Is the music industry returning to street corner busking?

The headline in the February 22, 2007 edition of Rolling Stone was ominous: Labels in Free-fall. It certainly looks that way. It reported that total sales of the top five CDs in January, 1997 was 865,144 units. This January sales fell short of that by 67% — only 285,702 units sold. Yes, that’s a free-fall alright. It’s also just the top five albums. Total album sales for the same two months was a drop of much less, 38%. That is, a drop from 55 million CDs sold in January, 1997 to 34 million this January.

So is the sky really falling? Or are these figures simply showing shifts in how people are buying music? The answer, I think, is both. There will definitely be winners and losers. And a lot of the losers are Rolling Stone advertisers.

Let’s look again at the numbers.

First, consider the affect that the long tail phenomenon is having on sales. Although the top five CDs have dropped by two-thirds, the drop was far less severe if you add up all CDs purchased. A drop of 38% is pretty horrific, but it’s a long way from 67%. Why weren’t they closer in magnitude? The answer is exactly what Chris Anderson describes in his book. The masses are buying a greater variety of music, stealing unit sales from the blockbuster CDs. The superstars are far less super than they were in ’97.

The article ignores that fact, because it is too busy bemoaning the imminent death of the album, and consequently, the death of the record label. I don’t argue that both are evolving fast. But dying? It’s all in how you define things.

Now let’s look at the CD. The numbers cited combine online and bricks-and-mortar CD sales. But they are deceptive, because they look at a CD, or “album,” as something that is sold unbroken. Buying individual songs is not included. What’s more, small retailers are also ignored by the source of this data, Nielsen SoundScan. Retailers can only participate if they have “Internet access and a Point Of Sales (POS) Inventory System.” My favorite independent record store has one but not both. What’s more, labels can report sales of their CDs, but must pay $500 per year for the privilege.

Single-artist labels are also disqualified. That means Ani Difranco was off the radar in 1997, when her Righteous Babe Records sold her CDs only (and sold them by the tens of thousands). This year there’s no telling what self-publishing artists are being ignored by Nielsen sales figures. And admittedly they’re the best we’ve got at the moment.

Now let’s look closer at what a record label is good for (here’s a hint to their post-millennium relevance: A record “label” literally is the donut-shaped paper glued to the middle of a vinyl 45 RPM single or a 33 RPM “long-playing record”). There was a time when artists needed a label, both literal and figurative. They needed help producing and distributing their music. Much has changed.

A co-worker, who is a niche recording artist in his spare time, describes a very different time not very long ago. Back then his home recording studio was a room with many expensive pieces of hardware, all wired together. When everything was fired up, the room became an oven. Voltage coursing through the system produced a perceptible signal hum, which itself had to be eliminated during the production process by – you guessed it – another costly gadget. All of this required money and ingenuity. My friend had enough of both to produce his albums, but most artists didn’t back then, and still don’t today.

Luckily, a musician can record and produce albums today with nothing more than the processing power contained in a notebook computer. Buy-in, in terms of both money and intellect, is much lower. As for distribution, deals can be cut directly with sites such as iTunes (are you listening, Freedy Johnston, you neo-Luddite, you?).

My friend is even considering placing a Paypal option on his music site. The site would accept donations, from anyone, regardless of whether they ever buy one of his songs. He tells me that others he knows can make an average of $20 a day, from total strangers, who just like what they’re doing and want to support their art.

It sounds a lot to me like busking. That’s what musicians used to do — and still do today on busy street corners — to earn a living or a little beer money. They strum their guitars, leaving their guitar boxes open for passersby to drop donations into. The kindness and charitable nature of music lovers has always been the lifeblood of musicians. I’m seeing things come full-circle, in an era of improved access to the music that touches our souls.

This was the meta message of Steve Jobs, in his essay last week that seemed to bite the hand that feeds iTunes. The Apple Computing CEO suggested that everyone would sell more music if digital rights management (DRM) was removed from the recordings that he and competing online music stores sell. Removing DRM would be the ultimate honor system. It’s as though he’s proposing to stop charging people a formal admission to hear their favorite artists. Instead, the artists come outside, into the open air, and sing their hearts out for those who toss their coins into a guitar case. Purchases of songs will remain retail transactions, but purchases will be made out of ethics and generosity and not punitive DRM constraints. 

