Bail-out of a Slow Dying Music Industry

“In Mozart’s time, word of mouth built an audience. People found him and heard him play. Then someone came along and said, ‘We can sell this experience.’ Right there, you’ve got trouble. Music comes from the spirit, but where does the guy selling the music come from?” – Prince This is a common attitude reflected across musicians all over the world today. Across genres, it is now increasingly being felt that artists are not being paid well enough for their work; while the consumer on the other hand is paying high prices.

It is also common knowledge that this major chunk is taken by the industry, which in reality is only an allied industry for the musicians, but currently has become bigger than the musicians themselves. There is also a sense of monopoly each label tends to create because of the nature of music. For example, if Universal promotes a certain band, the consumer is forced to purchase records of this band at whatever exorbitant price. This is because his music and taste is particular to certain groups and styles, and no suitable substitute can be found in different labels for competition to exist; as no two bands are the same. Each label thus launches a unique product in the market, priced at the highest it thinks people will be willing to pay.

It is important to now identify this industry. The larger music industry includes the musicians, but the industry referred to here signifies the production houses, labels, distributors, stores, besides about a quarter million people employed as managers and lawyers and largely associated to this industry. The origins of this industry can be dated back to mid-20th century when recorded music was first distributed as records, from the earlier sheet music, with which came up other allied industries for distribution and promotion. These together led to the creation of the larger industry which now dominates each aspect of the music available to us today. Music, the art, seems to have been lost in an assembly-line manufacturing process. At present, these major labels decide ‘what’ we should hear and like, and exactly ‘how’ we are to receive it. This is done through aggressive marketing and advertising strategies which tend to have a brainwashing effect on the consumer. Like any other consumer product, through the mechanisms of persuasion we are made to believe that a certain singer or band is good and that we should buy their record.

Post-2000, however, the industry has been facing a slow death. This decadence has been largely attributed to the growth of the internet. The internet has made available an extensive media library all cross the world through its widespread popularity. This immense network of networks ensures that any file possessed by any computer online can be made available to anyone else online in any part of the world. This has effectively meant the bypassing of all the ‘middle-men’ between the musician and his audience, as now the music is available to the consumer much more directly. The consumer need not anymore buy a CD/cassette for an exorbitant price, only about 5-10 per cent of which would go to the artist as royalties. He may simply download his music off the internet. One of the many advantages of this system being that the consumer is not forced to pay an exorbitant amount for a whole album, when he just wants one song. Also, much audio may not be readily available at stores, which this kind of a file-sharing system makes readily available. Concerns of piracy and copyright-infringement have been there since the start, but it has been stated many times over that the benefits of this type of a system are far more. Moreover, older revenue structures can be worked out and modified to suit the present. Revenue models need to acknowledge the internet as an ally rather than a foe.

One of the earliest battles fought on this terrain was between Napster and Metallica, a popular band of the 90s. Shawn Fanning, a student then and the founder of Napster, had come up with a revolutionary file-sharing software, which gave everyone access to all the music ever recorded. As the popularity soared, few bands soon found their previously unreleased work available online. This prompted many bands, along with their labels to sue Napster for copyright-infringement. The Napster case gave rise to a series of regulation on Digital Rights Management (DRM), primarily concerning distribution of copyrighted material online. These laws and the others which followed were, however, unable to stem the revolution which was to follow. Advents in digital technology and the growing penetration of broadband internet led to many more such file-sharing softwares, which now provide far better speed and content. In purely economic terms, the internet has led to the creation of a new market for music, in ways by adding additional demand, leading to a right-ward shift of the curve. This is because, music is now available to those who did not have access to, or cannot simply afford CDs. While the net CD sales have been dropping, consumption of music is growing at a phenomenal pace; largely attributed to free sharing over the net. Figures for internet-sharing are hard to ascertain simply because of the nature and extent of the internet. For an industry going downhill, this is obviously of concern.

It has now been understood that the current scheme of things is not working. File-sharing through the internet is simply impossible to stop and the battle too expensive to fight. Basic economics of this new industry underline unenforceable property rights, because you just can’t sue everyone and a zero marginal cost of production, because file sharing is just too easy. Many alternative revenue models have since been suggested by musicians and labels, some of which are now being explored. These range from an audacious move by a crippled industry to tax the internet, to revenue generation through online advertisements. The former refers to attempts on levying a music tax on internet and mobile phone connections in Canada and the European Union. This has been immensely criticised. It is argued that the guaranteed revenue from such a structure would threaten to kill innovation in music. The other more plausible model is using online advertising as a major source of revenue. Bands can release their music online for free download, and get paid as people visit the site and view the ad. This effectively cuts out the rest of the industry, letting the artists pocket the whole money and share a more direct interaction with the consumers. Bands like Radiohead and Nine-Inch Nails have both experimented with such online album launches and have succeeded to some extent. Some say that recorded music should now be distributed freely in order to gain popularity and an audience for the live shows. These live shows can then be major sources of revenue generation.

There is also a fairly new opinion that the copyright law should be removed altogether. This would remove the monopolistic tendencies of the industry and let the artist find markets globally through the internet. It has also been seen that the DRM-based websites, like the Apple iTunes Store, are not working as well anymore. Thus the industry, which is on its last legs, desperately needs to review its working and find solutions. If it is to survive in the war against piracy, it must embrace the challenges of the time and work out a revenue platform focussed on free online distribution, while gathering revenue from advertisements. Music will always be created and distributed, whether the industry exists or not.

Roudra Bhattacharya
[Image source:]