Mike’s post on “The Inevitable March of Recorded Music Towards Free” stirred up a lot of controversy and oddly confused analysis from places I didn’t expect.
Mike’s marginal cost argument isn’t so much that music should be priced at their marginal cost of production, but that they will inevitably have to price at that level. It’s the economic law of gravity powered by competition, be it from legal or illegal sources. Music labels used to have a monopoly over distribution, but digital distribution has ensured that’s no longer the case. I find Mike’s statement that “every consumer is also a potential producer of any song” particularly poignant.
Freakonomics, one of my favorite blogs, had a great roundup of opinions digital music a couple weeks ago. I don’t agree with all the opinions, but Koleman Strumpf (Harvard) has a great empirical analysis of the situation.
The counter-arguments I’ve seen don’t dispute the fall in price, but rather counter the fairness or un-sustainability of the business model. To that I say that “fairness” isn’t a business model. I’m also getting really tired of the starving artist meme. The industry makes all its money off of the big names that hit it big, but always points to artists that didn’t make it when they want to curry favor with the public. The fact is that most artists don’t make it in the current system, and still won’t in the new one. However, the new system will give artists a greater control over their destiny as they can run around labels and connect directly to consumers.
The un-sustainability argument mainly complains that the analysis doesn’t take into account average costs and fixed costs. But consumers and competitors don’t care what your cost structure is. They just care about how much they have to pay.
It’s the same issue technology firms confront. Once the IP is created, it costs nothing to proliferate. To ensure continued innovation, these companies are awarded patents to protect their works. But a similar system doesn’t make as much sense in the case of music. First of all, labels aren’t the root of the creativity, the artists are. Second of all, there’s not a compelling public interest in managing such a costly system. The RIAA is already seeing how much of a money pit that enforcement can be.
The music industry will have to search for natural ways of wooing consumers to their products in ways they can make revenue. Live and exclusive content make sense. However, there’s also the value of convenience that consumers will pay for. iTunes will still make money because it’s become a convenient destination for buying music online. AllOfMP3 effectively charged for this convenience factor at their lower price point.
Labels are dead, long live artists.
Update: One of the counters to the claim that “labels are dead” is that they will simply transform. However, how much of a record company will they be if their chief business, making and distributing music, is taken from them. It’s their strangle-hold on distribution that makes them key, otherwise they serve more as marketing firms, a much more competitive area. Their inability to influence over Apple’s iTunes is a sign of their decreasing relevance as distributors.
Finally, saying music is going to die because labels are dying is like saying we’re seeing the end of reporting because some newspapers close down.
October 5th, 2007 at 1:32 pm
The tradtitional model of a Major Record Label is truly dead on the vine. But let’s not forget the symbiotic relationship over the years of mega-rich stars and the mega wealthy corporations that both made these artists accessible as profited heavily from the resulting fame. If the public wants good music -any music, somehow their going to need to pay the artists that provide them with such a luxury; otherwise I hope you all enjoy replays of inferiorly archived and pirated digital music. The rest of us artists/producers/music entrepreneurs will have to settle for finding other ways to pay off the large investments weve made toward our ‘cheap’ recording equipment, vocal lessons, photography tabs, website design, travel expenses, bills, tuition, experience, etc. that went into making that amazing song/movie you love and just pirated.
October 5th, 2007 at 11:00 pm
I just pre-ordered a download of the new Radiohead album In Rainbows out on October 10th, and in the check out process I received an error because I didn’t fill in how much I wanted to pay for the album download. I was kinda confused at first. Name my own price for the only music out there i’d pay for without thinking? A very attractive discbox is another way to purchase the album at a fair price. Radiohead is in tune with what’s going on, I’d say.
October 9th, 2007 at 10:10 pm
Would like to point out that Mike’s arguments, even though essentially correct do not necessarily mean the price for all music will go down to zero.
IMHO the best parallel is that of software industry and the process it went through when it was forced (by market forces) to abandon software protection.
I agree with everything you say … I think more discussions on the implications of the immanent change in the business-model of music are in order (and are certainly more interesting than the back&forth arguments on the ethics of listening to a song without paying for it :-).
