Mind_Storm

http://www.theinquirer.net/?article=11936


Online sales mean music industry approaching vinyl curtain - As sales drop like a lead Zeppelin

By Charlie Demerjian: Sunday 05 October 2003, 07:58

EVERYONE KNOWS from the increasingly shrill rhetoric that the record companies are scared to death. Sales are dropping like a Led Zeppelin, and things don't look brighter in the future. The claims of file trading being the root of their worries are looking more and more fictitious with each added data point, and the next set will probably put a stake in the heart of that argument. This won't stop the flow of rhetoric, but people care less and less every day.
The record companies have completely stymied the efforts of those who wish to make a legal method of purchasing music over the net. They are stopping every attempt with an almost fanatical fervor. Why? Because once there is a way to purchase music on the net, the record companies go away, as does the RIAA, and the extortion money that the industry lovingly leeches from helpless artists.

What exactly am I getting at? Well, the vast majority of artists never see a cent from record sales. Obtuse accounting tactics, one sided contracts, and 'industry norms' make it nearly impossible to figure out that you are being screwed, much less prove it in court. It is a given that a new band will never see dollar 1 from record sales, and it is up to them to make a living from touring and merchandise sales. Most somehow manage to make a decent living this way, so don't pity them too much. The record companies make the big bucks. Look at the gross income for any of the big 5 labels, and you will see that there is a steady stream of cash heading to those companies, and it has a lot of zeros behind it. Where does the money go? Good question, but one they won't answer. There are a lot of big Mercedes in the company parking lots though.

Once the record companies 'bless' an official online music purchase mechanism, they win in the short term. It costs a lot less to encode a track once than print a physical CD, even if that cost is a pittance. A pittance less time a million is still a lot of money saved. The Big Five gain a lot in the short term, which is why many people wonder about the resistance they are seeing.

The problem is the long term. When people are accustomed to buying over the net, and the technology is established, there will probably only be a handful of players on the market. Each large ISP and media company will most likely have an online arm, and an ecosystem will grow up around them. Review sites, promotion mechanisms, and everything that the record companies used to do will be done online by the music retailers. Why are the record companies relevant at that point? They aren't.

There is a powerful mechanism preventing this from happening now, contracts. Most acts are signed to multi-year, multi-album contracts, basically enslaved to the record companies. Once those contracts expire, they will ask themselves the obvious question, 'why do we need the record companies again?'. The obvious answer is that they don't. Negotiating with 5000 retail outlets, another few hundred distributors and a host of miscellaneous other entities is impossible for any one band, but 10 online retailers is not.

After the infrastructure is in place, a new band can sign up with the service directly, and have their music just as accessible as the latest manufactured boy band. It is easier to negotiate than a one sided, labyrinthine record company contract, and the chance of actually receiving money is millions of times greater. 25% or 1000 sales is a much larger number than 0% of two million. Once they get a greater audience, the bands can negotiate better rates for themselves, but the doors will be open early on, and no strings will be attached.

Am I dreaming? Could this be real? Well, Apple is doing it now with their online music service, and others will follow soon. If they don't, they miss the possibility of having the next big thing while sales are hot. How much does it cost them to add a database entry again? With CD sales dropping on the order of 10% every 6 months, and no end in sight, by the time many of the big contracts are up, not having a presence on the CD racks will mean little if any lost revenue. They will still be in the stores, Best Buy has a relationship with one online retailer, and you can bet if it works out, everyone will follow suit. That store presence however will not be on 5.25 inch lexan slabs, and artists will be making more money for their efforts. The only losers here will be the record industry, and that is a good thing for everyone else. µ

Jadey

Where have I heard this before?

If you really want the money from your purchases to go to the artists buy concert tix and then buy merchandise while at the show. That money is much more likely to reach the artists pockets than anything you buy at the local record store. It's disgraceful that many people are led to believe you are stealing fron the artists. WRONG! Most of that music has been signed over to the labels already and they own the rights! The artists are being stolen from, but it's by the record labels moreso than the fans dl'ing online (though I'm not saying that's still OK.)