Today’s music industry – bridges and barriers
The recorded music industry has for a hundred years delivered its product to consumers on pre-pressed discs, and since the 1930’s has relied on radio, film and television to enable consumers to discover fresh music.
The two primary activities – discovery and sale/delivery are shown on the diagram below. Four major types of industry participant form the necessary bridges between artist and listener. Discovery is shown in black because it only after music is discovered will it be purchased. The bottlenecks in discovery in the traditional industry structure are arguably more significant than those involved in production, distribution and sale of the CDs themselves.
Record companies, distributors and retails form the three span bridge between the artist and listener for the sale/delivery process. Radio, and to a lesser extent the printed press, television and film, is an essential element in the discovery process. Live performance and magazine articles are also an important discovery process.
The diagram depicts direct artist to listener communication for discovery and purchase of music via the Web. In fact it is likely that many artists don’t want to run their own web sites – but will leave some or all of their web presence to intermediaries. These intermediaries will have lower costs, lower risks and fewer stylist restrictions and limitations on the number of artists they can handle compared to traditional record companies. The low-cost two-way nature of Internet communication facilitates direct communication between artists and fans – which is vital for many reasons, such as building trusting relationships with listeners, for giving feedback and inspiration to the artists, and for helping the process resemble a community.
The traditional industry participants all face high costs, high risks and significant delays in profiting from their activities. This contrasts with an artist who runs their own web site, or who works closely with a web intermediary – they can be earning money directly from sales within hours of recording their music. They face no significant risk or cost if they place hundreds of their tracks on the site.
The costs and risks of the traditional music industry mean that most of the money which finances it goes into such mundane activities as transport, warehousing, sales tax, retail rental and staff costs, and into financing whatever means are available to promote the product into the popular style feeding frenzy in the hope that its sales will rise, for a time, above the “noise floor” and the participants will actually make a profit.
A second diagram shows quantitatively the flow of money from the listeners towards the artists. Dotted lines represent intermittent or nonexistent flows.
Like the book industry (and the multimedia CD-ROM industry) the CD based music industry has great difficulty matching the proliferation of product with the enormously varied and unpredictable demand of consumers. There is high investment and significant time delays in producing large quantities of discs, packages and promotional material – with little reliable information about how many will be sold.
The risks, delays, costs and multi-layered nature of the traditional recorded music industry structure mean that only a fraction of the money spent by listeners flows to artists. The true industry structure is more complex – for instance collection societies (not shown) collect money from radio stations, and many public places such as shops and entertainment venues (not shown) and distribute an ideally large proportion to the composersof the music. Music industry copyright and commercial relationships are complex and cannot be shown fully here.
While it may be true that certain industry participants are rapacious or way out of touch with the true needs of artists and listeners, the existing industry structure does follow naturally from the technological limitations of mass-produced CDs and uni-directional mass media for promotion and discovery.
The Internet part of the model assumes that listeners have Internet-connected computers with significant hard disk capacity and a CD-R writer – this is becoming common. It also assumes that music at the quality which they want to purchase can be delivered via the Internet conveniently and with relatively low costs. We are yet to really arrive at this point. MP3 at 128 kbps may sound like the original 44.1 kHz 16 stereo recording in most situations, and at a Megabyte a minute, this is about one seventh of the file size of a losslessly compressed version. Still, a 33.6 kbps modem can only download about 10 megabytes an hour – so to gain an hour of music at 128 kbps will take about six hours. There are serious convenience and cost issues for most users at present with this arrangement, but they can be expected to be reduced over the next few years with lower Internet costs, and especially the widespread use of HFC cable modems, ADSL and other broadband local-access technologies.
Assuming this does happen, a listener can discover music by searching and listening in real-time. They can then pay for an hour or so of music, and spend only about USD$5 to download it into their machine. (That is 60 Megabytes of MP3 or around 360 Megabytes for music which can be compressed losslessly to 60% of its normal size.) The CD-R writing can be largely automated, and the cost of the disc is just a dollar or so. This leaves quite a few dollars to go to the artist (to cover their costs and to create profit from their music), whilst still being cost-competitive and a lot more immediate, personal and personalised than the traditional approach of buying music on mass-produced pre-pressed discs at a shop.
These lower costs, lower risks (listener chooses exactly what they want, rather than having to choose between album packages) greater immediacy and absence of stylistic and geographical barriers can be expected to lead to a net increase in the amount of music purchased, with a resultant increase in the funds remaining with artists – even if the total listener expenditure remains the same as it is with the traditional industry model. Considering the many benefits of the electronic delivery model, it would not be surprising if (in the absence of CD-R and Net-based copying) that total expenditure would rise – because there is a vast unmet demand for music which would be translated into more action with a more efficient and friendly business model.
However the effects of the ability of users to copy music are hard to predict. In the current atmosphere of rebellion against the record companies – often held in low regard by listeners and artists – copying seems to be all the rage. I am optimistic that the two-way, low risk, low-cost, immediate, personal communications of the Net will facilitate artists and listeners building trusting, lasting relationships which are conducive to the artistic development and financial viability of music development in a vast range of styles, and especially for artists who are just developing their work and are yet to attain widespread recognition.
The current industry places many stylistic restrictions on the music which can be discovered via commercial radio. These are more fully discussed in the paper.
There is a vast range of music and an equally (or potentially) large range of interests amongst listeners. This goes far beyond the straight jacket of the kind of music which is compatible with commercial radio.
There is an immense potential for an explosion of diversity – in new styles of music as well as the rediscovery (or the fresh discovery for most listeners) of fields of music which have existed for decades or centuries but which have never yet been discovered by an individual simply because no radio station in their area plays it. For instance, a single 1 1/2 hour Indian classical music program on a community radio station here in Melbourne (3 MBS) has opened my ears to a wide range of music (which to my ears is less formal and more varied and lyrical than Western classical music) which I would never have otherwise become attuned to.
Today’s music industry – bridges and barriers