Fiddling while the music industry burned

by Mathew on January 12, 2008 · 13 comments

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.

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