This CD Doesn’t Sell

The rack of plastic in HMV may be getting dusty as downloads become the norm. The effects on the music industry are far from subtle, but change always inspires innovation. Welcome to the new industry standard.

According to Will Page, the senior economist at PRS (the Performing Rights Society for musicians and songwriters), live music was worth more than recorded music in 2008.  According to figures he published at the International Live Music Conference in London in March 2009, live music is worth £904 million, while recorded music and other auxiliary revenue streams deriving from it, such as streaming rates and mp3 downloads, are worth £894 million. So, in layman’s terms, what exactly does this mean? To an ordinary punter, very little. For years, recorded music sales have dropped while live venues have burgeoned. For example, there are dozens more festivals proliferating across the country now, compared to a decade ago. In the mid 1990s, a handful of large festivals dotted the country, filling every other weekend. Now, there is a festival or two happening every weekend, so much so that the model is suffocating itself, with smaller festivals being cannibalised by larger ones.

If ticket sales trumped album sales last year, it can be hypothesized that performing live is more important, at least for the pocketbook, than releasing an album. And this hypothesis, be it fealty or equivocation, significantly changes not only how the industry treats music, but also how the consumer is presented with opportunities to gobble it up.  Record labels do not receive a cut from live music sales. Those sales are intrinsically separated from contracts, as bands negotiate their live spectrum aside from the record contract.  In addition, most of the CDs sold at gigs, a band’s best source of income, are sold back to the band at cost by the record label (after the label pays to manufacture the record), so the revenue belongs to the band, not the label. Historically, a record label’s sole moneymaker is over-the-counter (or online) sales of physical or digital content, be it bundled in plastic or on iTunes. As less consumers purchase recorded music, opting instead to download it for free and go see the band live, the label loses out entirely on making profit. This, in theory, makes the label redundant, because its service is no longer marketable to a point where it can be profitable.

So, the industry is changing. First off, a new deal has emerged, one referred to as a 360 degree deal, where the label enters as a managing partner for the entire project, and therefore receives a cut of every single revenue stream, including the aforementioned avenues it did not have access to beforehand. This has been spearheaded by concert promoting giant Live Nation, who signed on the dotted line with Madonna last year. The deal, worth over £50 million, sees Live Nation receive a cut in literally everything Madonna does, from promoting gigs to releasing remixes, t-shirts and other paraphernalia. Yet, Live Nation is a behemoth in the industry, and smaller labels are having trouble facilitating 360 degree deals with their artists, for a variety of reasons.  It can be creatively damaging, both for the artist and label. Being told what to do, even if you agree, spreads ominous relationships. As such, artists have become increasingly protective of their copyright, so that they reap the rewards of their success more than the label.

Another change afoot is that divisions existing within the industry for decades are gradually being torn down. It is common for a management agency to employ a booking agent, or have a publishing arm. Labels, forced with finding new ways to do business, have branched out into syncs and licensing (i.e. getting your music on TV and advertising), branding, publishing and even digital aggregation. The more routes one can explore, the more all those pooled together can equate to what once was achieved by putting pieces of plastic on racks at HMV. Moreover, the fan is being given the power to do the work as well, remixing music or designing artwork, which when done creatively gives the label, essentially, good work for free. Furthermore, labels are partnering with live promotion agencies, in an attempt to reposition their brand with their consumer.  That’s why Bella Union Records, FatCat or even XL are popular names; they promote their label aside from their artists.

But if live music is where profit resides, will the industry ever reach an equilibrium where all those left out ever regain their profitability? Well, no, but in trying to even the plot more options will be available to the consumer. What has happened is festivals will burgeon with more inventiveness, including better package tours and live showcases. Labels will bundle more artists together to save money, while artists and their representatives will seek more solidified relationships with promoters, so tours can be booked as easily as one headlining date in London. Venues will also offer more creative booking opportunities, to entice more promoters to fill empty nights and bands will be forced to think further outside the box, finding new ways to brand, market and proliferate their craft.  British Sea Power, for example, did a UK tour of the island’s highest (in altitude) pubs, while indie darlings, Flamboyant Bella, strapped Frisbees onto their CDs and sold them at concerts staged entirely at seaside towns. This is the new music industry.

And, consequently, live music will continue to soar past recorded music sales. Labels will survive, some of them at least, but instead of selling music they sell dedication to their brand, much like one sells soda or high street coffee. And bands, booking agents, venues, festivals and other live industries, they are the victors right now, even if victory in this case often only means survival.

So, creativity and ingenuity will always trump tradition, as those looking outside of the box for a new revenue stream will float, while those stuck within the rushing waters of the age-old music system will flounder beneath.  Record labels need to adapt, insomuch that what they are selling is a brand more often than not, rather than a simple record.  A CD, given how much money it costs to make and how little return is often promised, is no more than an expensive business card at times, as it often engenders more financial security with the doors it opens, rather than the numbers it sells.  And some record labels are realizing this.  Something in Construction Records, a small, London-based independent, has foregone traditional release dates, preferring to make the music available without technically releasing it, in hopes that the acclaim and sales growth over time will give it a proper release to set an actual release date. Other labels, such as Oxford’s Big Scary Monsters, are giving away EPs online with the purchase of a vinyl.  It’s being done and things are changing, as necessity is dictating the game, not the record label.

Shain Shapiro