Representation and distribution were handled by official record labels, and not musicians themselves, out of necessity. Technology required it. This system worked for over 80 years but nothing lasts forever.

Jobs’ anti-DRM essay is a signal that there must be a redefinition of the record label as we know it. Although labels won’t go away, the change will be significant. Instead of the label holding all of the power with most musicians, it will be the musician who can decide which street corner will serve his or her art the best. The label will manage the street corner. That is all. They’ll keep it clean, and maybe help to draw a crowd.

In 2006, Time Magazine called the person of the year “You.” Is it possible that in 2007, Rolling Stone will be forced to crown, as its label of the year, “The Musician?”

20 Replies to “Is the music industry returning to street corner busking?”

  1. The record labels weren’t only done in only by technology, but also by short-sighted business decisions — such as responding to market downturns with drastic personnel cuts that virtually eliminated their promotion and regional sales departments. The blockbuster mentality is pernicious — sure, it seems easier to sell a million copies of one CD than 250,000 copies each of 4 CDs, but I’m not sure it’s anywhere near as cost-effective. Plus, they needed to regard each artist as a brand, to be cultivated over the long term. This requires having independent radio stations and independent record stores as well, which the record industry did nothing to preserve. Let’s just sell it all at Tower Records and promote it all on Jack Radio!! Let’s not allow our customers to have any personal connection with their DJs or their record-sellers — and let’s only deal with bands that play in huge arenas where the fan is sitting a football-field’s length away from the talent. Yeah, that works.

    They deserve to die, and I’m glad that technology has enabled us to get our music elsewhere. I’m one of those people who never goes for a free or illegal download if I can help it — I see each dollar I spend at ITunes as a vote in favor of an artist I like. I’m not sure that every music-lover is that scrupulous, especially not younger fans, but as times goes by I imagine it will become clear how much margin to allow for the non-payers. And just possibly it will become apparent that certain artists tend to attract fans who will pay without question — and those artists will thrive because they’ve made more of a connection with their fans.

  2. yeah, my main point was that the record label’s positions were concomitantly eroded on two sides of a technological equation: The artist, by virtue of the advent of home recording technology, no longer needed the labels to advance the money to actually record most of the records. This used to be a large part of the artificially inflated advances that labels would pay artists upon signing. An artist would make a record and would get no money at all until that advance was recovered first. Labels saw more and more artists recoding in home recording studios, first using ADAT or similar technology and now using things like ProTools. This phenomenon was actually a component I believe that played into the popularity of music that is less collaborative and less harmonic. It also opened the path for artists that would never have been signed heretofore; think Seattle style music in which marginal talents learn three chords and record a hit. This is a separate discussion, but it has yielded some poor music out there because the talent set of being a musician and being a recording/editing/mixing/mastering expert are very different and few people I run into in the music industry have both. Traditionally these are all separate jobs involving teams of people each.

    So home recording technology applies better to some genres as opposed to others. Pop number one selling “Daughtry” or Kelly Clarkson are examples of records that only a tiny fraction of which could be recorded at home because they are hugely touched by the editing process. Freedy Johnston, on the other hand, does indeed record in my friend’s basement, otherwise known as “wakefield mines studio”.

    The second technological element of course was on the consumer side. Consumers were able to steal music more easily. This one has really been over emphasized though I think because from the advent of the cassette tape there has always been a way to do that. It’s just that it’s easier and thanks to digital, the copy is as good as the original.

    Labels maintain a position in the first scenario in as much as world class recordings still require quality production and editing, along with promotion, distribution, radio play and touring. I think that labels have over-emphasized the impact of technology to their bottom lines largely to protect the model that they had become accustom to, namely ripping off the artist. Take for example the watershed record deal that Michael Jackson struck in 1980 when he became the first artist to actually get $1 per unit sold. That means that even in the most artist beneficial model the label was keeping 90% or more of proceeds, even after the advance was paid!

    Like you say labels have their place in the industry but they need to capitalize on the benefits they can actually provide rather than pining for the return of the day that they can have the enviable 90/10 relationship with the artist.

  3. Thanks, Clay, for the additional detail. It is mind-blowing that the “King of Pop,” as he was known in his hayday, only earned a tenth at best of his high-margin recordings (CDs are cheap to make, and even vinyl is just not that expensive to produce and distribute).

