There’s a nice overview of the music industry’s dilemma in the current issue of The Economist. Nothing that surprising, but some worthwhile points — including a telling anecdote to start the piece, in which one of the major record labels has an epiphany about where the CD business is going:

“At the end of the session the EMI bosses thanked them for their comments and told them to help themselves to a big pile of CDs sitting on a table. But none of the teens took any of the CDs, even though they were free. “That was the moment we realised the game was completely up,” says a person who was there.”

There are also some numbers, of the kind that should make many a label stop and think, if they aren’t already:

“The volume of physical albums sold dropped by 19% in 2007 from the year before… For the first half of 2007, sales of music on CD and other physical formats fell by 6% in Britain, by 9% in Japan, France and Spain, by 12% in Italy, 14% in Australia and 21% in Canada.”

And some perceptive points about the slippery slope that the major labels find themselves on at the moment:

1. “Because sales of CDs are tumbling, big retailers such as Wal-Mart are cutting the amount of shelf-space they give to music, which in turn accelerates the decline.”

2. “Artists are receiving far less marketing and promotional support than before, which could prompt them to seek alternatives.”

3. “Record companies face such hostile conditions that their backers, whether private equity or corporations, are loth to spend the sums required to move into the bits of the music industry that are thriving, such as touring and merchandising.”

But perhaps the best point in the piece is the observation that the industry could have saved itself a lot of the pain it has seen over the past several years, and likely become stronger to boot, if it had shown more flexibility when digital music first became a reality, instead of deciding to sue everything that moved and call that a strategy. Now, they could be too far down the slippery slope to irrelevance to recover.

About the author

Mathew 2430 posts

I'm a Toronto-based senior writer with Fortune magazine, and my favorite things to write about are social technology, media and the evolution of online behavior

13 Responses to “Fiddling while the music industry burned”
  1. This is such a two-edged sword. I've said before that as the parent of one who aspires to the music business, I hope for many (profitable) opportunities for him, so I'm not interested in seeing the music industry collapse at all. On the other hand, the recording industry has so badly bungled their approach to electronic music and so badly alienated their customers that it may well be too late to recover.

    I'm not sure what they can do to turn it around, but disbanding the RIAA may well be a worthy start.

  2. Its all unravelling fast and it looks like EMI are about to blow up now!

    Downloads have changed the market dynamics for the music industry. What used to make commercial sense,(i.e CD Sales) no longer works.
    Peoples spending patterns have moved on and there is little if any perceived value left in the CD format. Music is now instant and disposable.
    When the dynamics change so radically, everyone needs to adapt or die.

    EMI as a business is doing all it can to ensure its own survival. But by asking Artists to adapt to their survival model, the artists will be putting all their fate in the hands of the label as it navigates uncharted waters.

    Should anyone trust that a Record Label run by a Venture Capitalist would have the Artists commercial interests at heart??

    For once the Artists have the upper hand and they are right to vote with their feet.

    The future of the music industry has to be be very different form where it has been up till now.
    For me its very simple.
    There is money in the Live events, ticket sales, Merchandise, Sponsorship, Brand extensions (fashion labels etc).
    Record Lables who only distribute music will fail as revenues diminish.

    Livenation.com (a live events company) signed Madonna in a $120m unified rights deal that makes sense for all parties.
    If EMI want a piece of the artists other revenue streams, then they will have to prove they can add value and throw their weight behind and embrace the new dynamic in the same way.
    Right now few Labels can do what livenation.com can.

    In some respects this reminds me of 1978 and the commercial birth of Punk and I think something good will eventually come out of all this.

    I’ve been watch these guys at http://www.ebtm.com, & http://www.atticusclothing.com, – These kind of ventures could offer Artists the kind of Brand Extensions to pay the bills in the future. I expect more of innovative stuff like these sites springing up.
    The Tequilla Man

  3. Thanks for the link to the Economist article. I also posted on it (pwnership.com), and linked to this blog. My thoughts are that yes, the labels ran their business horribly. That fact doesn't artists from abdicating the responsibility to change and adapt to the disintermediation cause by the internet.

    It's simple to suggest, 'well if the record labels get torn apart, what's a poor little band to do?' That mindset isn't directly discussed, and perhaps should be.

  4. It is a very interesting and also very fast development. Where will it all end?
    And the thing is: musicians keep on recording cd's, if not published by a major company, they do it themselves, with a lot of investments. The consumer may stick to his/her iPod, many musicians don't think in terms of MP3's only. They want to make a cd, a complete creation, with a fitting art work. The real thing.
    Here in Holland we run a webstore with cd's brought out by independent artists (http://www.toonbankrecords.com), trying to get all this high quality music to the audience. Will there remain a market for CD's in the end? I am curious!

  5. I want to ask a question rather than to make comment.

    Would someone commit copyright infringement by broadcasting music on a personal blog?

  6. I want to ask a question rather than to make comment.

    Would someone commit copyright infringement by broadcasting music on a personal blog?

  7. That's a tough one, kjx, but I would guess that most lawyers would say the
    answer is yes. If you're streaming, then that's broadcasting and you need a

  8. Thank You.

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