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| more on The Future of Music | | Date Created: Jul 07, 2005, 10:16 PM |
 An old friend and music industry insider had a much more complete and nuanced review of The Future of Music -- Manifesto For The Digital Music Revolution than mine.
Here's his take on the matter.
I enjoyed “The Future Of Music” at the same time I was annoyed by its socialist-utopian slant, which cheerfully disregards many of the the real cultural and business issues affecting the transformation of music from hard-goods to digital distribution. While the authors’ overall analysis of what’s happening is generally right on, some of their assumptions and metaphors are way off the mark. They also didn’t do enough hard research into how the corporate music business has developed, and refuse to lay any of the blame for its misery on general greed, which infects not only the record companies, but artists, managers, publishing companies, and even the heads of independent record labels, most of whom begin as committed music enthusiasts, but who quickly become prisoners of limited cash flow and look forward to a big payday from (who else?) the majors in order to bail themselves out and then some.
David Bowie’s “music as water” metaphor, while attractive and accurate as far as the technological mechanics of music delivery, doesn’t really hold up. For one thing, water is one thing. There is no (significant) variety in its content. We pay for its processing and delivery to us, for the development and maintenance of those systems. (And even in the case of water, we have the option as consumers of acquiring “better” bottled brands if we’re willing to pay a premium.) As consumers of water, parts of our dollar don’t have to go to the creators of water (hypothetically, Mr. Hydrogen and Mr. Oxygen) or its manufacturers (whoever puts H2 and O together.) In music, many pipers must be paid: composers, lyricists, performers, manufacturers, distributors and marketers all get, directly or indirectly, a piece of the consumer dollar. How the pie gets divided in situations where the product is diverse by definition is a complex matter, and has tended, over time, to drive the price of music upward, to its present untenable levels.
The authors of this book would have done well to point out that under present industry conditions, the balance of power shifts to the artist after the artist has had even the slightest success. The onerous conditions under which new artists are signed (which basically allow the record companies to own your house even after the mortgage is paid) are frequently overturned after one big record; and even the most ridiculous whims of the artist are indulged in the period of “re-negotiation.” These contracts are re-written by a retinue of managers, who get paid on the revenue they generate, and lawyers, who get paid by the hour. Artist advances, recording and marketing budgets, and irrelevant perks multiply exponentially. And this doesn’t even take into account the bidding wars for hot new talent, artfully orchestrated by the same managers and lawyers, that drove the prices for unsigned talent through the roof until only very recently.
You’d be right to say that the artists deserve their big payday, but it frequently comes before they’re established and proven as career players. Hence the risk factor is still there, and enhanced.
Corporate record companies will put up with this for a number of reasons. they’re less concerned with margins than market share, for one thing. For another, they’re always generating cash flow, and market valuations of their companies have been frequently calculated on the basis of multiples of revenues, rather than profits. This distorts the picture and ignores the escalating cost of doing business. The bottom dropped out of the recorded music market when technology allowed the cost of music to the consumer to drop to zero at the same time cost of doing traditional business was through the roof.
The authors are correct in stating that attempts to control this situation, either through rights management schemes or litigation, are futile. But I’m skeptical that their solution--which seems to be, let the government impose mandatory licensing fees and let the artists and managers take control—will help to create any sort of stable valuation that the consumer will accept as long as there are multiple delivery options and pricing schemes (not to mention the “free” option) for acquiring music. Historically, governmentally-imposed statutory licenses haven’t insured that the creators get their money; all they do is set a formula and level the playing field. I don’t think that’s enough to pull the industry out of its tailspin. The money pool is likely to stay flat, and that’s assuming digital revenue streams will cover the loss of CD/DVD income. With more copyrights available (nothing will go out of print), individual earnings will inevitably be downsized.
What’s more likely to happen is that the vast libraries of recorded music as they exist now will be unloaded at some stage by their corporate owners, who are beginning to realize that the current system will never allow them to realize the multiples they think they should get on their investments. One or two new holding companies will be created to distribute all of the old recordings through whatever channels emerge, and administrate payments. It’ll be a penny business, but lean and profitable.
Going forward, I’m inclined to agree with Kusek and Leonhard that newer music companies will hybrid recording, live performance, merch, etc. in a more vertically integrated way. But we’re not there yet, simply because it’s very difficult to merge diverse professional expertise and financial discipline into a new model without tremendous growing pains. The authors’ poster child for this model, Sanctuary, is in grave trouble: publicly traded on the London Exchange, they are hemorrhaging cash, having paid huge advances to artists like Elton John and Beyonce, guaranteeing income from the revenue streams they want to merge but haven’t figured out how to operate. They’re now in the position of having to look for a corporate partner to bail them out. In the meantime, their investor rating is very bleak.
As for the consumer, the most accurate statement in the book, I feel, is, “...the name of the game will be finding the music that you like.” But the authors only briefly address the changing role of music in our culture, from the driving engine it was in our youth, to just one more entertainment option in our media-saturated, over-distracted society. Granted, that’s a tough subject to get a handle on, but it’s difficult to accept a utopian vision that carries with it an antique and simplistic underlying notion: that people still want music they way they used to, but the record companies fucked it up.
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