It’s hard to tell if the music industry is failing or booming.
Goldman Sachs latest” Music In The Air” study predicts the global record industry will jump 500% to reach $US41 billion by 2030. Online streaming will account for $US34 billion of that pie, of which $US28 billion will come from paid subscription while $US6 billion will be ad-supported.
New Zealand is showing a similar breakdown. According to Recorded Music New Zealand, the industry grew in 2016 by 16%, following a 15% growth in 2015 – the first rise in a decade – of which streaming makes up half the total revenue.
Yet it isn’t all roses. It is still hard to make money streaming, evidenced by Pandora’s choice to shut down its Australia and New Zealand service this year. Even SoundCloud is reportedly running on the smell of an oily rag, recently saying it might only stay solvent for 50 days.
Without money and the old infrastructure, how will music become part of the culture? The only reason we know of Stevie Nicks is that a record company risked millions of dollars to get her airplay, make music videos and advertise the band. Barely any of this infrastructure exists for new acts today.
Thankfully, the decline of the record industry hasn’t led to the death of music. The internet has plenty of room for bands and listeners. But if the record companies aren't making money, they won't be able to turn music into a central part of youth culture and identity as they did in the past.
Maybe this is a good thing, maybe not. Yet it will probably be a net negative for people creating new music. To younger people, all music is unheard music. Classical, country, folk, rap, jazz or rock from any era is all new to them. The music industry used to spend millions on marketing in shops to ensure people at the very least bought newly produced music.
This biased the market in favour of newer artists. New artists today don't have that marketing and are competing against decades of back-catalogues of bands on Google which did have that advantage.
The social networking phenomenon is probably a subconscious attempt to restrict the size of our own world and limit cultural experience to something workable, thereby manufacturing the collective cultural experience that sheer numbers have obliterated from the larger work.
For example, take Instagram. It is a series of links (pointers to units of culture such as videos, audio files or articles) and opportunities to have a common cultural experience. A subscriber clicks on a link knowing other subscribers click as well. To the extent that participating requires at least reading the comments or commenting yourself, there is a shared experience. It may not be shared in time, but it establishes a common micro-cultural Instagram vocabulary.
There is an incentive to click on Instagram links, even if the post in isolation wouldn't interest you, because you know that other people will be watching. Just like a teenager sits through 50 Cent videos on MTV even if they hate rap. Everyone watched MTV which made it more than the sum of the videos. It informed the culture and tastes of others in a community and therefore had value.
Instagram isn’t so much about finding a community of like-minded people. It’s about finding a smaller community of a manageable size in order to have a more fulfilling cultural experience which is an innate human need.
Youth culture is simply different now. People discover new music through friends, Facebook, Twitter, YouTube or other channels.
If you grew up watching MTV most of your friends did so as well. It was the common experience. Even if you hated the music, at least you knew what it was. These days, video games and social networking occupy the centre of youth culture. Music is largely peripheral.
For example, we know music has a high penetration among teenagers. But if each band is a cultural unit, hundreds of thousands of bands exist in the total musical catalogue. So unless the band falls within the 20% that gets 80% of the total attention, it isn't likely to have any great impact. The total number of bands diminishes the total cultural impact the medium can have (a high impact unit – pop-star – supports the impact of the medium, and stars rise higher with fewer units in total).
By comparison, perhaps two or three hundred game titles are released annually and all have a built-in technological obsolescence preventing people from choosing old games over new ones. While fewer people play video games compared with listening to music, the total unit count in low enough that the relative impact of a video game is much higher than for a band. Movies probably fall somewhere between music and video games.
I suspect the cultural impact of motion pictures, music, television and movies has already peaked, and they peaked in the order I listed. However, the cultural impact of video games as a medium is still rising from one year to the next. But nothing is guaranteed anymore in a digital environment.
What if you could make anything from a clump of dirt?
Sticking with music for a second, why couldn’t one album be made for every person on the planet? Or maybe one version can be copied for every customer who wants to listen. At this point, why should music shops exist at all if a customer can go straight to a record company and "lend" copies to all of his friends?
But then why do we need record companies if we can buy songs directly from the artist? And once the first digital copy is available, why wouldn’t everyone download it for free? After all, it only costs the artist an upfront cost to record, after that, every subsequent digital copy costs exactly $0 to reproduce – forever.
Now we get to the root of the dilemma. The music industry isn’t facing this problem alone. As more goods are digitised, society moves closer to a post-scarcity world. Buildings full of employees, storefronts, mines and factories will vanish as a result. And what about all those luxury goods the music artists would have purchased with their singing money? They disappear too.
This problem collapses down to one, central, critical question: is it possible to value a product which is infinitely reproducible?
This affects you, directly. Everyone’s betting on service jobs to replace manufacturing jobs, but if skill itself is digitised it becomes worthless. If this doesn’t make you worry about civilisation, you’re not paying attention.
When Lou Gerstner took over IBM as CEO in April 1993, Wall Street speculated it was going out of business.
Microsoft owned the software market, Dell owned the PC business and both Sun and HP were churning out workstations as big iron mainframes fell out of popularity. The ex-tobacco executive Mr Gerstner was seen as an outsider and was seen to be shepherding IBM into the sunset.
One of his first acts as CEO was to gather the top vice presidents of every IBM division to write in one sentence what IBM's business was. The result? No two VP's gave the same answer. None could articulate the vision, and there was no understanding of the company's business from people who had been in the business their entire careers.
IBM was being left behind because it wasn’t innovating and no longer knew its business. Huge companies that don't innovate get replaced by companies that do, but innovation doesn't have to come from small companies.
The record industry is the same. It’s trying to find a way to protect its business from ten years earlier, instead of trying to figure out how to recreate its business for success in the next ten years.
Instead of focusing on what they really do – which is understanding listener's tastes, seeking out music to meet those tastes and supplying it – they still think their business is pressing CD's and shipping them in plastic cases to record stores or downloading a digital copy to a hard drive. They focus on shipping the music as a thing, instead of enabling people to listen to it.
The problem in the record industry is not a technological problem, it is a vision and marketing problem. "What do I sell? To whom? How?" Music still needs promotion of some kind, but maybe not videos and heavy FM radio rotation. Money doesn’t have to be made from every song play to make enough profit to record more songs. So think outside the box, whether that box is a huge department store, a CD case, or an iPod.