File sharing really to blame for record industry decline?
January 29, 2008 1:12 PM   Subscribe

Looking for data on alternative causes for the mainstream music industry's declining fortunes.

This post got me thinking about how music industry representatives pretty much take it as gospel that all their financial woes are caused by file sharing.

Over the past decade I've seen a lot of arguments made about other issues - fewer releases, greater competition for the entertainment dollar, arguments that the declines in sales are exaggerated, arguments that file sharing actually increases sales.

I'm looking for help putting together a comprehensive list of these arguments. Citations and especially any research with numbers (i.e. I vaguely remember an article where a study was done that argued increased record sales when file sharing was up but can't remember another thing about it) and advice on general places to look for more data and articles about this topic are appreciated.
posted by nanojath to Media & Arts (20 answers total) 7 users marked this as a favorite
No data or citations, but I think it's undeniable that people are into a much broader range of artists & genres these days, specifically because they've become more accessible over the net.

There was a time when finding new artists to get into involved picking up some fanzine that somebody in Manchester or whatever turned out on a photocopier, then ordering the music in at your local indie-import record store. And I'm not exactly talking obscure stuff here; think artists as big as Gary Numan or Can.

Nowadays, if you flick through anybody's ipod, up to 80% of the artists you've never even heard of, probably also because the barriers to recording are so much lower these days, what with computerisation & all.

Anyway, that's just a hint for possible data - greater numbers of artists, spreading the entertainment dollar thinner. If you could find any figures on how many recording artists there are out there today, and how that number has increased over time, that could explain a shift away from monolothic companies with big-ticket dinosaur bands towards something more egalitarian.
posted by UbuRoivas at 1:20 PM on January 29, 2008

Continuing with UboRolves' comment I would highly recommend The Long Tail which discusses this very issue in some detail. The basic crux of the argument is that while it is unprofitable for brick and mortar businesses to cater to niche tastes, online businesses and sites need to sell far fewer copies of a CD or song to make carrying it profitable. He also talks about how even though very few copies of items that are not in the the top 100000 songs/CDs/books every single one of them gets sold at least once and altogether make up about a quarter of such online businesses' revenue.
Apart from all this artists are able to promote their albums and songs much more effectively and easily online. The record labels are no longer able to completely control which artists become popular. This has led to a splintering of tastes with people becoming more and more specialized in their tastes.
posted by peacheater at 1:39 PM on January 29, 2008

That should He also talks about how even though very copies of items that are not in the top 100000 songs/CDs/books *are sold*...
posted by peacheater at 1:40 PM on January 29, 2008

I also don't have specific data or citations... but I've been working for or with record labels, artist managers and artist themselves (indies and majors) for the last 15 years and I can tell you from my perspective that the reasons fall into three main categories:

1. Buyer behavior has shifted. Packaged music (e.g. records, not music in general) has been totally devalued... especially to the younger audience, which has been the bread and butter of labels for years. Once it became more convenient to download music or trade it with friends (CD burners, MP3s) than to purchase it in the store the game was over. There's a great story about how EMI invited a bunch of teens to their London offices for a focus group last year about why they are or are not buying records. At the end of the session, to thank them, the teens were allowed to pick their a pile of CDs and take anything they want. None of them took anything. Very revealing.

2. The consolidation of labels into large corporate entities (many of which were publicly traded) put the emphasis on short-term revenue hits vs. long-term career artists. A good label has always been a catalog business, especially as 9 out of 10 albums do not make a label money. Once the shelf life of an album receded so did the long-term revenue opportunities. But this is somewhat moot as I'm not convinced even if labels remained life they were in the 50s and 60s that they would have been able to deal with the huge shift in consumer behavior that the Internet brought.

3. Simply put, there's more competition for a consumer's entertainment dollar. Movies, video games, TV (downloads/DVDs), etc. have made it much harder for labels to consistently monetize music. Especially as the labels lost control of their retail distribution platform.

All in, the music industry is still a great place to make money. You have licensing, merchandise, touring and a variety of (still developing) new media opportunities. But the business of selling packaged music is over. Any honest record label employee or executive will admit to that.
posted by tundro at 1:41 PM on January 29, 2008 [3 favorites]

I think by far the biggest problem is the inherent flaw in the major label's business plan considered in the modern world: They spent the last few decades focusing on driving single hit tracks into your head instead of cultivating appreciation for entire albums (or god forbid careers).

The idea was that you simply press-press-press into the public consciousness a small number of "hits" and then the buyer would be forced to acquire an entire album to satisfy their desire for the single that they have been conditioned to crave.

When their whole business was built around getting people to drop $18 to get the "one good song" of course the model will fail when folks suddenly have the option of getting the "one good song" for $.99.

