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The Future of the Music Business: An Alternate Viewpoint
I'm going to start by saying that Gerd Leonhard (The Future of the Music Business: General Trends) makes a lot of good points in his article above. But I think he's wrong about a few points.
CD prices will drop to $5 (and less) -- This isn't quite as bad as John Dvorak's (PC World) opinion that he shouldn't have to pay more than $1.38 which, by his own logic, is about $1.20 higher than what the cover price of PCWorld ought to be. I don't really know who Mr. Leonhard is (I bet I find out really fast, though), but it seems to me like he isn't a recording artist. Otherwise, he might have rethought that figure.
I'm an independent artist. I make my own CDs. It costs me $1.12 to produce one copy, which includes the actual cost of the CD, the jewel case, and printing a four-page, full-color insert. There are 11 songs on the current CD. According to copyright law, the mandatory royalties are 8 cents per song, for a total of 88 cents. That's $2 total cost and does not include any consideration at all for the labor. If you buy a CD from me, the postage to mail it to you is 83 cents.
So now were pushing a $3 fixed cost. I haven't even attempted to sell it yet. Haven't bought any advertising or paid for a web site to put it on, much less touch the cost of the thousands of dollars in equipment I had to invest in guitars, keyboards and recording equipment to make it. If I tack in $1 to pay these variable costs, the $5 price point only gives me $1 a unit to pay the band (5 guys). So we make 20 cents each for every CD.
If I were a major artist and had a killer contract right now. I'd probably be making $2 an album. The record company gets the rest, even though the artist pays all the costs of studio production, advertising, marketing and distribution. Major artists have started what is called the RAC (Recording Artists' Coalition) because they agree that albums are overpriced. They also think that since the record company has made them pay each and every cost except for running a CD burning operation, they deserve a little more than 2 bucks. Don Henley thinks health insurance might be nice, too.
You're asking these guys, who are already getting screwed, to reduce the entire unit profit to less than they already get paid less than 20% on. If Tom Petty gets forced into your $5 scenario, he'll be lucky to get 20 cents for the entire band for each CD, which adds up to a 99% pay cut. And still no health insurance.
But I'm not a major artist. Nonetheless, we spent a full year on this project and we poured our heart and soul into it. I certainly don't think it's worth $15 or $17 a copy, as the record companies seem to believe, but it's worth more than $5. If I can't get at least $7 or $8 a copy, why should I even bother to ever make a record? Why would any major artist? Sure, I'll sell you a $5 CD, with the CD, jewel case and insert. But at that price, you get a blank CD. Hope you like the melody.
The real upcoming trend will be somewhere between $7 to $10, depending on if the artist or the record company controls the price. If it lands on $8.98, that takes us back to 1987 price levels, which is a good start.
* (Traditional) Radio will become irrelevant -- That's not a future trend. That's now.
* Music companies will be utilities -- I don't think they'll be quite that successful. In my vision of the future, the record companies are a footnote in history. They do no one any good.
* Performing right organizations (PROs) as we know them will vanish -- I'm an ASCAP member, both as a songwriter and as a publisher (as soon as my publisher application gets processed). I can honestly say that ASCAP is the only organization in the world that cares about any royalties that are due to me under the rights I have according to the Constitution of the United States. For about 50 years, the annual membership dues have been $10 for writers and $35 for publishers. Effective May 23, 2002, the membership dues have been abolished.
I can't speak for BMI's members, but I can say with great certainty that ASCAP ain't goin' anywhere.
* The lifetime of copyright will be decreased to somewhere between 5 and 25 years -- Not a chance. Whoever writes something owns the copyright for life. Anyone in Washington, D.C. who even thinks we're giving that up is in for a big surprise. We'll do a Million-Musician March on the White House that'll make Woodstock look like a backyard barbecue for the Fraternal Order of Police. We'll all show up, dragging every media organization in the world with us and every fan we can muster up. Between the majors and the independents, we can pack a 20-mile radius and run multiple non-stop concerts long enough to bring the government to a complete halt until the issue was addressed.
My crystal ball shows something very different happening to the copyright laws and the future is very near and these changes are only necessary until the record labels disappear entirely.
* Record companies can still control the exclusive rights to an artist's works created under contract. However, 5 years after the record company has placed the song (or album) in its back catalog and is no longer offering it for sale, the rights revert to the artist.
* Rights to recordings/songs that are created by an artist and rejected by the record company go back to the copyright owner immediately at the end of their contract.
* Music is going back to its roots by becoming a service (again), not a product -- Close, but we'll still have a physical product. Consumers like to hold things in their hand to know they own it. You can make it smaller and cheaper, but people want something real.
As for what the "service" portion will evolve to...
This is based on an idea blatantly stolen from Janis Ian, with a twist. Remember Napster? At heart, it was a great idea but got trashed by the record labels. What did the record companies and the artists all complain about? The royalties and the pirates.
But what if the"next Napster" was run by ASCAP and BMI, those performing rights organizations that Mr. Leonhard has written off? Janis Ian calls it the Virtual Jukebox and her original suggestion was that the record companies get together and build it. I say give it to the PROs. The record companies ARE the pirates, so I sure don't want them to run it.
There would be download fees, of course, but they would be minimal. Janis says 25 cents a song, but she was trying to let the record companies make some profit. I'm cutting them out of the picture entirely. In the hands of ASCAP/BMI, downloads might start at a quarter a song so they can build an infrastructure, but is almost certain to drop once costs are covered. They'll end up at about a nickle a song, but could fluctuate depending entirely on consumer demand, with the most-requested songs commanding a slightly higher fee. Related MusicDish e-Journal Articles:
» The Future of the Music Business - General Trends (2002-11-13)
» The Future of the Music Business - Predictions (2002-11-19)
» The Future of the Music Business - Other Trends (2002-12-08)
» The Future of Music And It's Enemies 2002 (2002-12-17)
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