The new music world

If you're sensing a bit of a theme here today, there's a reason for that—the majority of my backlog of posts consisted of updates to previous topics that I hadn't revisited in a while. In this post, I'm going to write an update on the ever-changing music industry, to discuss some recent developments. From the New York Times,

A decade after Apple revolutionized the music world with its iTunes store, the music industry is undergoing another, even more radical, digital transformation as listeners begin to move from CDs and downloads to streaming services like Spotify, Pandora and YouTube. 

As purveyors of legally licensed music, they have been largely welcomed by an industry still buffeted by piracy. But as the companies behind these digital services swell into multibillion-dollar enterprises, the relative trickle of money that has made its way to artists is causing anxiety at every level of the business. 

Late last year, Zoe Keating, an independent musician from Northern California, provided an unusually detailed case in point. In voluminous spreadsheets posted to her Tumblr blog, she revealed the royalties she gets from various services, down to the ten-thousandth of a cent. 

Even for an under-the-radar artist like Ms. Keating, who describes her style as “avant cello,” the numbers painted a stark picture of what it is like to be a working musician these days. After her songs had been played more than 1.5 million times on Pandora over six months, she earned $1,652.74. On Spotify, 131,000 plays last year netted just $547.71, or an average of 0.42 cent a play.

In general, it's a little bit hard to know whether to consider this a good thing or a bad thing, for the artists or the consumers. What's certainly clear is that we're moving toward a model where recorded music is little more than an advertisement for the artists, who will make the majority (if not all) of their money from live performances and touring.

Realistically, this is how the music industry has always effectively worked, with a select few exceptions. Recall this graphic, from my previous blog post about the Dave Matthews Band, which has likely set the model for the future of the music industry:

I certainly sympathize with those artists who are unable to make enough from live performances to support themselves, but I also find it unlikely that those artists would realistically be able to sell enough physical music to support themselves, either, under any economic arrangement or business model.

I generally assume that consumers of music have only a set amount of disposable income available to spend on their music, and that performers should generally want them to spend as much of that money as possible on the thing that nets them the greatest share of the money—that thing, always, has been live performances, and therefore the less money spent by consumers on physical music, the better. Maybe that's the wrong assumption to make, and consumers really will destroy the music industry with their choices, but I have serious trouble decrying the decline of the record label model. It was never a good deal for the artists, regardless of what some of them may think.

[New York Times]
(h/t Marginal Revolution)

Song of the Week(end)

Time to send you all off into the weekend with some tunes. I know I've been neglecting this feature lately, but I'm back in action today, and I intend to keep it going in future weeks.

So, let's get to it. Like most people who grew up in yuppie little suburbs in the '90s, I own about a dozen Dave Matthews Band albums of one type or another, and I've memorized a bunch of their songs. Now that I live down in the town where the band got its start (and still has a significant presence), their songs are even harder to avoid--not that there's anything wrong with that. I've even written about them here once before.

Anyway, DMB has a(nother) new album coming out this year, and they've already released a couple of singles. One of those is "Mercy", which is this week's Song of the Week(end). Is it the best Dave song ever? No, of course not--these guys lost their songwriting fastball back in about '98, but that's not the point. (This is the best DMB song, of course. This is #2. This is #3. You're welcome). They're still fun to listen to, and this song is as listenable as any DMB track. So enjoy it, and enjoy your weekend.

Dave Matthews Band and the changing face of music

Since the advent of Napster in 1999, the record industry has experienced a slow, steady, somewhat agonizing decline. The contraction of more than 25% in total sales since the industry peak--which, not coincidentally, also came in 1999--has led many to predict the death of the music industry, while also spelling doom for the thousands of recording and performing artists throughout the country.

Artists and record labels alike have struggled to determine how best to use the digital format to their benefit--masterful use of YouTube by artists like Soulja Boy and Justin Bieber has contrasted with the strange self-defeating stubbornness displayed by Metallica and The Beatles/Apple Corps, among others.