A bit more on this at my blog: http://blog.beyondo.com/2007/10/inevitables-of-inevitable-march-of.html
October 10th, 2007 at 1:48 pm
Labels are dead - its quite clear and obvious that bands can produce themselves and make available their music DIRECTLY to the listener. Society has some made it seem that if we don’t pay a lot of money for it and if it isn’t created in this pattern, then it isn’t right - when it is.
Every band should open a paypal account and let listeners donate $$ directly to them for the album. Game/Set/Match - why exactly - do we need AR reps and major labels???
October 10th, 2007 at 2:07 pm
The labels are dying, times are changing, help us keep track of it all…
http://www.recordindustryfreemusic.com
Thanks
Tai
CorSport
October 10th, 2007 at 2:32 pm
It isn’t dead until they legalize P2P
Oled @ http://www.prankvideoz.com
October 10th, 2007 at 2:35 pm
There is another component to music distribution that people seem to forget, thinking it’s only a matter of getting the bits from here to there. A huge part of distribution is convincing you that you *want* those bits, and want them enough to pay for them. Sure, Radiohead has a large enough fan base to no longer require that component of distribution to the extent that it did originally. But for an unknown band, the adage of “make it and they will come” is much harder to realize. What’s deceptive is that once signed, labels encourage bands to have these lavish lifestyles that are ultimately paid for by album sales. Of course, the label takes a cut, and so that cut is something that certainly should be revisited. If albums were $5, OTOH, I think most of this would be a moot point. But that albums, even iTunes downloads, are $15+, that’s crazy because it’s not following Moore’s law in any way, shape, or form.
October 10th, 2007 at 2:36 pm
I’m with Ernesto that an artist should be fairly compensated. That’s why I don’t buy CDs [I get my music from iTunes] anymore, the RIAA is not interested in paying [all of] its artists and has shamelessly exploited the creativity and naievety of young artists in signing away their careers for pennies on the dollar.
Good riddance to them. If I know for a fact that it’s the artist who’s going to get the money, I’ll be more than happy to buy. I just can’t stomach paying for some leeche’s California mansion that he built on the creativity of other people.
October 10th, 2007 at 2:44 pm
This is so true. Consider however that artist still need to be able to make a living. The problem has not been that music is sold (not free), but that it is sold a. bundled in an album only, b. at a price that is considered by too many as too high, and c. under a revenue sharing plan that is too lopsided toward the label.
For the future my money is on the online music distribution models. I particularly like DiscRevolt. WWW.DiscRevolt.com. They sell credit card style cards with album art on the front and a unique code on the back. The artist sell the cards at live shows just like they would a CD. Considerable less than going to DiscMakers for CDs, and the same or better profits for the artist.
October 10th, 2007 at 2:48 pm
Music shouldn’t be an “industry”. Music should be something that you sit down and make yourself with your friends and family. It was like that before the “industry” and hopefully will be again soon.
That’s the real fear of the music industry, that people will stop stealing music, and start making it.
October 10th, 2007 at 2:49 pm
I agree that the fairness argument is kind of a red herring. I want good music to continue to be made, but trying to fight against an environment in which there’s almost no barrier to copying data seems futile.
It’ll all have to adapt. I think Radiohead’s attempt will be one way bands move. When you know your money is going directly to a band, and when you aren’t forced to pay more than you think you should, you’re more likely to actually pay. It creates a more intimate relationship.
There’s many other methods out there as well. For instance you could make your creative process partly open to give people a preview and college money. Once you reach a certain dollar amount, it is released to the public.
There will also still be touring and merchandising.. If people see music falling apart, some wealthy people may donate to particular bands they like, etc.
It may be a bit of a cataclysm in the near future, but it’ll find a way to work itself out eventually.
October 10th, 2007 at 3:07 pm
Where will people go to get high quality recordings? MP3s are OK for portable listening, but they are too compressed for home stereos through good speakers. Sure many pop CDs sound bad simply because they’re mixed poorly. But the potential is there anyway.
