The Music Industry: An Optimistic View

(This is a re-posted, May 2003, article that I wrote. If I may say so, notice how correct I was.)

There has been a lot written about the gloom and doom of the music industry over the past few years, with some of the most scathing views coming from The San Francisco Examiner, the week of May 5th, 2003. But, I see some serious daylight on the horizon. It, although, is complicated, and will take a few years for the full sun to rise.

In the May, 2003, issue of Fortune Magazine (Steve Jobs and Sheryl Crow on the cover) there is a great article about the iPod and the music service that works with it. Though this is clearly an opportunity for Apple to help change the fortunes of the company, this will have serious, positive, implications for the music business on a global scale. As sighted in the article, having the ability to buy one tune at a time for $0.99 makes for the easy sales of only the tunes that one wants. Also, an artist can have EP style releases of their "best" stuff, opposed to writing fillers for the sake of disc space. It is possible that an artist can have many releases in a single year, each with 3 or 4 tunes or more.

But aside from these end-user based advantages there is the advantage to the major record companies. With the advent of advanced versions of Pro Tools, as well as the inevitable competitors that will bring high level recording software to the market, production costs for albums are, and will continue, plummeting. The collateral damage, of course, is the commercial recording studio, and the inevitable end to the retail record store, but this will not effect "record companies". If the entire record industry adapts the technology initiated by Steve Jobs and the iPod for all platforms on a world scale, record companies will quickly enjoy a period of prosperity not seen in music industry history.

First: Production costs for artists will be virtually (no pun intended) eliminated, especially where established artists are concerned.

Second: With legal and completely solidified online distribution systems, record companies will have the ability to eliminate almost all "physical" distribution systems. This has caused supply-chain management nightmares from the beginning of the industry to this very day.

Third: Private high bandwidth servers can be used to get promotional cuts to radio stations for airplay. No more cash load on promotional copies, and their distribution expense.

Fourth: The revenues will go up for the majors because more people will buy music. People will also re-buy older favorites as well, or buy those single hits that they never owned. I have never owned "Spirit In The Sky", but man, I love that song! With iPod, I can buy that one tune, for the first time, "now".

Fifth: Record majors will start to re-invest in the development of acts again. Also, they will have the technology of the internet available to review geographic download information, which can make promotions and touring far more effective in the support of releases.

But it is not all that sunny and blue sky.

First, the "entire" industry has to adapt inter-compatible versions of this simple to use system. This will take time. With the current mentality of record companies this could take at least 18 months to solidify. Also, the general public has to sign on, big-time. This will take a huge promotional joint effort on the part of the internet distributors "and" the record companies. It is still to be proven that they can really work together, especially when it gets down to standards on intellectual property between the industries. Also, I expect some serious concern on the part of the current record company establishment, in that it is easier to learn the record business than it is to learn the internet business. And believe me when I say, the internet business has deeper pockets. Imagine getting signed to "Google". Need I say more??

Yes, the major record company will be back on top, if these agreements, alignments, and cooperations occur. The large record groups stand to make many tens of billions of dollars annually on server based music distribution around the globe. But say good-bye to "community". The community I knew, which died a slow death up to 1998. For me, I can deal with that because I lived it. And I feel sad for those who missed it, just as I missed the summer of '68. The parties at studios where we got smashed and talked about the music, and the jam sessions that bands had during record production. Gone.

Yes, there are a-few changes a-coming, and they will be bigger than anything we have ever seen to date in the music industry. But that's not all. The movie industry is next, and that will be "much" more interesting. This is because unlike the music industry power, the movie industry has the brains "and" the money to fight against the internet companies for control of distribution "and" content. But that battle will not start for at least another three years, almost exactly after the solidification of the "new" internet music industry, what ever that will be ..