I think there is plenty of data to back this up, when you look at people buying online it seems more and more people are opting to simply buy one or two songs from these flash in the pan, artificially constructed and profoundly shallow major label albums (while conversely people are more likely to buy whole albums from the indie labels and career oriented artists.)
posted by Jezztek at 1:47 PM on January 29, 2008

Doh, I was partially beaten by tundro's spot on post.
posted by Jezztek at 1:49 PM on January 29, 2008

The death of the music business is intimately tied to the decline of broadcast radio. Commercial radio is still effective in generating ad revenue but the programming no longer is designed to showcase new music (thank you ClearChannel). The decline in MTV music videos is probably also a factor. There is no effective vehicle for promoting albums to megahit status any longer. I don't think this is the only factor, but it is a very important factor. Competing with "free" is also another pretty big factor.
posted by caddis at 2:05 PM on January 29, 2008

One small but salient point that a lot of commentators have made is that people may not be buying the CD any more, but they're buying the relevant DVD instead. The price difference between just having the audio on CD, and having the audio and the video on DVD, isn't that great.
posted by AmbroseChapel at 2:33 PM on January 29, 2008

From my POV, the CD as I knew it in the 90's usually had about three or four good songs on it (and that was a really GOOD CD) and the rest was a bunch of fluff/filler/crap. I buy a whole album, and yes I buy that album online, but only when I know the album is good already (heard it early) or I trust/know/really love the artist. Everyone else is a one off, and besides, record sales are not the way that artists make money (unless they are extraordinarily lucky). I will go to a live show, buy a shirt - that sort of thing puts money into Rufus Wainwright's pocket way faster than buying an album.

File sharing actually helps artists who put out music people want to hear - just look at Jonathan Coulton. You can stream every single song the man has ever recorded for free from his website. He quit his job ~2 years ago and now supports his family on the money he makes from his music. That's not nothin. But I'm way more inclined to buy a song from JoCo for the same reasons I'm more likely to pay for a concert ticket.
posted by Medieval Maven at 2:39 PM on January 29, 2008

And here's another point -- who says their fortunes are even declining?

You're trying to deconstruct the spin at one level, but you might be falling for a whole other level of spin.

Here's a fascinating article about the Australian music industry, which released an end-of-year report full of doom and gloom, which deliberately concealed the fact that they'd had the best year ever:
The Australian record industry has just had its best year ever. But it doesn't want you to know about it. This month ARIA announced its sales figures for last year. In its press release, it talked about Delta, it talked about falling CD singles sales, it talked about the rise in DVD sales, but at no stage did it tell us it was the industry's best year ever. Why bury the good news?

Record industry types aren't usually shy about success. But this time their success is a little embarrassing. For the past few years the industry has argued that file-sharing and CD burning is having a negative impact on sales. But, unfortunately, their own sales figures don't back up their arguments.
posted by AmbroseChapel at 2:43 PM on January 29, 2008

Here's a BBC News article from 2005 stating P2P downloaders were actually buying more CDs.

And here's a 2004 paper on filesharing that found the effect of downloading on sales was close to zero.

And this interesting article titled, "The Recording Industry is Trying to Kill the Goose That Lays the Golden Egg" should make for interesting reading.
posted by Kioki-Silver at 2:51 PM on January 29, 2008

Dig through Coolfer. Lots of good, level-headed analysis of the current music industry woes.
posted by scottandrew at 3:07 PM on January 29, 2008

besides, record sales are not the way that artists make money (unless they are extraordinarily lucky). I will go to a live show, buy a shirt - that sort of thing puts money into Rufus Wainwright's pocket way faster than buying an album.

That only works if your artist is able to tour, and has a fanbase that goes to shows and wears t-shirts. Not every artist is a 20-something indie rock band admired by Pitchfork :)

I see this "musicians can make their money from touring and merch!" thing come up all the time, and it ain't necessarily true. There are definitely artists for whom selling music is their primary means of income.

Apologies for the derail. To bring this back around to some sort of relevance to the OP's question: a side effect of the music industry's business model of the last 20 years is they've stopped creating real relationships with their audience. It's that relationship -- the audience's emotional ties to the music and the artist -- that drives people to support the artists they love.

That's the real reason why, for example, JoCo is able to do what he does. It's not the free music, it's not Creative Commons love, it's the relationship he has with his fans. He blogs, he answers emails, he's humble and funny, he wrote "Code Monkey" which went straight to the heart of anyone who ever touched a webpage.

Major labels suck at this. The relationship is key. Without it, you won't even sell t-shirts, let alone music :)
posted by scottandrew at 3:43 PM on January 29, 2008

Your premise is flawed and the record industry isn't declining. For instance, Universal Music Group's margins have increased from 3% to 20% since 2003.
posted by rhizome at 3:50 PM on January 29, 2008

I appreciate many great and thoughtful answers so far. I am definitely open to the argument that the industry is not in fact doing badly and the links on this topic. I'll be back later to review and flag some bests.
posted by nanojath at 4:06 PM on January 29, 2008

margins are not profits
posted by caddis at 4:39 PM on January 29, 2008

margins are not profits

Word. You can always increase your margins with a few layoffs! Something happening at many major labels right now.
posted by scottandrew at 6:19 PM on January 29, 2008

Most people upthread have it right.


- Since Napster, we've had to compete with "Free", something many labels are unwilling or unable to do
- CD: $16.99, 70 minutes of music, art. DVD: $12.99 Movie, 6 hours of bonus features, Audio Commentaries, Social experience... where ya gonna spend your money?
- RIAA sues our customers.
posted by softlord at 5:59 AM on January 30, 2008

Great food for thought. I'm working on an outline for an essay incorporating many of these ideas. Drop me a mail if you'd like a link when it's done.
posted by nanojath at 7:46 AM on January 30, 2008

They altered their business model to go away from finding, developing and marketing talent to one that starts with an image and making the rest disposable.

By marketing the idea that music IS disposable, they've dug themselves a deep hole, while having eliminated the internal infrastructure to understand than and figure out how to get out.

Watch the commercial for that Time-Life "Hits of the 70's" commercial, and notice how unattractive most of the people are in the video clips they show; but note the quality of the music. They've reversed that.
posted by raikkohamilonso at 11:20 AM on February 7, 2008

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