Sep 02 2010

Why the Future of Music is Brighter Than Ever

Published by at 7:00 am under economics,marketing,social media,technology

Many hands have been wrung about the future of music. The music industry has seen year over year of increasingly steep declines for a decade. Think about that for a minute: in 2001, the business fell by 3%. In 2002, it fell another 11%. In 2003, it recovered slightly. But the dead cat bounce was confirmed in the subsequent years. The industry has posted double digit declines in 2006, 2007, 2008, and 2009. In 1999, the industry was $14.3 billion. In 2009, it was less than half – $6.3 billion.

Can you hear the clanging death bells? Music will surely die! This fate has been proclaimed everywhere, but, of course, misses the point completely. If we learned nothing else from the housing bust, let us at least remember that more isn’t always better – sometimes it’s just more.Often, growth of an industry is confused with the health of that industry. While it’s true that in the aggregate, growth of a nation is essential, the prosperity of the country does not depend on that growth happening in certain sectors. In fact, another basic premise of economics is that creative destruction is good. Not that it’s easy, mind you.

Most recently, Megan McArdle wrongly declares that we are “ruining the future of entertainment” in her May column in The Atlantic. She hedges a lot in the piece, but ultimately worries that we will kill the industry before it has a chance to reinvent itself.

And, therein lies the mixup: McArdle confuses the music industry with the art of music. She uses the declining size of the industry to wring her hands about the future of the art form. And, of course, this is a completely false comparison. By every objective measure, the amount of recorded music that is created has exploded right along with the imploding music industry. MySpace and YouTube are likely the largest legal distributors of music in the world right now, but they are not considered part of the music industry. We are exposed to vastly more professionally-created music than ever before. From satellite radio, to Pandora, to playlists in malls, to TV soundtracks, to baseball stadiums, music is more interwoven into the fabric of our lives than ever. Lest I forget the 250 million iPods hanging off people’s ears.

Music is just fine. It’s the industry that is having trouble.

But, it seems that the demise of the industry might be very good for music as a whole. After all, the business has always been built on the mega-hit. Big labels invest R&D in lots of small acts, and a few of them break out and sell millions of units. Those that break out make tons of cash for the whole label. Those that don’t end up with huge bills that they can’t ever cover. For a fascinating account of how bands are more like indentured servants, check out former Semisonic drummer Jacob Schlichter’s book, in which he lays out how you can sell hundreds of thousands of records, and still not make any money.

Even more compelling is the lengths that the music industry had to go to to keep juicing the books. If you are concerned with the art form of music, I would think you would be appalled by the way the most important records decreased in artistic integrity as time went on. The best selling albums worldwide have become increasingly inane and embarrassing for everyone. Here are the worldwide 30 million+ sellers in date order (I took out greatest hits compilations to emphasize the quality issue):

Especially in the final years of the music industry, I’m struck by the vapidity of big selling music. Could anyone seriously claim that Shania Twain’s Come On Over or the Backstreet Boys’ Millennium will make a lasting impact on the cultural landscape (and this coming from someone that owns both albums)?

So, if the fortunes of the industry do not align with the fortunes of the art, then how do we evaluate the future of entertainment? One clear trend we can predict is that more people will be involved in the creation of music. From elementary school concerts, to teenage phenoms, to songs about guitar breaking, individuals are making music for their own circles – not for the masses.

The guitar breaking saga is actually a great example of what the future holds for music. By now, everyone knows the social media angle: Dave Carroll’s guitar was broken by United Airlines. He got the runaround instead of a reimbursement. So, he took his plight to the masses with a trio of songs about how United broke his guitar. The songs went viral, reaching a total of more than 8 million views.

The business side of the story is just as fascinating: Carroll was on the road playing roadhouse gigs more than 6 months out of the year previously. After his social media success, he scaled up his operations and hired several new people to handle CD order fulfillment, plus a web and marketing team to spin his brief success into something longer lasting.

Perhaps music just got too complacent. And a huge industry disruption was just the thing to restore the soul and the passion to the art.

If that’s the case, I look forward to the future of music – it will be bigger and brighter than we can imagine.

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