    Holly, you mentioned that you’re “one of those people who never goes for a free or illegal download if I can help it — I see each dollar I spend at ITunes as a vote in favor of an artist I like.” I’m not quite a clean as that, but that’s only because I realized that sharing someone’s MP3s, ripped from that friend’s disk, usually, winds up being good artistic karma after all.

    My wife and I continue to watch our massive, wall-sized storage unit straining to contain our growing CD collection. That’s because we’re learning about new artists and styles from the very MP3s that we “stole” by accepting them from friends. In other words, we’re listening to more diverse artists and paying for them when our conscience — and our compulsive need for liner notes — demands.

    Recent examples are Elbow, The Minus 5, Spoon and The Decemberists. All started as stolen goods, so to speak. Now we have multiple, legal copies of them all.

  4. I’ve never heard of the Elbows or Decemberists… but I bet that they’re damn glad you “stole” their music.

    The labels HELD the power because they had the means of DISTRIBUTION… which the musicians could not do economicallly themselves.

    This whole thing is a business model issue. And if you want to see a model of the future… then look to the past: Grateful Dead. They “gave away” the music (ie. let fans record and distribute the music) and made money by touring and merchandise (and controlling distribution of TICKETS, not music).

    Today’s jamband scene is one model for how the music “industry” will survive. The music itself will be the freebie, loss-leader come-on — and the profits will come from some other, related source.

  5. Jeff, great post. Music is fun. MP3s and other digital formats have revolutionized the industry. I think that the CD labels are suffering in part due to their resistance of jumping on the band wagon of digital music formats.

    For me the local public library is a great source of new music. I rend the CD, I rip it to my iRiver mp3 player, I listen for a few weeks. If I like it I purchase the mp3 online, if I don’t like it I simply delete it.

    Support the artists! Lets pay for their music!

  6. Great perspective, Ron.

    Elbow and The Decemberists might feel better about me “stealing” their music once they see legal copies of their CDs on my shelves, and learn that I would never have come to appreciate their complex songs in the first place those songs hadn’t grown on me over time, through those contraband copies.

    I’m hoping another friend will respond with the perspective he share with me over lunch on Friday. He contends both live performances and CD sales are not where the big money lies nowadays. It’s striking it rich when your song is chosen for a film soundtrack, television show or commercial.

    Michael, if you read this, I hope you can add some more detail to this interesting approach to a changing business model.

  7. I agree with you Jeff,

    The model will change. But I’m not all together convinced that the film, television or commercial royalties are the only place where profits can be found. Still, endorsement deals continue to be viewed by many as selling out.

    Will a new model emerge?

    Hard rock group Korn could be an example for something new. Upon completing their record deal with Sony, they sign to Virgin Records and struck a deal with EMI. EMI paid Korn 25 million upfront in exchange for a share in the profits of their next two LPs, including tours and merchandising. In exchange, EMI received a 30 percent stake in the band’s licensing, ticket sales and other revenue sources.

    Could this be a new business model emerging for musicians? We’ll see.

    CD sales to my knowledge have never been where it’s at for musicians, so the changing business model could mean that labels are cut out all together. With the advent of UGC it seems that more people are creating fame for themselves (e.g. Myspace phenom Tila Tequila). I expect that unless the labels are able to redefine their business, OR create a new model to capitalize on we’ll see a shift in the musician label dynamic.

    As Ani DeFranco proves it is possible to take the label out of the equation. What I’m interested in finding out is whether or not the tremors felt by the big three will resonate down to the indie level.

  8. I think you’re right, Andrew, that the Korn model could emerge as a new model. But I see one potential point of discord in that model: By getting their money upfront, the band has every incentive to “get the music out there” (ie, give it away) in order to pump up ticket sales and merchandising. But is this aligned w/ the label’s perspective?

    It could be, but here’s what I’ve found: That execs in certain industries find it hard to adopt new models. My bet is that the old fogies at the labels will still want to rely on CD sales vs. ticket sales and merchandising — two sources of revenue they’re less familiar with (ie, have less control over?).

