It doesn’t take a label exec to explain that the music industry is suffering from a case of arrested development.
Like your stoner friend from high school that never really moved out of his parent’s house, the music industry has been trying odd jobs and dabbling in some questionable revenue generation schemes with little success for over a decade.
The film industry has grown up, adjusted a business model to new technological mediums, and learned to take care of itself in a modern streaming-based ecosystem. Even the publishing industry has gotten with it, with a barrage of Kindles, iPads, and subscription-based unlimited reading startups showing the world that books are ‘groovy’ and ‘hip with technology.’ Meanwhile, the music industry is rolling with the wrong crowd, relapsing into illegal piracy in the face of unrealistic price points. Even the most progressive names in music are the unpaid interns of media, selling albums for free to get ‘exposure’ and ‘networking opportunities.’ But the music industry’s identity crisis is actually a great thing for you.
Record sale revenue peaked in 1999 at an untenable $38 billion worldwide, though the figure is deceiving as many people were replacing LP’s with CD’s at the time, effectively paying twice. From there, revenue entered a steep and steady dive, buckling to $16 billion in 2011 and $15 billion last year (2013).
As venture capital funding pours into startups and seemingly every industry is being amicably disrupted, the music industry is the guy who’s way too drunk when the party’s just starting to get fun, tripping headlong over the coffee table when he goes for a fist bump. Let’s take a look at why the other players at the table are smoking cigars while music’s lying face down on the floor.
A Cinematic Success
Film studios are in on a secret record labels are just finding out about. Despite the same bumpy ride from the physical to the digital space, the film industry came out looking good while music spilled a drink all over its shirt.
Netflix disrupted the DVD market, and adapted their entire business model when DVD’s went out of style. The company even innovated the content itself with the now ubiquitous hour-episode-series format that has given audiences a taste for deep character development and long, developing narratives. But subscription based music streaming services like Spotify, and its new competition from Apple and Google, have thus far failed to keep a struggling music industry off the streets. And outlets like SoundCloud and HypeMachine exemplify a key difference between music and film – musicians will post songs for free if it means reaching new listeners.
So the film industry is pretty fond of the “charge money for a product” strategy. But there must be more to film’s monetary success – because records stopped selling well before music sold itself for free. What’s the secret?
As noted by Philip Inghelbrecht at TechCrunch, the music industry could emulate some of the film industry’s success by adopting a licensing strategy that film is fundamentally based around. Windowing is the strategy studios use to keep content scarce, cutting down supply and slowly ramping it up to viewer demand with dynamic pricing.
Here’s how the process works: A film starts with a theatrical release, where viewers pay 10-15 dollars for a single viewing at a finite number of theaters. After a window of time, the rights are then released to DVD where viewers pay a similar price for ownership — or nowadays, to streaming services like Netflix where users pay once a month and watch as much as they want. In the third window, films are released to television channels, where they’re effectively free compared with other content (ignoring advertising and cable costs).
So this gig has worked pretty well for film over the last half-century. But is windowing really the best bet for making the music industry profitable again?
One company thinks so. Apple is leading the campaign for windowing in the music industry, dishing out a substantial $100 million for exclusive distribution rights in the first month of U2’s new album release. (So they might have overestimated U2’s relevance when they put the album on every new copy of iTunes – but that’s a different story.)
If the windowing model were to gain traction in the music industry, avid listeners could be enticed to pay for multiple streaming services to get the earliest access to exclusive album releases from each. Casual listeners could just wait until a later window opens up an album to everyone. This would bring profits to the biggest companies in music distribution. But it’s basically the worst case scenario for listeners who might give in to paying for multiple monthly subscriptions — as distributors like Spotify, Apple’s Beats, and Google Play jostle for exclusive record release rights. The cost would likely still be less than buying individual CD’s. But is this really the best the industry can do?
Windowing won’t be enough to save the record companies. But maybe they don’t need to be saved.
It’s questionable at this point whether a windowing scheme could actually gain widespread adoption. With huge acts releasing albums for free online, from Radiohead to ODESZA, a lot of artists are simply accepting the fact that album sales are no longer a viable means for making a living. Many groups are happy to rely on live tours for profit, while some take an idealistic stance in accepting the current state of the market — insisting that music is meant to be free. Sure, this is a death sentence for labels. But free music is great news for everyone else.
The direction of the revenue model for the music industry will ultimately be dictated by the artists themselves. With a growing number of artists ditching labels completely, opting for free independent releases and a focus on live performances, artists who sign exclusive release deals with large streaming services could face judgement and opposition from fans who see music as a gift more than a product. And with the skyrocketing festival craze and a growing live music culture, free album releases could become a sustainable norm. Perhaps artists have grown so sick of digital piracy and mongering labels that they’re willing to simply concede the small portion of profits they would see from record sales after label and recording costs. It’s ultimately their decision.
One thing is clear: we’re witnessing a democratization of music.
Sure, the music industry is suffering monetarily. But the changes it’s failed to adjust to are great for musicians and their fans. Tools like SoundCloud, HypeMachine and YouTube have led the campaign for free music. But they’ve also removed long-standing barriers to entry in the global music scene, allowing notoriety to any artist with work worth sharing. In this new landscape content is king, as songs with enough originality go viral of their own accord without need for didactic record labels. Meanwhile, festivals are doing for live music what streaming is doing for music distribution: bringing musicians and their fans closer together. Music festivals like Coachella, Lollapalooza and Outside Lands are democratizing the live scene by bringing more music to more people at a time, and giving exposure to artists that wouldn’t get noticed without a dedicated audience paying for a full weekend of good vibrations.
The music industry hasn’t found the answer yet. And maybe it never will. Despite new companies adapting to the streaming revolution, music sales might never again be as profitable as they were a decade ago. But this is actually a beautiful thing.
Sure, windowing and exclusive releases could lead to rising costs for the serious music listener in the near future. But in the grand scheme of things, music is slipping further into the hands of listeners, as it loosens from the grasp of a record industry that has shown it might be incapable of adapting to changes. The standard of quality in music is increasing along with its accessibility, as notoriety is becoming the organic result of catchiness and crowd appeal rather than a calculated product of a system of distribution channels with too much power.
Making money from a record is harder now. And it will probably stay that way. But getting good music to real fans is easier than ever. And that’s a great thing.