The Future of Music, Record Labels and Its Fans

The impact that music distribution today will have on the public and what the future of music means for the music business, record labels, its musicians and its fans. It identifies the solutions needed to adapt to this rapidly changing music world.

Abstract

This paper investigates what the impact of music distribution today will have on the public and, more importantly, what the future of music means for the music business, record labels, its musicians and its fans. It describes the surprisingly big impact that the future of music will have on the musicians, the business and fans, providing a context in which technologically mediated changes can be understood. The effects on the music industry and music world are illustrated through a series of peer reviewed data sources, music magazines and a documentary. The initial results of these changes are thus demonstrated, and the article identifies the requirements and solutions needed to adapt to this rapidly changing music world.

Introduction

I would like to explore the future of music, its business and its fans. By doing so, I will be looking at the major downloading frenzy, as well as other factors. Music has a great social and cultural impact. With ever changing technology, people are starting to switch from CDs to mp3s and downloading, and from radio to MySpace music pages. I find this extremely important because it can shape and change a whole era.

Looking back at the '90s, we are able to see many events that took place and changed the era. After grunge tore up the airwaves, the labels wanted everything to be tidy and separated evenly. Much like in the '80s when the labels were all about being integrated and organized. Top 40 was their creation. Their plan was to maximize profits by reducing the number of artists and the number of albums. The record labels despised little bands each with their own little fan base. The result: boy bans, Aguilera and Britney. Late in the '90s, videos were non-existent to MTV, when it began branching out into sitcoms and other shows. Radios did not play the new stuff, unless it was artist approved. The underground music scene dove further down under. You would not even hear about an artist, if they were not mainstream. It was a nightmare for music in all ways.

Then came along a concept that changed the '90s and generations thereafter, which is why I believe it is important. Downloading started to emerge. The labels envisioned a record store as a place that would be completely empty, yet, where you could get anything you desired. You would just go in and request the disc you wanted. Instead of them having it on hand, they would just download it and copy it for you. With the consequences of downloading and the Internet, new bands were starting to emerge. Labels were not even getting their money.

It seems that some artists or bands do not need to work as hard as they used to achieve fame, through gigs and tours. Bands and artists do not seem to become big in any traditional ways. Instead a group can use technology to get to the top using MySpace and still seem to get benefits. They can be followed online. Is anyone noticing that some careers are lasting no longer than a year? The digital age is equivalent to making one-hit wonders more common. While technology may be increasing the way we are able to access music, and we are entertained at concerts and the like, downloading is also one of the reasons the music industry is opting for a fresh eye and a new business plan.

My research question for my paper will be: what impact does music today have on the public? More importantly what does the future of music mean for the music business, record labels, its musicians and its fans? I will also be using a French-language source to show my accomplishments and the knowledge I have learned through studying French at school.

Thesis Statement

My thesis statement is that the future of music and the music business could have a surprisingly big impact on the musicians, fans and a generation. By reviewing the impact the music had on the industry, artists and fans in the 90s, I can better understand how much of an impact this era will have on the music industry. Through scholarly articles that discuss downloading, I can confirm that the public has definitely adapted to a new way of listening to music.

I review interviews and statements made by artists, as well as examine scholarly articles. From such evidence, I develop a strong basis upon which to discover the following: the future of music and the mediums in which to hear it, and the affect it will have on the music business, record labels, musicians and its fans. I expect the answer to my research question will be that the future of music has a significant impact on the music industry, the record labels, the musicians and its fans will all have to adapt. The music industry and the record labels will have to change their plan for marketing and selling their product. The musicians will find new ways to distribute their music (i.e. Radiohead's In Rainbows album, which was offered at a "pay what you want" philosophy on their website, along with many other bands such as Nine Inch Nails). The fans demand change, which can be seen through the music lovers choice of listening to music, such as MySpace music pages or perhaps simply by surfing YouTube.

Integrative Review

The music industry: a deceiving business. Kirk (2004) notes that, out of the 30,000 albums put out every year only 100 are hits, the sales have fallen from $40 billion to $28 billion, 85 percent of all records fail. This industry, like many others, bases its lifeline on the income from its diverse products. Yet in recent times this income has been threatened. Technology is ever growing and has taken over the music business, to change the way our music is produced, distributed, delivered and received.

The music business can be a difficult one to understand. Garofalo (1999) finds that music has changed from a secluded mass cultural event, to an accessible global interactive trend. The reasons for this revolution can be seen through advancements in technology, along with cultural growth and economic influence.

