Forbes: What The Music Industry Is Doing Right
February 6, 2009 at 5:27 AM (PT)
They've done a ton wrong ... but not everything, writes DAVID K. RANDALL in FORBES. Even before word that LIVE NATION might merge with TICKETMASTER ENTERTAINMENT (NET NEWS 2/5), THE GRAMMY AWARDS, held this SUNDAY, couldn't come at a weirder time for the music industry. Album sales are dropping, the concert business is facing a scary summer and one nominee for Album of the Year gave the songs away for free online without the backing of a major label.
Labels and promoters face a host of problems, ranging from digital piracy to an overbooked summer lineup. With so much in flux, it's a good time to ask: What, exactly, is the industry doing right? With that in mind, FORBES polled major labels, concert promoters and WALL STREET analysts to find out what steps the industry is taking now to ensure that it survives for another decade. Here's what we found.
The $7 billion publishing industry is hoping to learn from past mistakes by pushing for royalty revenues from Internet use. Though this may kill Internet radio, it will also set a precedent for publishers receiving a cut for the use of the music they own regardless of the medium.
Once fat cats, the labels are struggling as young consumers turn away from lucrative physical albums in favor of digital downloads. Digital music will make up 41% of sales as the music market shrinks by half a billion dollars from current levels to $9.8 billion in 2013, according to a report by SONAL GANDHI at FORRESTER RESEARCH.
Despite this, labels are still an important part of the industry. "No one knows how to find, develop and promote an artist as well as a major label," says one executive at a concert promoter who asked to not be quoted by name. While RADIOHEAD may be able to distribute music without a label, the vast majority of bands depend on the marketing and promotion divisions to cut through to the mainstream. Though thousands of them have been let go, A&R men and women are still finding future revenue sources.
Some labels are also exploring ways to transition to becoming marketing partners with artists. "Before, record companies would use distribution as a gun to artists' heads to make long-term deals," says AEG LIVE CEO RANDY PHILLIPS. "The smart labels are realizing that it's more like free-agency in sports, where you partner with someone for a mutual benefit."
INTERSCOPE Chairman JIMMY IOVINE received praise from several sources within the industry for being open to new distribution models. "He'll take any meeting on any new medium concept or platform," says one rival executive.