  9. The music industry as a whole is changing very fast and we can only guess (in an educated way) where it will go. Labels were once required to gain distribution and to generate radio airplay (hmmmm, remember “payola”). However, with the purchase of music shifting to download vs. buying a tangible piece of vinyl or plastic and radio listenership (especially among Gen Y) in a free fall, they are rapidly losing their place in the business model.
    Yes, with digital recording everyne can (and does) record their own tunes. This has also somewhat commodotized recording studios where they now are working harder for less. And, means much more “product” on the market.
    But, listeners still need to be made aware of, or hear the music. This is where licesning to TV and Movie properties has come into play. Being featured in the latest episode of the Sopranos puts your song in the ears of millions of people and also. more importantly to professional musicians, it helps pay the mortage.

  10. Interesting post. A new “street corner” on the web for busking. I think this probably can only be successful for a small few, however.

    One other possible revenue stream which could help the music industry out — and which is currently being ignored — is the simplified licensing for small, personal videos. I”m talking about a few dollar charge one could pay to legally use a song for, say, a business presentation seen by 20 people. Shelly Palmer, a composer, recently wrote about this on his blog. It’s an interesting idea whose time has come — and is slightly more appealing than relying on strangers to drop a PayPal transfer into your tip jay.

  11. Ron,

    You bring up a good point. Major label execs haven’t been known as the torchbearers for change.

    On the other hand, if a new business model can demonstrate strong incentive, (e.g. dollars and cents) I’d be surprised if I didn’t see Major Label execs clamoring to ride the money train.

    Thinking from the label’s perspective – where there’s a will there’s a way. I believe that there are win-win solutions available that can complete the entertainment trifecta of consumers, producers, and financiers.

    The problem comes from one party abusing the other. It wasn’t too long ago that CD sales climbed to 21.99 for new releases. It was that kind of abuse that gave piracy a forceful shove forward.

    If we can create a plan that creates fairness, i see no reason why we won’t get what we’re after.

  12. Can anyone name a superstar, household name Artist or band that has not been signed to a major label with it’s national radio promotion, marketing, and CD and Video distribution capability. I can’t.

  13. Hi, George. Thanks for the comment. I’m not knowledgeable enough to name a superstar or household name launched without support. I would suggest that this is a lot like saying “name a superstar or household name who doesn’t have employees.”

    At some point in the trajectory to so-called mainstream success, it’s my understanding that the demands of an audience require delegation. There simply aren’t enough hours in the day to get the job of being famous done without a lot of outside help.

    But by definition, superstardom of the Lady Gaga variety is much more rare today than even 15 years ago. This list of albums that have gone platinum reflects what Chris Anderson wrote about in his book The Long Tail. The air has gone out of the phenomenon of the musician everyone listens to, and the money has gone with it.

    This shift has been replaced with more fragmented tastes — tastes better served financially by a less top-down distribution system and a more networked distribution system.

    I would even suggest that Lady Gaga is not earning as much money than, say, Madonna in her prime.

    But I’m not expert. Just an extremely interested bystander. Does anyone in the industry want to comment?

  14. George, an answer for the superstar/household artist question is Lisa Loeb for “Stay” in 1994. She was the first artist to have a number one single while not signed to a recording contract. Loeb earned the distinction of being the only artist to top the Hot 100 before being signed to any record label. Cool stuff.

  15. There are now many, many artists that have hit hard without the “benefit” of a record label. Radiohead is a good example. More and more artists are now not only eschewing the label but getting rid of the traditional distribution channel as well. The internet and the way people consume music has enabled this. Many artists are using sites like ReverbNation to market directly through social media and websites.

    My own band’s first CD which was produced by Butch Vig and was originally on a record label was recently re-released by us, the artist, directly to our facebook page and directly to iTunes. Oh, and the cost of putting it on iTunes – a whopping $34.00!

    I recently had a discussion with Mark Mogthersbaugh, co-creator of DEVO and composer and producer of many,many television and movie soundtracks. DEVO recently launched their first album in twenty years. He had a lot to say about the disadvantages of hooking back up with their old label Warner Brothers!! He said this business has changed so much that there is no need for a label anymore – if anything Warner has only served as a detriment to sales and creative output.

    Another recent conversation with my friend who is musical director for American Idol tour indicated clearly that touring is not making many bands money right now, especially large, expensive touring acts. They guys that are making money at it are bands like Squeeze who are out on a reunion tour playing smaller houses and selling label-less music on both CDs and digital copies.

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