Some artists, however, have understood the new paradigm, adjusted, and profited handsomely by recognizing the brand-building power that the internet provides--artists like the Dave Matthews Band (who got their start in my current home of Charlottesville, VA, and still have a significant presence here... emphasis mine):

As usual, the list of North America's top-grossing music tours of 2010 was heavy on AARP-eligible best-selling rockers: Bon Jovi, Roger Waters of Pink Floyd, the Eagles, and Paul McCartney all figured in the top 10. But tucked among them, taking in $72.9 million, was the Dave Matthews Band, the '90s-era jam-loving college-town rockers known affectionately as DMB (and less affectionately as "the Dave Matthews Bland")...

Analysts and executives have long lamented that the music industry is dying. That is not quite true—it is the record business that is clearly done for, and in its place, touring stands as the top moneymaker for many industry participants. DMB lives to tour, making them not just popular, but very, very profitable.

When I say DMB lives to tour, I do not jest: Every summer for the past two decades, the band has hit the road. In 2010, that meant playing 62 shows in 50 cities to 1,270,477 fans—more than any other artist touring in North America. The group also took trips to Europe and South America, and there was a Dave Matthews and guitarist Tim Reynolds mini-tour. And the year was hardly unusual. Since 1992, Dave Matthews Band in its various iterations has played a whopping 1,692 shows.

So the precipitous decline in record sales in the past decade has hardly hurt DMB's profitability: The band makes the bulk of its money touring anyway. And it makes a lot of money doing it. According to Billboard Boxscore, between 2000 and 2009, DMB sold more tickets to its shows than any other band on the planet, moving a staggering 11,230,696 tickets. (No other band sold more than 10 million tickets in the same time period.) In the aughts, DMB grossed more than $500 million from touring alone.

On top of that, of course, there are profits from merchandise, records, and other revenue streams. As long ago as 1998, DMB reportedly pulled in $200,000 a day in merchandise sales on tour. Plus, DMB has a reported 80,000 fans paying $35 a year for fan-club membership. And it benefits from a large catalog of cheap-to-produce live-show discs and DVDs. "Without any marketing or promotion, Live at Red Rocks debuted at No. 3 on the Billboard 200 chart and was instantly certified platinum," the band itself boasts of a 1998 album.

For decades, artists relied on their record labels to produce and distribute their albums, as well as to negotiate with the radio stations to gain them exposure. Now, it is becoming increasingly clear that the middle-man is no longer necessary--and further, that the role of produced music is less as money-maker and more as advertising and brand-builder for the artist or band.

The real money in the entertainment business--for the artists, anyway, forget about the labels--is and always has been in touring. There is both anecdotal and concrete evidence that demonstrates how many artists have never made a dime from album sales, no matter how many records they sell.

With this as the case, I would argue that the artists are better off self-producing their music and giving it away for free on the internet, in order to promote and support their aggressive touring schedule. Their fans only have so much money to spend on entertainment, after all, and it's much better for the artists if they spend that money on concerts, live-show recordings, and merchandise, rather than a studio-produced album where the artists' margins are terrible.

And, essentially, that's exactly what DMB has done. If you go to their website, you can instantly listen to any song on any album that the band has ever released (and there's a lot of them). DMB has always been a master at creating a connection with its fans, and the internet has made this connection easier than ever for the savvy artist to create and cultivate.

Without the record labels, the music industry will undoubtedly be a very different place. But it doesn't necessarily have to be a worse place, and content does not need to suffer. Bands can still be enormously profitable by touring (and touring the right way), and the barriers to entry have never been lower, as Justin Bieber and Soulja Boy have demonstrated (not to mention Susan Boyle).

I'm often talking about creative destruction here (and why bad businesses must be allowed to fail), and I think the decline of the record industry is another important example of that same dynamic. The music industry isn't dying, it's just changing--the smartest artists still know how to make money by the bucketful.

[Slate]