Thursday, November 19, 2009

Oh How the Music Business Keeps Changing

Oh How the Music Business Keeps Changing
By Christopher Knab
(copyright 2009 Christopher Knab)

Let me start out with some sobering thoughts.

95% of music downloads are illegal downloads and are NOT paid for. (Funny, I thought most of us in the music business wanted to make money from whatever audio or music business profession we chose to get involved with) Well, there is SOME hope on the horizon. Internationally, 2008 saw a 25 % growth in LEGAL downloads for a dollar total of $3.7 billion dollars! We shall see what 2009 has to report in a matter of a few months from now.

Digital platforms on the Internet that sell LEGAL downloads have increased online and through mobile devices as a new generation of music subscription services, social networking sites and new music licensing channels are emerging. In 2008 digital platforms accounted for 20% of recorded music sales, UP from 15% in 2007!

The music industry continues to change dramatically, but how will you make money from your music, as the industry shifts from a “sales-to-a-customer” model to “monetizing” ACCESS to music across a multitude of channels and platforms?

CD sales, as of 2008, are still the number one way record labels make their money, but the writing is on the wall that the future is NOW for you to implement this new “access” approach to making money from your music.

Some researchers and experts on the subject of selling music predict that by 2012 the shift from CD sales dominating the labels revenue to other approaches already mentioned will take place.

Music is no longer about a pre-prepared set of songs released on a CD by a artist or band but it is a growing business of customers selecting from a wide catalog of individual songs, like on iTunes or eMusic.

So, many artists will be moving away from their ingrained habit of coming up with 10 to 15 songs to record a traditional ‘album’ and moving toward creating compositions released individually, and finding more ‘uses’ for their music in the marketplace, like: song placements in films, television and placed on the Internet, as well as used in commercials and even selling sheet music copies of their compositions. Also look more for bands and recording artists to offer individual song downloads from their growing catalog of material available on their own websites, and the many social networking sites that will act as distributors of music.

How music history repeats itself

I found this unaccredited article on the web about 6 months ago. If anyone knows who wrote it, I would like to know so that I can give them credit for it….Chris Knab 11/19/2009

Well over a century ago, the music industry businessmen of that time argued that its future was threatened by a new method of creating and distributing multiple copies of a performed song. That new technology was...the player piano roll.
Actually, throughout history, when any new technology comes along, from the Gutenberg printing press to Napster and any form of today’s file sharing choices, the businesses that had set themselves up to control creative content have felt threatened and have fought to try and maintain their lucrative control. New technologies have always posed a threat to the owners and creators of music, movies, books and other artistic works.

Those publishers, writers, artists and other owners of copyrighted work have always reacted to any threats with lawsuits and calls for stronger laws. Through time, congressional action and judicial decisions have shaped and reshaped copyright law, and in most cases the powerful businesses have won.
Let’s take a quick look .at some key historical confrontations between emerging technologies and the businesses that felt threatened by those technologies.

The recording business has been dominated from its beginning in the 1800’s by large firms which held valuable patents on first, the wax engraving methods of preserving recordings and also the recording stylus. Since 1902, the American Graphophone Company (Columbia) and the Victor Talking Machine Co. had pooled their patents on the lateral cut method of recording in an attempt to monopolize the market. Those major companies were challenged by a growing number of smaller manufacturers, including Vocalion, Emerson, Brunswick and Starr. The giants sought protection in the courts, and in Victor Talking Machine Co. vs. Starr Piano Company (1922) the Second Circuit Court of Appeals held the Victor patent void for lack of invention and for abandonment.

Not only did the lawsuit effectively end the major’s monopolization of lateral recording, it formed a bond between the smaller companies that joined in fighting this case. By the mid-twenties, for example, one company called Gennett was producing 3 million records annually, in addition to 15,000 pianos and 35,000 spring-driven phonographs. By 1928 Gennett cut 1,250 master records, compared to Victor's nearly 7,000.