May and Singer (2001) ask some very important questions concerning the future of the record labels. With the increasing digitalization of music, every song ever recorded could appear on the internet. In this devastating reality, would music lovers, or should one say pirates, really pay fifteen dollars for one of their CDs? Knopper (2009) has some hope for the 'high' prices of CDs versus free digital downloads. Online stores are now cutting their prices near to the ground. Just this January, Elvis Costello's album, My Aim Is True, was selling for less than two dollars on Amazon.com. Some artist advisors are even warning that $9.99 is too expensive for an album, while on the other hand a few record label executives cannot handle this low a price. Amazon is even accepting a decline in profits if it can attract more consumers. Some prices are even too low for some companies such as Apple/iTunes which is planning to raise its typical 99 cent songs to $1.29 for newer songs (in both Canada and the United States). Crockett (2005) adds that after paying off record companies and other fees Apple only receives 4 cents per track. O'Rourke (2007) then adds that maybe record companies and the Recording Industry Association of America (RIAA) should give up the fight against file sharing. In October 2007, Jamie Thomas, was ordered to cough up $220,000 for the illegal downloads of 24 tracks on Kazaa, a file-sharing network.

It looks quite unreasonable when that same month, Radiohead applied the "pay what you want" (or pay nothing) philosophy on their website with the release of their album, In Rainbows. The average price paid was $8, it was beneficial for Radiohead, since a typical artist takes home $2 for every $17 CD sold. Take Radiohead, for instance and what they have done with their latest album. Costa (2007) puts it blatantly, this is the future of music distribution. In Rainbows sold 1.2 million copies. The band was able to drop distribution costs and keep the labels hands from taking any cuts. Patrick (2009) mentions that even the Nine Inch Nails posted a downloadable version of their new album, Ghosts I-VI, for a very low price of 5$. The consumer could even download nine of the songs off that album for free. Moreover, the Nine Inch Nails CD, The Slip, was made available completely at no charge. Nine Inch Nails even mentioned that if they could do anything at the moment it would be to offer their album at the highest bit rate for $4 through PayPal. Even Madonna is getting onboard. She bypassed her record deal and sided with a company that only focuses on licensing, merchandising and touring.

According to Costa (2007), the Internet is becoming more and more useful for artists to cut out record labels. This time it is not the small or amateur musicians but rather what major labels base their lifeline on, the hit bands and artists. There is absolutely nothing the music industry can do about it. Costa (2007) finds that In Rainbows is a very important example for the music industry. It represents the acknowledgement of the digitization of music and the reality of the music business. As a result, Radiohead was able to gain many benefits. Most records are leaked online long before their release. Although, In Rainbows was not, it was released online the same day as it was available for reviewers. In doing so Radiohead were able to get paid. Labels make their biggest profit on the hit musicians, who are the ones who are most likely to adopt "free" online pricing. Funny how nowadays it is up to the artists to come up with sensible prices and fabricate their own distribution models.

Jones (2005) also brings up an all too familiar statement by the industry: "protect the artists!" Maybe the industry should be spitting out statements such as: "save the record companies!" These dishonest major record companies care only about their revenues and could care less about the state of the artists. Kirk (2004) points out that corporations burn artists out, use them and abuse them and then throw them away. Way back when the record labels were started, they were run by people who loved records and loved music. Perhaps they still do, yet today some artists who go into a meeting with a record label executive, see that the exec cares less about the new song you had just written and is more concerned with how many units you sold in the past and how many units you could sell with this new song.

According to Kirk (2004), one way that the record business can be flawed is in the case study of the Hudson Brothers. The Hudson Brothers were an American music group formed in Portland, Oregon in the 70's. They were forced into the limelight by their record executives, appearing on shows such as The Hudson Brothers Show and The Hudson Brothers Razzle Dazzle. Their freedom was stolen from them when they showed up on TV. They were no longer credible. TV thought they were rock and rollers trying to act. Instead of their picture on Rolling Stone, it appeared on TV Guide. MTV is a great example of the downfall of music and the many downfalls to come. MTV is a powerful force. To become a hit, one needs a great story and a great single, much like Britney Spears and Jennifer Lopez have done in the past. MTV exulted marketing over substance. As with Top 40 radio in the 70's, it became only about the three minute single and what you looked like. MTV is visually appealing. According to Kirk (2004), the depth of Britney's songs is about that of a bird bath.

May and Singer (2001) point out that the sectors of manufacturing and distribution could be the most affected. When one buys a CD, one pays for everything: from distribution to royalties, all the way to retailer mark-up. With the distribution of music over the internet, two thirds of such costs could ultimately disappear. May and Singer (2001) find that emergence of technological improvements and downloading such as Napster, were the biggest setbacks to the music business. Yet there is hope for the industry. May and Singer (2001), find that the CD is still the best way to listen to music, offering excellent home and car audio. AM radio-type quality MP3 audio will not be able to continually substitute for home and car audio. The MP3 format posses many problems for the consumer. The listeners are faced with a poor sound quality, much like that of an AM radio. In addition, computers these days do not last for long and the transferring of MP3 files from one to another can pose a setback.

