How the Record Companies Can Survive

If you're here, you've probably heard about me through the Overseas Exile blog about "how to move to a foreign country." Or maybe my tech blog. However, I've repeatedly found that I often want to write without being constrained to expat or technical issues. My LiveJournal account is an awful choice as they're dying. Thus, my new blog where I can write what I will.

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For a long time people have struggled with issues with the recording industry's attempts to remain relevant while hunting people down and using bogus RIAA lawsuits against them and ignoring Fair Use claims. The problem, in a nutshell, is that the world economy is transforming into an information economy and the music industry views themselves as a manufacturing industry. But music is ultimately not a physical product; it's a product that is perfectly suited for the information economy.

This is what it's all about.
Photo by Andre Savastano

The music industry has been struggling to figure out how to reinvent itself for the digital age but it turns out this is fairly easy once you understand what's actually going on. Not only will this help to keep the record companies in business, it will make the artists happier, too.

I am currently writing a new book on the Perl Programming language. My publisher paid me a sum of money, they provide editorial support, and I'm currently finishing the writing of the 17th out of 19 chapters. Once that's done, we'll finish some editorial tasks, complete the book's pre-production work and send it off to the printer. Then it will be marketed, distributed to bookstores, pitched to universities as a textbook and hopefully I'll earn more money. I know how to write. The rest of that stuff I don't know how to do. For a band hoping to get their big break, they're more or less in the same situation.

If you want, you can read about how record labels work and while the industry is different, the overall structure is the same. It's important to note that this is not what the music industry was in the past, not is it what it will be in the future. Currently the music industry is using the massive sledgehammer of lawsuits and lobbying politicians for legislation to protect their business model. If there is anything which could be seen as "anti-capitalist", it's industries demanding the government intervene in the market on their behalf, but there you go.

Mozart was an exception.
Image: Wikimedia Commons.

There was a time when being a musician wasn't a viable career opportunity. You might play locally, or, if you were really lucky or good, you might get a patron. Having the success of Mozart was simply unheard of. The recording industry changed that due to their comprehensive coverage of finding talent, producing their work, handling legal issues, distributing their work, marketing their work, developing related merchandise, arranging tours, and so on. So what would be an alternative to that industry?

Louis CK earned over a million dollars by producing his latest comedy album and selling it directly to the public via his Web site. He also did an AMA ("Ask Me Anything") on Reddit where Louis CK explained his Internet experiment.

Think about that: a million dollars. He's stated that he earned more by marketing that directly than by going through a studio. Many other artists have been trying this route, with varying degrees of success. In fact, one author took famed science fiction novelist Charles Stross to task on a post Stross made about the book industry, claiming that the publishing industry isn't necessary and that authors could make more money by publishing their ebooks directly. Stross destroyed him in a very telling response that is the key to how the music (and perhaps book) industries can reinvent themselves in the digital era:

Charles Stross
Photo by theNerdPatrol

Rubbish. There's this concept called "division of labour" that I'd like to remind you of; if I had to run my own self-publishing op I'd lose half my writing time to what is essentially a peripheral activity (from my point of view).

And that's the key to how the Recording Industry can reinvent itself to survive.

Imagine that your Brave New Band is writing incredible music but stuck playing gigs in cheap pubs, enjoying the aroma of stale beer and the complete lack of groupies. Nobody buys your t-shirts because nobody knows who you are. However, you're good enough that one of your demo tapes has interested a label and they want you to sign. Being rather savvy, you're aware of how record labels can gross a million dollars putting out your work and you can wind up eating rice and beans in a run-down studio flat in London. What do you do? Shoot for fame with a label, risk losing creative control and still being broke? Or go it your own way?

That's where the music industry can reinvent itself. Mass producing a physical copy of the music, shipping it to stores, and suing the hell out of everyone who might "infringe" on their work is very expensive and in many cases, counter-productive. On the other hand, my wife recently paid €12 to download an album rather than pay €70 (!) for a physical copy. She wanted the music, not some daft cover art she could download for free anyway. She is happy to pay for the music, but she doesn't want to pay for all of the rest of the overhead (and she recently lost her entire music collection when her computer crashed and she's rather bitter about the cost of paying for it again).

So let the music industry handle the one area they can do: marketing. Let the musicians handle what they can do: music.

Marketing costs money
Photo by 401K

So what makes this different? Think about how I mentioned my book working. I didn't pay anyone to market my book because my publisher is handling that. Similarly, I see a rise in music marketing companies coming along and telling artists: you produce the music any way you want and we'll handle marketing and sales via the Internet. Forget about music stores, physical copies of the music or even DRM. People are willing to pay for reasonably priced music and DRM hurts sales. If an artist wants to "go it alone", they either handle the marketing themselves (something that few people are really good at), or they're faced with paying exorbitant costs to marketing agencies.

If the music company is willing to back artists and pick up the tab on marketing for a cut of the sales, everyone wins by specializing in what they're good at.

Of course, the music industry isn't willing to reduce themselves to music marketing specialists. They want complete control over every aspect of the music, touring, merchandising, production, distribution and marketing. And they're willing to sue the hell out of anyone who stands in their way. The sooner they realize this, the sooner they can start exploring new possibilities in business. The old music industry is dying and the new music industry is beginning to emerge. The artists win, the music industry can win and the consumers can win.