It is always smaller, innovative companies who, throughout history, have been instrumental in moving technology and changes along. And it is always larger, more powerful and financially secure companies who want to either block the change and stay with the norm, or if that fails, sue the innovators of change so as to keep their monopoly intact. And too, if the legal approach fails, what we see is the bigger companies buying the innovative companies, so that they can fool the public into thinking they came up with the innovation all along, but were just waiting for the right time to introduce the technology they once feared, but eventually land up richer then before their reluctance to whatever threatened them in the first place.

So, for almost two decade now, the music industry has been moving forward reluctantly into this inevitable digital future that is with us now, dragging its heals, screaming and hollering in the courtrooms and through the media about the rights of this or that person or business entity and trying to hold on to what is impossible to hold onto....change.
Please remember though, this is hardly the first time the entertainment industry has decided that a new consumer technology will bring about the end of their world, and so we have endured endless posturing emanating from that delightful trait in human beings known as greed.

So back again for another history lesson. In a move whose impact was not felt for another 50 years, piano rolls in the early 1900’s were still a very lucrative business and the music industry of that day, (the rapidly growing companies that controlled that era’s recording techniques that led to the flat disc technology of ‘78’s) did not want that ‘old’ technology to stick around , so they hired legislators who wrote section 115 into the 1909 Copyright Act, allowing anyone to make a mechanical reproduction without the consent of the copyright owner. IF notice to the publisher and a payment of two cents per reproduction was paid. Congress wanted to protect against a publishing monopoly, since the early music industry of the 1800’s was run and controlled by Music Publishers.

However, Section 115 of the Copyright Law of 1909 had the unintended consequence of helping create many more record labels, which emerged from that controversy in good health, thanks to their lawyers, and the smaller labels found themselves with the ability to secure master recordings, influence changes in distribution, and sell records for whatever the market would bear. All the labels had to do was pay the publishers a couple of cents a copy and, after paying other costs, they kept nearly half of retail sales.

For a long time, record companies made a lot of money, and publishers were no longer the dominate profit makers in the evolving record industry. In the early days, it was a great business. A label paid for the content, and paid for the license, then sold the recording at a higher price--and made a good profit.
Things move along fairly well, even after the demise of the ’78 disc, when in 1948 and 1949 the ’45 disc and the long playing 331/3rd LP were introduced. In fact, as far as musical styles go, it is independent labels who back then, as now, are the ones who take the risk on a new style of popular music, and when it makes a significant dent in record sales, the major labels are there to jump on that new trend and create mass appeal and sales of whatever new musical trend.
The cassette arrives in the early 1970’s and things go along pretty well, until in the early 1980s, a bunch of major labels declared war on record stores who sold blank cassettes. The labels threatened to pull their co-op advertising dollars (money that helps stores buy newspaper ads, in exchange for promoting specific titles) from any store that also advertised blank tape, claiming that the stores were promoting piracy. They backed up these claims with a study, commissioned by Warner/Elektra (as it was then known), that "proved" billions of dollars of record revenue were being lost to home taping.

Their “studies” however proved to be a load of crap, and another study, paid for by a consumer audio manufacturers' coalition--who presumably had a much smaller axe to grind, since they could go right on selling equipment no matter who won--showed that the vast majority of home taping consisted of people making dubs of records they already owned, for use in their cars and personal stereos, and that in fact people who taped albums at home bought more records than people who didn't.
Nevertheless, the labels, through the RIAA, pushed for a blank tape tax, the proceeds of which would be distributed, through some undetermined formula, to artists who were purportedly hurt by home taping--Michael Jackson's name was bandied about a lot. Frank Zappa, in his autobiography, made the case that the record companies were so hungry for the extra revenue that they were willing to stifle their own artists and accede to the "Washington Wives'" demands to put parental warning labels on albums, if Congress would pass the tape-tax bill. Fortunately, the bill stalled, although some other countries have not been so lucky. As far as the warning labels are concerned, you can see for yourself how effective they have been at keeping offensive records out of kids' hands.

(Note: this is as far as this article went, but we can learn a lot about how new technologies always threaten the power-owners of today. Sure wish I knew who wrote this!!...chris knab.)