The digital music era will best be remembered for the wars over who will actually control the delivery of music to the consumer.
Traditional record companies are now desperately fighting to retain control of the music business they once monopolised. Technology companies like Yahoo, Apple, Microsoft and even Amazon are now looking for a slice, if not all of it. Traditional retailers like Woolworth’s and HMV are also looking for a chunk of this action, as are music hardware manufacturers like Panasonic and Sony. Corporate giants like Coca-Cola, Starbucks and Tesco are muscling in too, and even British charity Oxfam is looking to earn some dosh selling digital music.
Then there are the consumers themselves, who can now acquire music over the Internet, burn their own CDs and cut out all of the middlemen who traditionally took a slice of the vast profits available in the music industry.
Going direct
More interesting still, musicians themselves are able to market directly to consumers, creating fan bases without the structure of the established music business. (Lest you doubt the possible success of such tactics, Arctic Monkeys’ CD became the fastest selling debut album in British history on the back of extensive downloading directly to fans.) Interestingly (and despite what the music industry tells us), the downloading phenomenon hasn’t affected CD sales much at all. In fact, in some markets CD sales have actually risen as a result of it. Some surveys reveal that consumers who download a lot actually buy more CDs than they would have previously, as they get a chance to sample music before committing to the full cost of a CD.
Bypass compilations
There are two areas where downloads have affected the record industry: compilation CDs and big-ticket artists’ CDs.
The compilation CD was always problematic for consumers, as you got a few major hits that you wanted accompanied by less desirable tracks from bands on the same record label(s). Thanks to downloading, people can select the tracks they actually want on their compilations.
Don’t shed no tears
Big-ticket artists (U2, Robbie Williams, Beyoncé Knowles, etc) have seen sales of their albums drop recently, probably as a direct result of downloads, legal or otherwise. But don’t feel sorry for them just yet. Their CD sales revenues may have declined, but they are earning vast sums playing concerts. Oddly, consumers reluctant to part with twenty-plus euro for a CD that they can play over and over and even copy are willing to spend well over a hundred euro for a ticket to a one-off live performance. US business magazine Forbes recently published a list of rock’s top earners, based solely on record sales and concert ticket sales revenue in the US.
The artists who comprised the list didn’t surprise anyone. They included The Rolling Stones, U2, Eagles, Paul McCartney, and Elton John. What did amaze me was the ratio of concert earnings to CD sales revenues. List-toppers – the Rolling Stones earned $168 million in 2005, of which a paltry six million dollars came from CD sales.
U2 took $139 million in ticket sales and just $11 million in CD sales, despite having a hit album, hit singles and winning several industry awards in the same period.
End game for record companies
Do you see the problem for the music business in those figures? It controls CD sales and by massaging sales figures can manipulate the amount it pays the artists (many record contracts still include arcane provisions like “breakage,” a clause dating back to the days of the 78 rpm record, which was made of highly fragile shellac). On the other hand, concert revenues are paid directly to the artists. So the traditional business model, where bands toured to support record sales has been flipped, and bands now release records to promote their concerts.
To further confuse the mix, mobile phone ringtones are becoming the new “singles,” with ringtones even becoming hit records. Pop star Shakira has just announced that her new single, “Hips Don’t Lie,” will be released in the US as a ringtone only, bypassing CD sales and digital services like Itunes entirely.
The reason? She’ll earn a lot more money from ringtone sales than she would from more traditional methods.
That must really be scaring the big record companies.
Is this art at all?
There may be even worse to come, as two recent surveys reveal. A British survey conducted by music psychologist Dr. Adrian North revealed that young consumers no longer have a “deep emotional investment” in music, thanks to its ubiquity in daily life. Young people now view music as a disposable commodity rather than an art form. There’s worse news in the “European Music Consumer Survey 2005” from Jupiter Research.
According to Jupiter, over one third of 15-24 year olds have no concept at all of music as a paid-for commodity. Half of that same age group considers CDs to be bad value and nearly the same number again would rather download. Jupiter’s Mark Mulligan warns that, “Unless the music industry can transition these consumers while they are young away from free consumption to paid music formats…they may never develop music purchasing behaviour and the recording industry could suffer long-term harm.”
So the fight for control of the way music is delivered to consumers may turn out to be merely one battle in a war for the very hearts and minds of those consumers.
Ltd
