Jonathan Har-Even — February 25, 2011 @ 10:12 am | Reply


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