The Week the Music Industry Came Unraveled

Was it really just last week that the RIAA won its first major file sharing lawsuit? I think that history will remember the victory as the apex of the industries clever strategy of suing its customers. In the eight long days since the verdict, it’s been nothing but bad news for the major labels. It’s almost like the verdict put a curse on the entire industry.

During our podcast a few weeks back, we raised a few eyebrows when we suggested that it wouldn’t be long before major recording artists began self-releasing their albums. This past week we saw a major act do just that, as Radiohead began selling its latest collection of songs directly to consumers through the band’s website.

Can one band bring down an entire industry? Hardly. But Radiohead isn’t alone.

This week we also learned that Oasis, Charlatans, and Jamiroquai each plan to give their next album away for free. Charlatans manager, Alan McGee, has determined that the bands will make more money from concert tickets and merchandise sales when fans can freely download the latest release. That sort of thinking makes Radiohead’s name-your-own-price approach look somewhat stodgy (although, Thom Yorke apparently hates touring, so it’s not like Radiohead is looking to make a living doing stadium tours).

Then there’s Nine Inch Nails. Earlier this week Trent Reznor announced that he’s finally free from his recording contract. Based on Reznor’s comment about seeking “a direct relationship with the audience”, it sure sounds like he’s thinking about following a model similar to Radiohead’s.

If all of this wasn’t bad enough, rumors are now circulating that Madonna will be dumping Warner Brothers and signing a contract with concert promoter Live Nation. It’s hard to tell if the deal is a harbinger of things to come, or the sort of one-off fluke that is bound to happen anytime an industry goes through the sort of major transformation the music industry is now going through. By all accounts it will be nearly impossible for Live Nation to recoup what they are apparently offering Madonna. I guess that would make her the Alex Rodriguez of pop music.

I’m hesitant to lump Madonna in with Radiohead and the others, if for no other reason because signing a $120 million 10 year contract hardly constitutes taking a substantial risk. Given Live Nation’s near monopoly on the concert business, and ties with Clear Channel, I don’t see them shaking up the status quo. While Live Nation is not an RIAA affiliated label, it is certainly part of the existing music industry establishment.

So what will the future of the recording industry look like? Will it be superstars like Madonna signing contracts directly with concert promoters, or will it be bands like Radiohead self-releasing product directly to fans?

The answer is neither, and both. Music business models are in a state of flux right now and no one knows for sure what will work in the future. There is no magic formula, and the right approach will likely be different for every artist. That makes it extremely challenging for up and coming artists to develop a sensible career path.

Some have noted that it’s easy for major artists like Radiohead and Madonna to consider alternative distribution methods when they’ve already established their brand through traditional means. These same people argue that superstar acts actually help major labels subsidize the development of new bands. Won’t all of this experimentation actually hurt the bands who are just starting out today?

The truth is that the current system isn’t all that favorable to lesser known musicians. The vast majority of recording artists make no money from their music — or so little money that it isn’t their primary source of income. The average recording artist signed to a major label spends most of his or her time in debt to their label.

I keep hearing the argument that when major artists jump ship they are effectively leaving lesser known artists to drown. In fact, the lesser known artists are already drowning.

One thing is certain, the current music industry business model is irreparably broken and needs to change. After years of resistance we’re finally starting to witness something that looks like real change.

Change is good. I like change.

8 Responses to “The Week the Music Industry Came Unraveled”

  1. Dan says:

    Agreed. It’s about time that overpriced and outdated distribution vendors (labels, publishers, etc.) got a reality check.

    Your podcast on POD was great, BTW. I’m hoping the same shift that’s happened in music will help authors and small publishers, too.

  2. gary says:

    Very interesting times. Very good article, and the only one I have read so far that recognises that established artists can give away their music as loss-leaders, but new artists can’t. Things are going to be VERY tough for new music in the future.
    Maybe http://www.sellaband.com have the right model, where everything is fair for the label, artist and fan.

  3. Tim Perry says:

    I just found this place and love it!

    Excellent piece. But just one nit to pick:

    You sayeth (and it’s a repeated theme), “I think that history will remember the victory as the apex of the industries clever strategy of suing its customers.”

    Retail does it all the time with shoplifters.

    😉

  4. Kelly says:

    Its a very interesting and cool post about online shopping. people are using online shopping to buy any product.
    I need this info for rugs buying

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