October 10th, 2007 at 3:08 pm
I totally disagree with Ernesto. I also have studio equipment & produce music for myself and a few others. Where I differ is this. I make music because I can. I built my studio so that I could. As romantic as it would be to live entirely off of the money I make as a result, that’s not exactly going to happen right away. In lieu of this, I have a job. Now, if someone wants to make “their own” music in my studio, then I will charge them for use of my equipment and/or my own expertise. If I perform somewhere, I expect to be paid for it & I will sell cd’s on the spot. I don’t expect to get paid every time someone HEARS (via downloading, radio, a friend, etc) my music. That’s just absurd. Wake up and start seeing the world for what it is, & not what you wish it was.
October 10th, 2007 at 3:45 pm
For those of you who don’t know them, Streetlight Manifesto and Bandits of the Acoustic Revolution have had this idea of producing and releasing music themselves for a while now. They made up a little label called The Risc Group. Allthough Streetlight Manifesto does belong to Victory Records, I believe they belong to them just for distribution and such. Also Reel Big Fish was dropped by Jive Records, and there is a great example of record company abuse. Reel Big Fish is now currently on Rock Ridge Music, a small minor label that has upcoming bands and bands dropped by major record labels. Rock Ridge Music is just there to distribute the music. Hopefuly we will be seeing more groups like Rock Ridge and The Risc Group in the future.
October 10th, 2007 at 4:23 pm
>Music shouldn’t be an “industry”. Music should be something that you sit
>down and make yourself with your friends and family. It was like that
> before the “industry” and hopefully will be again soon.
This could be said of almost every industry. Food shouldn’t be an industry. People should just have gardens and grow everything they need. Same with clothing. You could dig out some scissors and a needle and sew/knit all your clothes.
>That’s the real fear of the music industry, that people will stop stealing
>music, and start making it.
Somehow I don’t think that even registers on the music industry’s radar.
The thing about making music is most people aren’t good at it. Those that are should be able to sell music to others and make money from it.
October 10th, 2007 at 4:26 pm
Ernesto, times have changed, looks like you and the RIAA need to rethink your hustle and leave real music making to real artitst who actually enjoy and believe in what they do
October 10th, 2007 at 5:01 pm
Expecting an artist to work for free is nuts if that’s what music being free actually means. Yes, artists should be in it for their art, but don’t hold it against them by telling them your value of their work is zero. At least respect them enough to help cover the costs of the recording.
Also music labels are not dead, but the major labels are definitely having problems, big problems, from the looks of things. There are plenty of other labels with more contemporary business structures that are doing just fine - they just happen to be much smaller and very close with their artists, which may be where some are going wrong.
October 10th, 2007 at 5:04 pm
Yeah, labels are dead - just go to your local Wal-Mart and see how dead they are. 90% of the music sales are CD, and 90% of that is from RIAA labels. That’s just how dead the labels are.
Labels certainly aren’t dead - independent labels are experiencing growth, actually. Major labels are experiencing a downturn from an artificial heyday when they controlled everything, but that doesn’t mean they’re dead.
The price of music, like anything in a free market, will approach its value to the consumer. If it has no value at all, that number will be zero. Then the labels will be dead - along with most of the artists. But music does have value to many people, so that’s a hypothetical notion.
BTW, Koleman Strumpf is a professor at the University of Kansas, not Harvard. He’s smart enough not to see the big picture about the relationship between record sales and downloading, though, and that puts him ahead of a lot of everyone (including the labels) trying to oversimplify it.
October 10th, 2007 at 5:41 pm
A lot of you are complaining that with the record industries gone, there won’t be incentive for people to make good music anymore. And there won’t be any way for Mr.Joe Average to find said good music if it WERE made.
Personally, I think you people are stuck in the past. I don’t listen to music on the radio. On the radio, I only listen to NPR. I get my music recommendations from friends, or from movies I’ve seen, or even webpages I visit. I discovered the artist Jem by just surfing around on myspace and hearing a song that caught my ear.
With the market saturation of MP3 players and similar devices, most people who are really into music carry it around with them. They’re not going to listen to endless commercials and bullsh|t just so that they can listen to a music playlist that has been chosen by some corporate sphincter.
When I specifically WANT to find new music, I surf Amazon and look for artists that are somewhat like the artists I already like. Or I listen to ONLINE RADIO via shoutcast, which boasts a much more eclectic venue than what can be found on the local FM dial.
And honestly, most of what the music factory (industry) puts out these days is boring unmitigated unimaginative crap. No thanks.
