Thanks for checking out my inaugural post on RockMyWorld. I also want to thank RMW for giving me a chance to throw in my two cents about the current state of the music industry and its place in the world of entertainment.
First, a little background – I’ve been working in music for the past twenty-three years, primarily handling licensing for a major music publisher with a very famous catalog – you definitely know the top ten songs they own. I also wrote for, produced, performed in and managed independent music projects and artists for roughly fifteen years back in the nineties and early aughts – and no, none of them made it anywhere, so I won’t be talking about that very much, unless I need to give an example of what not to do. I also currently do music supervision and rights clearance for indie films, and I produce independent film projects of my own. No, I don’t sleep much.
What I will mainly do in these posts is talk about my experiences in the music business – from negotiating big money deals with huge media companies to trying to figure out how to make a buck – literally – from internet distribution and exploitations of music. One thing is for sure – the only thing certain about this industry is just how uncertain it is.
And now, the rant du jour, which I’m calling…
Pizza and Beer Money
OK, so let me give you my take on where we are today in the music business:
At its peak in 2000, the music industry earned roughly $14.25B in revenue from all sources (sales, licensing, performance, and other distribution/exploitations of music), according to the Record Industry Association of America. By 2012, that amount had dropped to roughly $6.5B, down 55%. It could be argued that no other industry in history has seen such a dramatic loss in revenue in such a short period of time – not the horse carriage makers with the automobile, not the train and bus industries with commercial air travel, not the sailing ship makers with the advent of steam.
The main culprit, of course, was and still is piracy. Record sales – the bread and butter of the industry, which accounted for nearly 90% of revenues in 2000 – collapsed during that same twelve year period, dropping from roughly $13.25B in 2000 to roughly $2.5B in 2012, a loss of 80%. Yeah, that’s right. Eighty. Percent. Still thinking of buying that second guitar now? [x_pullquote cite=”Eye Cues” type=”left”]”I have said for many years that artists must treat their band or solo career like a small business and their music as their product”[/x_pullquote]The music industry – which had relied on record sales for the bulk of its income since the early 1900’s (hell, a license to include a song on a record is still called a “mechanical license,” named after the rolls that were used in player pianos) – has still not found any new revenue streams that even come close to replacing those losses. The main platform for music consumption now is, of course, the internet, but the industry continues to struggle to make anything more than “pizza and beer” money in that space, particularly from the Pandoras and Spotifys of the world. Now, with more and more media – particularly TV, film and advertising – being viewed under a user-controlled, “on-demand” model, every corner of the entertainment and advertising industries is now struggling to play catch-up and adapt.
That said, on the music side, at least, there is still some money out there to be made – if you’re an investor with a few billion to spend, at least. Buying publishing and master recording rights, in particular, has recently become a very attractive investment in recent years. In 2012, EMI’s recordings and publishing assets were sold to Universal Music Group and Sony/ATV, respectively, for $4.1B, with GSO Blackstone’s Capital Partners part of the group that purchased the publishing. In 2009, a Dutch pension fund purchased the publishing rights to the Rodgers & Hammerstein catalog. Several other hedge fund-supported, “independent” music publishers have started springing up recently – notably Imagem and Round Hill Music – purchasing existing catalogs and breaking new artists on a regular basis.
There has also been an upsurge in money coming in through crowd-funding platforms and other sources, enabling independent artists and writers to finance their recordings, merch and music distribution, and touring.
Even so, these numbers are nothing compared to the way it used to be. The truth is, once music can be consumed for “free” – or, at least, way cheap – online, the value of it is going to drop, plain and simple. Now that nearly any TV show or movie can be watched for $7.99 a month, or you can hit “skip” on an online ad five seconds in, their value is going to drop, too. And lowering the value of content means that the budgets to produce it and license music for it are going to fall as well. Domino’s, anyone?
What’s funny to me is that when it was just the music industry getting its ass handed to it back in the early 2000’s, we didn’t hear a peep from Hollywood or Madison Ave. in support. After all, in those days, “sharing” a 3MB MP3 file was about the limit most people’s internet connections could handle, so movies were pretty well safe from piracy. On the other hand, nowadays you can upload hundreds of gigs of data in no time, which makes movies and other video content “sharable,” too, which these multi-billion dollar media companies and brands will not hesitate to mention when they’re trying to license music for pennies on the dollar.
Of course, some genres of music – like country and gospel – will always make money, and “evergreens” like “White Christmas” and classic rock and R&B songs still have no trouble paying out. But new bands and artists are facing a daunting task to have their music heard, let alone earn a living from it. I have said for many years that artists must treat their band or solo career like a small business and their music as their product. Frankly, anyone going to Berkeley or any other music school should have only two classes their first two years – performance and business.
After all, it’s supposed to be a music career, isn’t it?