With age of downloading, major record labels and studio executives really have something to worry about, notes Jones (2005). They are concerned about having to re-structure the models they have put so much effort into all of these years. Moreover, they are scared about not being able to satisfy the studio executives and marketers with their six-figure salaries. Their biggest fear is perhaps that power of advertising and distribution will yet again be at the artists' control.

The Economist (2005), however, points out that certain entertainment firms should be careful about their copyrights. With the explosion of digital tracks the high quality music could virtually disappear, if it is not copyrighted. May and Singer (2001) find this is where my generation comes into play. Young consumers have a big impact since they believe that music should be free for the same reason information is free. Copyright has been around since after the Industrial Revolution. It must be reviewed, since technology is here to stay. Jones (2005) finds that we might have to reconsider the relevance and the role of copyright in the digital age of music, yet this could pose a problem because this is how artists earn their money. Perhaps we have no choice but to accept this new technology and reconsider the established ways that are no longer relevant. If we look back on today, twenty or so years from now, we will laugh and find that the war against file sharing was like "trying to stop a hurricane with a tennis racquet."(Jones 2005)

Armstrong (2008) states that in the past, the industry focused on looking for hits to allocate their main source of income, yet the expansion of the digitalisation has shifted their view. Kirk (2004) points out that before, record labels only had so much time and so much money to spend. If an artist did not go boom, then goodbye. Yet Armstrong (2008) has found that finding hits has turned into a less important objective for the music industry to draw in profits. Jones (2005) states that not everyone is complaining about the state of the music industry. Small bands and independent record labels are benefiting from the advancements in technology, since they allow for the accessibility of their music to listeners, the advancement of their fame and consequently a larger fan base for their gigs.

Most people now know the sales of CDs have hit an all-time low; from 2001 to 2005 the sales of CDs were cut in half. Armstrong (2008), though, argues that the pirates are not to blame. Most of the blame for this decline is due to the ability to store large quantities of music on iPods, computers and the internet, which give the consumer a large variety of music. Music lovers are now straying away from the mainstream music, adapting and discovering different, sometimes amateur, digital music. This new trend can be explained by enormous "shelf space" available today. Back when music was not digital, the industry left out different types of music as a precaution over the fear of "shelf space." It became hard for radio to find "shelf space" and to squeeze 32,000 records into a "needle," when you have to accommodate 4 or 5 new ones a week. Kirk (2004) mentions radio will only add a few songs, the same as with MTV. The Economist (2008) argues that the established file sharing networks are responsible for 70 percent of the plunge in album sales. Surprisingly for every one song that is bought legally, twenty songs are being downloaded illegally, according to studies compiled by a statistic firm BigChampagne.

Jones (2005) brings up another side to the decline in sales of albums. He shows that pirates are still consumers of CDs. The sales of albums might be at an all-time low, but perhaps they are plummeting for the same reasons as the film industry: consumers are still no longer interested in buying old acts like Britney Spears and remakes of the Dukes of Hazzards. Music lovers are becoming more knowledgeable and they are no longer buying the 'crap' that is being fed to them. Kirk (2004) also mentions the same point. Conglomerates want to have a strict deadline on the artist's release of an album which leads to the production of terrible "art." Even the last great influx of art, rap, was corporatized, packaged and has brought about processed people.

Downloading is not the problem. It is because artists stopped putting out quality music. They stopped giving the public something to believe in. They fed them all the terrible music, but the people caught up and responded by finding alternative ways to find good music. People have been deceived and disappointed. They want to buy an album because of the great single they heard on the radio, yet now they have to pay for all of this "junk". The public will go and buy good music when you give them good music to buy.

May and Singer (2001) bring up an interesting conclusion to the plunge of the music industry, which is perhaps is not a bad thing after all. Record labels may not have anything to fear if they choose the right path though. One way of looking at it could be through a subscription delivery system much like the cable companies today or even the movie subscription-based delivery companies. With this solution, the music business will most likely expand two times in size. Jones (2005) points out that to save the music industry, it can no longer go on to use its album delivery business model. Instead it should look into a more music distribution oriented business mock-up.