Real artists do it for the pleasure of making music. Not for the fame glory and money.
And if you’re a musician who is only making music looking for a payout… learn to sell insurance or lay bricks. Music made for such base and crass goals has no soul, no heart, and is not welcome in my life, my discman, my mp3 player, my hard drive, or my ears.
October 10th, 2007 at 7:10 pm
People Still Dont Get That Music Labels Are Dead
This story has been submitted to Stirrdup. Your support can help it become hot.
October 10th, 2007 at 8:16 pm
I agree with at least 99% of the comments, except, mp3’s do not offer very good sound quality. They’re not even close to the audio quality you get on a wave file recorded on a CD.
For me that is the only barrier to online music, at least all the time.
October 10th, 2007 at 9:06 pm
> People *Still* Don’t Get That Music Labels Are Dead
Amazing that there is still any question. Everything following was posted SIX years ago! The viewpoint is similar, and the point of view was not original with net-savvy people:
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Mp3 must die indeed! And hopefully be replaced by a format that is more
compact and has better sound quality. By a format that allows cover art and
entire track listings to be bundled into one file. By a format that allows
you to rip a dj mix to cd without gaps between tracks.
That is probably not what you meant.
I don’t really care if artists are compensated for making music. Life
isn’t fair. There are many things that people do that require skill,
training and artistry that go unrewarded in life. Recorded music as a
commodity is a paradigm unique to the 20th century - an abberation that will
be looked back upon with curiosity in a couple hundred years. Nowhere is it
written in stone that we must pay to hear pleasant sounds. Before the age of
photographic reproduction people were forced to spend money in order to have
pretty pictures in their posession. Now we live in a world where everyone
has seen relatively accurate reproductions of Rembrandt and DaVinci. Are we
impoverished for it? It is true that graphic artists now have a harder time
making a living the way they used to - everyone has that painter friend who
begs and borrows to pay the rent. However it is telling that the visual arts
persist as strongly as ever. And for evey starving painter, there is
somewhere else a poster designer, mural painter, commercial photographer,
etc.
From time to time throughout history there are fundamenal shifts in the
way people can make a living. Anyone who currently makes their living in the
recording industry had better be ready for change. When I was growing up
there was quite a hubbub over music videos. “Now you have to make a video to
sell records” people said. It was throughly true, and people that adapted to
the medium did well. If you can’t beat them, etc. For people not involved in
the recording industry music videos were a good thing. Aside from the fact
that videos are pleasant to watch, they have consistently been early to
adopt industry innovations (only experimental film is more eager to do this)
that then find their way to television ads and later to films. Anyone seen
the Matrix? Remind you at all of that Chemical Bros video? But videos are
nothing compared to the promise of net based music distribution.
Should the amount of pleasure and knowledge that Napster and the mp3
format have spread take a back seat to the needs of a minority of successful
recording artists? I assume that anyone who honestly thinks they should is
either naive or completely uninterested in the progress of human thought.
The spread of information on the net has already lead to impressive things
(the completion of the Genome project for one) and it has only just begun.
Whether “progress” is a good thing is another matter but I will assume the
reader is for it - one word arguyment in my favour: Kozinsky) Unfortunately
is harder to quantify the effect that being musically informed has on a
person. Since Napster, I have been able to inform myself on virtually every
musician I ever had an interest in and discover many more - I may not be
able to site examples of how that will change the world - for all it has
done is given me more topics that I can draw on in conversation and a better
sense of history. I am convinced that this sort of musical cultivation on a
global level is positive change for humanity.
Musicians will not stop making music anymore than my grandfather stopped
playing the violin though it never made him a dime. My grandpa was probably
a much more accomplished musician than Garth Brooks or any of the Backstreet
boys - he certainly devoted more time to music over his life than they.
However nobody thought it was particularly unjust that he had to work an
office job - not even he himself.
All I ever hear is the whining of people who don’t learn from history.
There were as many people who wanted to make a living tap dancing in the 20s
as there are aspiring musicians at present. When tap dancing dissapeared
from cultural prominence you can bet there were a lot of confused and
unhappy tap experts left in the wake. However people still dance - they just
don’t softshoe and know all the lyrics to “Shoes with Wings On.” Peer to
peer music distribution is unstopable. Wake up and get with it.
