The Recording Industry And Their Broken CD

Two of my favorite bloggers, TechCrunch's Michael Arrington and Drama 2.0, have recently added to the rich discussion about the future of music.

I love music, but have always been perplexed by the business of music and the role labels play. Are they even needed? Music labels are at a transformational crossroad, they will need to prove their relevance and justify their existence. We see success story (NIN) after success story (Pennywise) as musicians break away from their labels and directly connect with their fans. Instead of innovating, labels stubbornly cling to their antiquated model, the CD. As they decline, their bad attitudes show, all the while they ignore and infuriate their customers. The times, they are a-changing, one way or another.

I love Drama 2.0 because s/he takes a no nonsense stance on new technologies. S/he's extremely level-headed and doesn't get carried away by web 2.0 hype and kool aid drinkers. If your marketing campaign isn't increasing your ROI, then it's failing, Drama would argue. Drama helps me keep one foot on Earth at all times.

Drama in Brief

Drama's argument, regarding the future of music, is narrow and derives its strength from existing law. Drama argues how Intellectual Property Rights are violated by digital pirates, "when somebody downloads a song (or software product) without paying for it, it is a violation of the rights holder's intellectual property rights."

S/he continues to elaborate and states, "you do not have any right to decide that you can take that intellectual property because you do not like the pricing." From here Dram warns us about unintended consequences such as "ISP-level filtering."

As always, Drama's logic is incredibly difficult to challenge because a narrow, mostly legal, foundation is established. However, being on the side of the law doesn't always make you right (more on this later).

Arrington in Brief

Arrington's argument, on the other hand, is based on emotion. Arrington is a dreamer, as most innovators are. Arrington argues, "the fact that recorded music can be reproduced at a zero marginal cost is why music sales are declining." He establishes, "recorded music is nothing but marketing material to drive awareness of an artist." As he sees it, musicians should make their money playing music. Musicians who can't make enough through concerts should get a real job.

I prefer Arrington's argument because it represents change and reflects the customers' frustration. By disregarding the status quo (including the law), he can make a passionate argument for change. Neither one is 100% correct, but Arrington is surely winning the battle.

Looking Forward

I'll start my argument by addressing Drama's points. First of all, you are entirely correct with your stance. Stealing is illegal. Intellectual Property should be protected and there is value in recorded music. However, simply regurgitating existing laws down plays the enormous frustration customers and musicians have with music labels, especially the big ones. People aren't stealing music simply because they can, there is something much larger at play.

I feel no pity for record labels and I've enjoyed watching them fail. Instead of working with and listening to their customers, they sued them. Without us, the customers, music labels don't have a business.

Why would someone download an album for free? Because it's easy to do, for sure, but there is a larger angst to address. Concert ticket prices aren't going down, yet people continue to see the bands they love. The fans are supporting the artists, not the labels. There is a fundamental difference between the "Music Industry" and the "Recording Industry." There is clearly money to be made in the music industry.

R.I.P. The $20 CD

Have you walked into a music store lately? $19.99 for a Jay-Z album. $19.99, are you kidding me? Music labels created a product, the CD, that few people want now, yet they continue to push it. It's the same thing we see in the newspaper business, but they at least they have the brains to adapt and reevaluate their product. There are far too many people involved with albums these days that don't add to the music, but add to the price.

For example, Kingdom Come, the CD, lists at $19.99, while the MP3 download via Amazon is $9.49. What happened to the other $10.50? Is it spent on shipping, middlemen salaries, stocking and rent costs? The CD, the preferred product of music labels, is bloated. CDs are an inefficient and poor way to distribute music. Why would the labels continue to push them?

When governments or corporations don't listen to their customers/constituents they are in trouble. Prohibition didn't work; people continued to drink. Were they breaking the law? Sure, but who cared? The feds weren't listening, so these people continued to live their lives. Same thing with music, CDs are dead, but the labels haven't adapted. Instead, they tried to crush their customers are force them to use an antiquated system. Any pain they feel from illegal downloads, they truly deserve.

Musical Talent is a Requirement

Aside from the CD being a dead, bloated and inefficient way to distribute music, labels have been creating non-musicians for years. A non-musician is someone with little musical talent, but is pushed and supported by big labels. Britney Spears and Ashely Simpson are famous non-musicians. This, to no end, creates massive amounts of resentment. A great example is Ashely Simpson's lip sync mishap on SNL.

One reason why albums cost too much is because non-musicians are propped up by other people and these people don't come free. When Ashely Simpson performs live, she should only need her band and her voice. If you need pre-recorded tracks, to make up for your lack of talent, to perform live, then you aren't a musician, you're an actor or a "performer". Labels are dying because they push a dead product and promote people who aren't musicians. They slit their throats with one hand a blow out their brains with the other. As soon as one label starts down this path, others follow. In no time, "musicians" without musical talent are being produced. This is why does popular music sucks so much.

Unfortunately for Drama, being on the side of the law doesn't make you right. Real musicians play music because they love to and to make money. With the internet as a distribution and promotional tool, many more musicians can connect with their fans. Most musicians won't be mega-stars, but they will be able to earn a living. After all, you only need 1,000 true fans.

In general, I agree with Arrington's stance. Labels aren't needed and musicians who can't make money via concerts should get a new job. However, we have different opinions on music as a product. While he argues that music is nothing more than a marketing product, I still see selling music as a way to make money, but not at $20 a pop.

Enter the $5 Album

I think no album should be over $5, this might even be too much. I prefer the "pay what you want" model. (I did pay for In Rainbows.) Musicians can generate large sums of money at the $5 price point per album. Nine Inch Nails generated $1.6m in their first week of selling Ghosts at $5. This is a 36 song album, so albums can clearly be recored, produced and sold at $5 for a profit. If you can't pull this off, you are wasting money somewhere. With a "pay what you want" or $5 model, musicians can still make money by selling directly to their fans.

Revenue generators for musicians are concerts, merchandise and albums, but the percentage of each will shift; concerts will generate the most money. Their cut of album sales (at $5) + concerts + merchandise = a musician's income. It's that simple.

New Model Bands

Music is a marketing tool for the concert. Pennywise recently released a free album on MySpace, I downloaded it and now I'm a Pennywise fan. If they come to NYC, I'll probably go see them. By distributing their album for free, they increased the chance of attracting real fans. Real fans are the core to any musicians' income.

In fact, now that some bands have adopted the new music model, I, as a fan, am doing crazy things. I'm promoting their work and writing about them. I'm also spending stupid amounts of money on concerts. I just bought two Radiohead tickets for $114 each, without batting an eye. As you can see, bands need to attract fans like me. Musicians attract fans through their music, not by labels forcing them down our throats. As a professional musician, if you can't attract fans, you aren't viable and should get a new job.

In closing, we are at a point where some bands have adopted the new music model, while others, including the labels, have not. It is clear to see who is winning. If you're a music label you need to read the writing on the wall, pay attention and change your strategy. Stop hiding behind laws and rules. If you don't listen to your customers, you are in for some pain. Music will live on with or with out the labels.