The Music Industry in the Digital Age
Posted by PandasMama on Sunday, April 20, 2014
David Archuleta has returned after 2 years away from the music industry. I know all of the fandom is excited to see what’s next for David, but many are worried at the same time. Will David return to the music career he was working on prior to leaving? Will he be able to return to the same level of success he had obtained? Will he sign with another major label? Will he release a new CD? If so, how soon? There are a lot of questions to be answered and from what I have recently learned, David has a lot of new ideas to consider, because there are a lot of changes about to hit the music industry.
Last month I completed an online course from Berklee College of Music covering the history of the music industry and where it is headed in the future. The course was taught by the very knowledgeable John Kellogg, Assistant Chair of the Music Business/Management Department at BCM. In addition to his position at Berklee, Mr. Kellogg is an entertainment attorney and has authored several books about the music industry. This class was very enlightening as to what is involved in becoming a successful recording artist and dealing with the, for a better word, insanity known as the music industry.
The music industry has always been known for its entrepreneurship, innovation, and technology, but along with these characteristics has come a roller coaster of concerns that the next great technological innovation will cause its demise. This fear dates back as far as sheet music when piano rolls and later records were introduced. Later with advent of radio, publishers once again thought no one would buy their records if they could hear it for free. But radio actually saved the music industry during WWII, when records could not be produced, by having live transmissions of programs and performances. Radio was concerned when television came about. Each time something new has been introduced, the industry feared it would be no more, but each time it has recovered and found new ways to thrive.
In the 1990’s people replaced their vinyl and cassette collections with CDs. This was a major boon for the industry. Artists re-released all of their older music previously on vinyl and cassette tapes on the new “indestructible” CD’s. By the end of the 1990’s, MP3’s started to take over the market. With this technology, people no longer needed expensive and bulky players to enjoy their music. iPods could easily fit anywhere and held hours of consumer’s favorite tunes. Today we are in the middle of a shift from the physical world of CDs and DVDs to another digital world beyond MP3s, the world of steaming services. In this new realm, audio and video recording will still be important to the music industry, but these recordings will just be delivered in new ways. Mr. Kellogg and other industry leaders believe that as soon as 2017 the record business will enter a new era where super WiFi will be readily available and people will no longer need a computer hard drive or CDs for music storage. Everything will be available in “the cloud” using subscription services like Pandora and Spotify. If you’re not yet familiar with “the cloud”, you might want to do a little Google search and learn what it is all about. It is taking over everything very soon. The internet has a new way to service the world, and it is awesome.
With this new super-duper internet, the need for a huge amount of monetary backing to produce quality music recordings will end. Soon, all the artist will need to record music and release it to the public will be a laptop with the proper software, a service provider to post the music, and the internet. Artists will be able to produce their own music, possibly at their homes or small studios, and deliver it to their fans without the need of the major record labels.
In the past, signing with a record label was necessary to get your music out to the world. There were many choices depending on the genre of music the artist performed. Today, 3 large conglomerates and their subsidiaries own the majority of all record labels: Sony Music Entertainment, Japan; Universal Music Group, France; and Warner Music Group, Leonard Blavatnik, Russia. These three companies distribute 85% to 90% of all records sold today. But these big money labels aren’t raking in the dough like they used to. The public is now more likely to purchase singles from a digital source like iTunes or Amazon then purchase an actual hard copy CD. The labels have lost revenue and outlets for purchasing actual CD’s have all but vanished. The record companies are looking for new ways to survive this technological change. That is why you see major acts suddenly being sponsored on their tours by huge companies such as Target, Coke, Pepsi, Nike, LiveNation, and iHeartRadio which is owned by Clear Channel, the largest radio broadcasting company.