October 10th, 2007 at 9:22 pm
[…] Still Don’t Get That Music Labels Are Dead People Still Don’t Get That Music Labels Are Dead: People Still Don’t Get That Music Labels Are […]
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October 11th, 2007 at 12:41 am
Agree today world is different with yesterday world. This is about long tail phenomenon. Actually the label is not dead yet, just change the way its look. They will dead if they can’t follow the trend.
October 11th, 2007 at 3:07 am
“every consumer is also a potential producer of any song” - so true, especially with the ringtone-like garbage that is running rampant these days!
Actually you will find that most of the time it’s : “every consumer is also a potentially BETTER producer of any song”!!
October 11th, 2007 at 5:09 am
What’s interesting in this debate is the new business models that will emerge and that we are yet to see, p2p networks present the greatest opportunity for bands to get their music out there and build a fanbase with a view to making money on merchandising and live gigs as has already been proven. Do read Koleman Strumpf’s (great name!) article in the NY piece, for those of you too jaded or otherwise herewith a choice sample:
‘Putting profitability aside for now, what is the explanation for the sales reduction that has occurred? The most obvious culprit is illicit file-sharing on networks such as Napster, KaZaA, eDonkey, and BitTorrent. While linking the two seems tantalizing — file sharing rose to prominence at roughly the same time that record sales started to fall — there is surprisingly little evidence to support the claim that file sharing has significantly hurt record sales.’
That man know’s his numerical mustard.
October 11th, 2007 at 12:20 pm
It is really simple.
Artists will get together and make a music website/s.
They will offer streaming music with the chance to buy it/download it a high quality recording.
Of course some will still pirate, but most will support their favorite bands.
In the end music won’t be as expensive. Maybe 1 or 2 dollars a song.
October 13th, 2007 at 3:36 am
[…] discussion about the future of the industry and the fairness of the latest consumption trends. For example: The counter-arguments I’ve seen don’t dispute the fall in price, but rather counter the […]
October 15th, 2007 at 12:28 pm
I don’t think people can claim that “labels are dead” until all of their functions can be performed by musicians independently. Distribution is only one function of the label. There still isn’t a great solution for independent musicians to go on large scale tours. Labels have connections with venues across the world and people willing to do all the marketing and promotion for the musician. Sure, you can “piece together” tours on myspace by contacting venues. I’ve known bands that have done that with some success, but they’ve had no where near the marketing push or 5 star venues that label-bands have had.
October 21st, 2007 at 3:51 am
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October 30th, 2007 at 6:40 am
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November 8th, 2007 at 6:40 pm
When you ask a musician to be a promoter, a distributor, a manager, and a producer you are pretty much dooming him/her to a very small/local sphere because those things, to be done well, are full-time jobs.
Yes, a musician or band can take up those aspects of the music business but the efforts will reap slow and small rewards - nothing like what a professional company can do where connections are in place and the people know how to nurture a career.
Ask a DIY musician honestly, if given the chance, would they stay DIY or take a record deal that helped their career and let them make music full time.
November 24th, 2007 at 12:11 pm
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January 28th, 2008 at 2:41 pm
pirated music is an uncurable disease that WILL result in the destruction of all major and indie labels; and basically will be the end of music as we know it.. which might not be a bad thing. But it will also cripple quality of product. Its pretty simple. You get what you pay for; and when its free.. you get crap. Labels have been pushing the boundries of their monopoly for years. And in a way its their own fault for being so far up their own asses. But the bottem line is that its all fine and dandy to download the music that is out there at the moment; music that is still being put out on the market and funded by major (when I say major, i mean companies with deep pockets) labels. You take away their return profit and it results in worse studio gear, cheeper studios, less experienced producers, less TIME in studio - a perfect example of how that effects music is the wonderful invention of protools. Which provided a platform for software such as autotune to thrive, so that half-ass artists can get in the studio spend less time, save more money and have a more convenient and cost effective record.
no profit return means no product. which means labels are dead. they cant afford to buy onto tours, which means they cant recoup the costs of making a sonically acceptable record. Which means the artist cant make any money.. which means there’s nothing to play on the radio.. which means theres stores to buy records… etc etc
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