The article emphasizes the drastic change in business practices in the music industry in the late 90’s and focuses on a new business model of streamlined consolidation and capturing more market share. He paints a picture of an industry so intent on making a quick buck on a single that artists are left to flounder undeveloped – never finding their true sound, or voice.
While I definitely agree that the music industry’s focus has almost nothing to do with developing artists and making artists money (and some may speculate that it never did in the first place), I think Mr. Kot potentially overlooks another element of business completely ignored by the music industry – selling music.
Sure it seems utterly fundamental: use a collection of music to generate income by selling music at a fair price, use the music to drive people to concerts, and use the concerts to sell merchandise while using artist popularity to get the music licensed in media. But let’s take a look at what the gurus in the music industry did instead.
First, they continued to collect songs and sign artists throwing cash advances at them. So far, so…average. There’s nothing new about this, but it is one way to add to your catalog. Second, price CDs (as Mr. Kot mentions) into the stratosphere so no one buys them. Third, drive up ticket prices to concerts and merchandise at those concerts, eliminating any interest by anyone but the ‘true fans.’ And third, completely ignore the burgeoning internet.
Oops. The last time I checked CEOs were supposed to be good at business, yet we found the record labels almost ignoring the internet, and then with the advent of Napster, turning against it entirely! How utterly insane.
Now we get to the good part. The music industry at that time (and still today) is over run by lawyers (I’m sorry did I say CEO’s earlier? Probably should’ve said JD’s). Because the industry is run by lawyers instead of businessmen (and heaven forbid someone who can play an instrument), the focus becomes less on how to make money with music, but instead how to make money with lawsuits.
Then Steve Jobs creates iTunes.
Now the funny part about iTunes is that the labels signed on…which is kind of silly. You’d think the labels might’ve looked at Napster and said “hey, why don’t we create something like Napster where people could download our music with permission but pay for it!” But they sued Napster instead rather than seeking them out for ideas about how to use the service to benefit everyone (because I would argue that the chances that artists saw very much money from any label-led lawsuits are very, very slim). And Steve Jobs, instead, said “gee, that Napster is a pretty great idea, why not monetize it legally?”
So while Steve Jobs has started to cash in on intellectual property (which is kind of the point of the entirety of the music industry), the labels start to tank. Why? Because their business model completely and utterly shifted. They weren’t focused on selling music, they were focused on lawsuits. They are STILL focused on lawsuits. They completely have no idea how to exploit the benefits of today’s technologies…they only know how to sue people.
Let’s put it in a real world scenario. Imagine you have a friend who writes and performs songs. And that friend manages to make a YouTube video that generates a lot of hoopla and they get a modest 5,000 hits. Not so bad, right? Now imagine if your friend said “gee that’s a lot of people listening to my music…I’d better pull it down since they’re not paying me for it.” How much money has your friend generated from their popularity? Oops.
Suppose that friend instead said “cool, I should upload two more songs and put my Twitter address and MySpace page on there which mention where and when I play live.” How much greater is their potential to make money now?
So while the labels could and should definitely start focusing more on artist development, or heck, even signing artists that ALREADY developed (don’t get me started), they also need to turn around and exploit those artists properly – something they continue to fail to do year after year all the while wondering what on EARTH they’re going to do about this pesky internet and hungrily looking for the next big lawsuit.