While the big acts are out working to keep themselves and the big 3 in business, lesser known artists are getting tired of working to produce a product that they are barely compensated for. Recording contracts with these labels are very complex things, involving insane percentages of asset values, royalties and advances. Most artists signed to major labels make less than $1 per CD sold at full price, and this is only after the label takes out the advance money for producing the CD in the first place. Many times an artist doesn’t even break even on a first CD and the advance money recovery is carried over to the next CD they put out. That is why labels sign artists to multiple CD deals, hoping that they will make money off of the artist in the long run. Smaller, independent labels have better deals for artists, sometimes even splitting the royalties 50/50. But now, new artists are discovering they don’t have to play with the big guys to actually have a career in music.
With technological advancements, many artists are starting to create their own record labels. This way they are assured of making more money off of their projects. All of the money that previously went into the hands of the records executives, can now go back to the artist and their team. It’s like a DIY (Do It Yourself) project, except John Kellogg calls it DIO (Do It Ourselves) because he still believes the artist will need a team to make the project (the artist’s career) work. The artist cannot do it all themselves. They will need the lawyer for proper contracts (even contracts with themselves). They will need agents to help with bookings, promotions, social media, etc. It will be a team effort, but the artist will benefit greatly in the long run, as long as they cover all of their bases.
Let’s take a step back to the idea of the distribution of music to the public through “the cloud.” This technology will be very important because it will be the way artists promote themselves. It might not seem logical for an artist to put their music out on the internet for free or almost free, but without the big money of record labels backing them, artists will need a way to reach new audiences. Internet streaming of music will be necessary to lead new fans to an artist and their music. With the demise of the CD album, many artists will be releasing singles and social media will be very necessary for the promotion of the artists. Most that succeed will make money touring, not recording, unless they own all the rights to the music they produce and the music is used in other formats like movies, television, and subscription services, all of which the artist will receive royalties for. Several artists have already become very popular with the younger audiences just by using YouTube. Once the artist has a following they can tour and make money. Royalties for writing music and having it played on the streaming services and the radio will help the artist financially, but the majority of income will come from live performances and they will need to have a dynamic, engaging live performance to keep their fans happy and wanting more.
Another way artists will be reaching their fans is through live streamed performances. I know many of David’s fans have taken part in at least one of the poor quality cell phone “concerts” over the past few years. Actually, most of us probably heard David announce his decision to go on a full-time mission while watching his Christmas concert from Salt Lake City broadcast over Ustream from someone’s cell phone. Well, those types of concerts have suddenly grown up and are now being used by artists to reach their fans through streaming services like ConcertWindow and StageIt, where the audience pays to watch an actual high quality performance over the internet. For a nominal fee, you can see your favorite artist, or maybe one you are just interested in checking out for the first time, without having to travel many miles from your home or pay the exorbitant ticket prices asked these days. Just last month I watched concerts by Imagine Dragons, Keith Urban, and Willie Nelson performed live at a venue right here in Austin, TX, and broadcast at no cost by iTunes as part of their promotion of acts during the SXSW Music Festival. Five evenings of performances were broadcast around the world for free. With the advances in streaming technology, anyone will soon be able to watch their favorite artist perform live without ever leaving the comfort of home. Pay-for-view streamed concerts will soon be the norm for many artists.
Streaming services, DYI recording labels, social media, Cloud technology, and the demise of the CD and major record companies; these are just some of the new changes coming to the music industry in the next few years. Artists must get on the bandwagon with all of the technology or they will be left behind. I guess the same applies to the music fans of the world, too. We don’t want to be left behind, clinging to old technology that probably won’t work 5 to 10 years down the road.
So now that I have bombarded you with information, just think how David must feel at this very moment. Returning from two years in a much more technologically challenged culture and having to dive in head first into the insanity of the music industry. It has to be overwhelming. He has to take his time and decide what will and won’t work for him and his career. He has to learn and plan and pray and listen to his heart before he can dive back in with both feet, if he wants to succeed in the digital age of music.
PandasMama is a guest writer for The Voice and maintains her own blog, Cacophony vs Harmony.