Big Labels No LongerRule Music Business

By Rob Patterson

Is the music business major record label dying here in the digital age? The predictions of its demise have been rife for years.

There’s only four left standing here in the US, and two of them were recently for sale: Warner Music Group and EMI Music Group. The positive sign is that Warners was valued at a higher price than expected. The flip side of that is that both are loaded with debt. A potentially beneficial survival strategy under consideration for the two companies has been merging them into one, lowering the count to three.

The debt is as much a result of poor financial decisions on the part of previous owners’ lousy management practices while pursuing a broken business model. Sure, the digital music marketplace as well as illegal music downloads damaged major record companies. But what sparked their demise just as much and maybe even more so was when Wall Street and the investment community took an interest in major record companies in the 1980s.

Prior to then, these firms generally thrived on the blockbuster model: The big hits paid for their many mistakes and unprofitable acts. An album like Michael Jackson’s Thriller paid for a whole lot bombs.

But there was another flipside. At a panel at the South By Southwest Music Conference in March, music critics like myself were mistakenly called “gatekeepers” for our role before the digital era. The real gatekeepers were the record label artists & repertoire execs (A&R) who decided which acts to sign up and record. Sure, some of them inked lousy acts that would never have made it. But they and their companies also sometimes signed and supported worthy artists of quality that made music that in most cases wouldn’t go mass market but was significant and important.

The majors long ago ceded that role to the independent labels, who in recent years have been posting sales numbers with some that rival the big numbers — at least in today’s lowered levels — that was the one big edge the majors could offer over the indies. Meanwhile the majors have focused largely on big pop acts, and even further damaged their ability to forge the future and remain on the artistic cutting edge by moving from recording contracts for that were like indentured servitude to deals for new acts that are tantamount to slave labor, taking a cut of everything the musical artists make: not just records but touring income, merchandise and song publishing.

Meanwhile Apple is the company making money from selling recorded music on iTunes. And being smart about it by selling single tracks for 99 cents and albums for ten bucks — much the same as it was when I was a kid (and far lower than the inflated prices record labels set when CDs were expensive to manufacture and failed to drop when they became cheaper to make than 45-inch vinyl singles with a picture sleeve).

The big record companies do still have one edge that keeps their value up: the content. Not just the vaults full of recordings, but the song copyrights held by their music publishing arms. And an indie label has yet to achieve what is now a rare feat for any musical act of selling millions. But that day may come soon.

What does this all mean for those of us who love music? The majors are madly chasing the pop hits for a younger audience that is rabid for the latest trendy thing. The indies have taken over the role of being tastemakers and developing new artists with something deeper to offer. And the marketplace is filled with chaff that makes it harder and harder to find what you may like and want. Or in short, we have a world with more music to buy than ever … if you can find it.

Major labels were once to a degree like Medicis, on occasion supporting valid art. Now they are largely candy merchants offering quick fixes with little nutritional value. Indies are the boutiques that vend specialty items of quality. And smart artists have learned that they have the ultimate power as content producers.

The recorded music industry remains in flux and though many predict what the future may bring, few truly know how it all will shake out. But as a still rather robust live music business indicates, music still matters to people, even if it has largely been reduced to another consumer product rather than a defining cultural thread as it once was in the 1960s and ’70s.

But people will still keep making music, be their motivation stardom or art. And listeners will continue to consume, whether their tastes are for fleeting pop pleasures or music that’s substantial and lasting. Music will never die. But whether the big music companies will finally wither away remains an open question. One thing is for sure, however: The future of the recorded music business will not be like its past.

Rob Patterson is a music and entertainment writer in Austin, Texas. Email orca@prismnet.com.

From The Progressive Populist, August 15, 2011