Hello Mr. Brightside

Jul 25 2011

I’ve been waiting about 5 years to write this particular blog. I can’t say that it’s done with total confidence. Like a person in the desert finding a fresh pool of water just ahead, I’m a little afraid that what I’m seeing is just one more mirage. It’s not written with much joy either. There are far too many talented music people, on both the creative and business sides of the industry, who are still out of work to unabashedly celebrate the moment. But with all the caveats and caution, I still think it’s time to go on record:

There’s light at the end of this deep, dark tunnel that we’ve been in.

After almost a decade of what has seemed like irreversible decline in the music industry, with each year bringing declining sales, more consolidation, less creative growth, and a growing irrelevance in pop culture, we might finally be turning things around. Over the past several months, there’s been not just random bits of good news, but an emerging pattern that would seem to indicate, dare I say it, positive momentum for a recovery that can reinvigorate the record labels, publishers, artists, songwriters, producers, live industry and all the thousands of other music-related businesses that have been suffering through this long slog through the wilderness.
Here’s a few of the things that have weasels smiling these days:

• The emergence of new technologies that are legal, licensable, and viable – and fun to use!

The appearance of Spotify, Turntable.fm, and iCloud, along with the continued growth of services like Pandora are showing that it is possible to make music available in a way that’s attractive and profitable. Of course, there will continue to be winners and losers in what seems to be an ongoing story of overnight sensations and quick, brutal endings (say goodnight, MySpace). But the convergence of streaming services and social networks, and the cooperation between labels, publishers and technology services in making the music available legally, is a model for a more promising future.

• A growing government concern about piracy and illegal file sharing.

I’ve been predicting it for years: once the technology of file-sharing reached the point of endangering the movie and television industry, we’d start to see a change in the US government’s willingness to step in and get involved. The truth is, politicians couldn’t care less about the music industry. It’s too small, too controversial, too disorganized, and too youth-oriented to matter, and as a result the industry has lost virtually every battle it’s entered, whether it with the broadcasters, restaurant and bar owners, or internet service providers (ISPs).

The movie business is a whole different animal. It is the big dog of American entertainment, and the companies that are built on movies, like Disney, Viacom, and Universal Pictures are among the crown jewels of the American corporate world. Now that they’re being threatened by illegal file-sharing around the world, the US government is sending signals to internet service providers both here and abroad that they will be held responsible for copyright violations occurring on their networks. In return, ISPs are showing a willingness to consider some type of punitive action toward consistent copyright violators, as well as a surcharge that would compensate rights holders. Thanks to Hollywood, what was deemed utterly impossible when the music industry asked for it five years ago is starting to look like a reasonable compromise.

• The revitalization of the CD catalog business.

Again, I’ve been at this one for awhile now—in “Living In the Past Beats Dying In the Present” I used the example of the German music market to argue that the short-term future of music was “selling old product to old people”. With its new $5 CD program, Walmart is taking that formula to the bank, selling CDs of classic music to older, mainstream consumers. Not surprisingly, it’s revitalized the catalog business, which especially for major record labels, is absolutely essential for a return to profitability.

• The opening of China.

This week brought more good tidings from abroad, where it appears that a consortium of the major US labels, called One-Stop China, and Baidu, China’s primary online Google-equivalent, have reached a deal that will allow Baidu to provide users with free ad-supported music streams. In turn, Baidu will pay the labels and creators of the music, as well as crack down on illegal sites that infringe copyrights. While it’s unlikely to generate any significant income for 5-8 years, this first crack in the Chinese fortune cookie could be a massive long-term step toward breaking into a potentially massive market of consumers. The prospect of monetizing markets like China, India, Eastern Europe, and Southeast Asia has been one of the primary factors fueling the hedge fund interest in purchasing publishers and music catalogs. It now seems that may have been right.

• The success of Adele.

Doesn’t seem right to discuss a resurgence of the music industry without even mentioning music itself. Given the divergence in tastes among any random group of listeners, as well as the constant creative rise and fall in each different musical genre, it’s possible at any time to make an argument for the proliferation or the imminent demise of “good music”, whatever that means. Still, one has to take note of the fact that just this year, Adele has sold more than 5 million copies of her album and set the record for the longest stretch at #1 of any female artist. Those kinds of numbers weren’t supposed to happen anymore in our post-album, singles-dominated, market-fractured, ADD-addled music world.

Adele

But the fact that it was done by a real singer who is neither a fashion model, television star or an ongoing gossip-column soap opera; who is not a winner of any TV talent contest; who doesn’t rent her music to advertising campaigns; who doesn’t Twitter; whose music is not aimed at Top 40 radio trends—these are signs that can’t be ignored. Add in other new artists like Mumford & Sons and Florence & The Machine, and one begins to sense a shift. This is not to demean Katy Perry, Kei$ha, or Rihanna, all of whom make great pop music for a demographic that loves and lives that kind of music. But it means that there are alternatives, and that there is more than one audience and one road to building a very substantial, and lucrative business around your music.

Of course, it would be foolish to ignore the equal number of warning signs flashing in the distance, or any of the huge potential pitfalls that could easily derail the resurgence of the music business:

• The major labels continued reliance on over-age, tired, and narrow-minded chief executives

• The brewing meltdown of many of the world’s performing rights and mechanical collection organizations

• Our continued inability to update and streamline copyright law to keep pace with technology and globalization

• The inescapable reality that music is no longer a primary pillar of youth culture, but rather shares that role with social networking, gaming, fashion, and a million other diversions

Yet even some of the worst news in the business, like the mass layoffs at Universal Records, or the continued consolidation of the major labels, has a positive aspect. At least it shows people making changes that in many cases were either inescapable or long overdue. Restructuring an industry is never pretty, and much that’s good is inevitably lost in the slash and burn of clearing the way toward the future. Nevertheless, it has to be done.

There is a time for criticism, and this blog has often pointed out the looming problems, mis-direction, or just plain dumb decisions throughout the music industry. But there is also a time for letting positive energy feed upon positive energy, re-establishing a sense of optimism and untapped potential. This business was never easy, nor was it meant to be. As I said in last week’s blog: the only thing that can truly kill you in show business is cynicism. Once that deadly element sets in, it’s over.

As we head into the 4th Quarter of 2011, this blog is going to try to focus on the good news, and what we can do to take advantage of the positive developments in the music business. With the help of my standout Berklee intern, Jorge Oliveres, I’m also looking forward to highlighting some of the people who are making new things happen, or who have a particular expertise that can help music publishers and songwriters exploit the new opportunities we’re seeing.

I think we’ve finally turned a corner in the music business. Now, it’s time to step on the gas and head toward that light at the end of the tunnel.

Follow me on twitter @EricBeall

    Great post! The dust will settle, let’s be there when it does.

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