When you say they're not actually part of the music industry, are you referring to distributors like amazon/apple, or artists outside of traditional distribution? I'm just wondering what we define as the edges of the "music industry" - it used to be fairly clear what those were, and I know that traditional industry has been essentially cut in half by digital distribution.
No, it's much worse than that, the figures are grossly misleading if taken out of context! Yes, music sales are down by about 50% compared to 12-15 years ago and yes, the artists get a much higher percentage of sale price when distributing through say iTunes. So on the face of it, the record labels are the big losers, the consumers are the biggest winners and the artists are winners too ... but this is NOT the reality behind the figures!
In the old system, the record labels would identify an artist which they thought had great potential and invest in them. They would pay for a producer, recording studio, studio musicians, CD manufacture, marketing and distribution and give the artist an advance so they had a liveable income for the 3-6 months it would take to make the album. In total this would cost the Record company anything from about $100k - $1m (very roughly!). Of course, the record company would have to recoup these costs from sales, so even with an album which had reasonably good sales, the artist might not get much more than their original advance. Also, 9 out of 10 albums didn't earn enough to cover their costs but that 1 out of 10 could make a huge profit, enough to cover the losses of the other 9 albums and still leave enough for record execs to buy that nice house in the Hamptons! Artists were not happy about all this because they saw $1m in album sales but ended up getting just a few tens of thousands, or occasionally saw $30m in sales but only got a million or two of it.
Getting 70% of $1m or 70% of $30m sounds way more attractive, it's even much more attractive if we cut the sales figures by 50% but that's not how it has worked out! iTunes are not part of the recording industry, they take their roughly 30% cut but invest none of this cut back into the industry. They don't even invest in the 1 out of 10, let alone the other 9 who were given a serious shot back when the record labels controlled the market. As an artist, to earn that 70% you have no choice but to invest your own money to make an album and support yourself while making it. This means the average album today has probably been made for around $500 - $2k which is roughly 100 times less than the record labels used to spend. For this reason, most of the big commercial recording studios have closed and those which remain are mostly operating at a loss. Abbey Road Studios, the world's first purpose built music recording studio, and arguably the most famous recording studio of them all, has been operating for the last 5-10 years at an annual loss of about $6-7m. So the 50% decrease in music sales doesn't reflect the roughly 80% or more reduction in the number of top flight commercial recording studios and of course in the personnel who used to work in them, including ancillary personnel like session musicians.
Furthermore, the "up and coming" artists of course don't have a marketing budget or an established marketing machine like the record labels did, so while for a few dollars you can effectively get worldwide distribution that worldwide distribution earns you nothing because everyone else can get worldwide distribution as well. Not only is the pot half the size due to sales being 50% lower but the artists at the top are still earning the same amount so what's left is a lot less than 50% of what it used to be and at the same time, the number of people competing for this pot has increased about a thousand fold!
I can't remember in which industry rag I read it now but in 2012 roughly 75,000 CDs were commercially released, would you like to hazard a guess what the average sales were for the bottom 60,000 albums? Does 20,000 CDs sound reasonable? What about 2,000? The actual figure is 13 ... Yes, just 13!!! 70% of 13 album sales is about $90, welcome to the utopia which is worldwide digital distribution! But even this sounds like the "good ol' days" as consumers are now buying "streaming plays" rather than paying to own songs, achieve 1,000 paid streaming plays and you'll earn enough for a nice medium latte at Starbucks!
Consumers may think they are the big winners because the cost of listening to their choice of music is way cheaper than it used to be, but this is just an illusion. While recording technology is better and cheaper than it's ever been, for the first time in history, the average production quality of commercial music has fallen. Unless something drastic happens, it's likely that the finest quality music recordings which will ever be made, have in fact already been made and quite a few years ago! Many record labels used to invest significantly in new, cutting edge, experimental artists in the hope of finding that "next big thing" and to a large extent, this risky but potentially extremely lucrative investment has driven the evolution of the popular music genres over the last 40 or 50 years. But iTunes, Amazon, Pandora and other similar companies don't invest anything at all in the music business and even the record labels which do still exist have had to drastically cut costs and investment to remain even vaguely competitive. The end result of this drastic cut in investment in new talent is that the evolution of the popular music art form itself is stalling. Add this to a disappearing highly skilled workforce and high quality recording facilities and this is why so many who've been in the industry for many years are calling this the end of the music industry. This is what led Bon Jovi a few years ago to publicly state that he held Steve Jobs personally responsible for the death of the music industry. It must have seemed like the ravings of a mad man to most consumers but was met with nods of approval from many in the industry. The average consumer simply doesn't yet realise how ultimately they are the losers because they obviously don't know what they are missing, how the popular music art form and recording industry would have evolved, and they are yet to feel the full impact of a slowly stagnating art form. By the time the consumer does realise the severity of the problem, it's likely to be too late to do anything about it and the 60's, 70's, 80's and 90's will come to be viewed as the "golden age" of popular music culture, never to be recaptured, and Bon Jovi will be able to say "I told you so"!
What seemed in the early 1990's like a utopian dream of easy worldwide self distribution, beyond the control of the major record labels cartel, not only hasn't delivered on it's promise but has turned into a nightmare worse than anyone could possibly have imagined! I'm not saying this same thing will necessarily happen to the film industry but it is a shocking cautionary tale and completely contrary to the promise of digital distribution as described by Blade_Jones.
G