As we all know, there has been a constant war by the big record labels and the RIAA against the file-sharing systems now on the internet. The Economist (2004) finds that the labels are now coming to terms with the file sharing networks, but not entirely. The record labels now want to find ways they can profit from this. Universal is in the process of establishing a deal with a firm which would use the advancements in technology to actually track down songs that are traded on the internet and send the pirates a bill. Sony-BMG is also looking down this road. Connolly and Krueger (2007) argue that not only are the labels angered but the artists too. The artists' solution, more tours and higher ticket prices. This goes without saying that the biggest stars today are relying on profits from tours and not the tradition of recordings. Shockingly the Rolling Stones' 2002 tour was able to generate 91 percent of their income for 2002 ($44 million). During 2002, the ratio between concert revenues and album sales proved to be a staggering 7.5 to 1. This plan also has its cons. The price of concert tickets for regular seats goes up an unbearable 8.9 percent a year, which does not include seats on the floor or in the first few rows. This problem causes the number of concerts to shrink. The sales of tickets in 2000 was $30 million, whereas three years later this figure had dropped to $22 million.

Another problem, which can explain the problems the music industry is facing today, is discussed by Lambert (2008). If we can get free streaming music on our computer, then why not on our phone or Blackberry device? Dano (2007) finds that future of the music industry is up to wireless. Music is now a "on-the-go", mobile movement. Since the emergence of Walkmans music lovers could roam around, with three or four cassettes in their pocket, while they listened to their music. Then came the portable CD player, where most CDs got scratched dragging them all over the place. When digital music players came about, music lovers could listen to music non-stop without having to press a button. When one can save a hundred dollars, nowadays, without having to buy a MP3 player it makes sense to buy a cell phone that can play digital music. With music at the consumer's fingertips with a device like the iPhone, another war takes place.

More and more websites and companies are now offering free streaming music on their websites. All the music lover has to do is choose their favourite song and the song will play on demand. No cash or waste of time downloading songs. Technology also develops other interesting opportunities for music lovers. Jango is a website that offers the consumer the opportunity to create their own radio station. The music lover is able to pick their favourite songs, how often they play and allow their friends the opportunity to listen the station they have created. But Lambert (2008) finds that soon consumers will want their music on mobile devices rather than their Internet browser. Pandora.com has already given the consumers just that. To date it has offered over two million downloads of its personalized radio for the iPhone. Music companies are now trying to get higher royalties whenever a track is played on an Internet radio. Therefore, it might take a while before music on a mobile device is mainstream. Licensing restrictions are even set up on Pandora.com which administer where songs can be streamed, blocking Canada all together and soon the United States.

Lambert (2008) also thinks there should be a monthly-subscription model in place, since many music lovers are more at ease with transactions on the Internet. Today subscription companies are around long enough to be stable in the consumers eyes. Another website, Seeqpod, offers a mobile application which allows music lovers the ability to search and listen to any song on their mobile device, apparently for a "one-time payment" of $ 10.

Hancock (2006), finds Panic! at the Disco, a young pop-punk group, saw YouTube as an opportunity rather than a copyright breech. When they first saw a video from their live show appear on YouTube, Panic! at the Disco saw it as a way to see themselves from the fan's point of view, to critique themselves and improve for future shows. In 2006, their video "I Write Sins Not Tragedies" was one of YouTube's most watched video with 6 million views. Panic! at the Disco took it as a way for consumers that were not familiar with the band to become recognized with their music. YouTube allows artists to promote themselves and their songs and have a close connection with their fans.

The question: how will this turn into profit for the artist? Hancock (2006), informs that the founders of YouTube are now in discussion period with the major labels. Record labels are granted with the opportunity to promote their artists on YouTube, the website then produces "advertising revenue" for being the host of quality material. Even an executive for Warner Music Group admitted distribution channels like that of YouTube, are the greatest opportunity the industry has ever had. Benefits can also be granted to record labels. If bands have a chance to fool around and experiment, a new hit song might fall into the record label's hands, even in this era of packaged materialist "pop princess". Yet music executives are still trying to find ways they can use YouTube to their benefit.

According to Schweizer (2009), artists are now turning to other alternatives to make their money. YouTube and mobile devices, such as the iPhone and the BlackBerry add to the major problem of illegal music downloading. With technology sticking around for good and pirated music downloads amounting to 95 percent of all downloads, some musicians are avoiding and forgetting about their businesses such as Sony BMG Music Entertainment, Universal Music Group, Warner Music Group and EMI Music. Even the co-manager of Radiohead is facing the truth that YouTube has become the main channel between artists and fans. Artists are now able to no longer regard a record label as the only alternative, they can become big without them.

The sale of digital music through the Internet and mobile phones showed potential with increasing sales of 25 percent, amounting to $3.7 billion in 2008. This amounts to a fifth of the global marketplace. Yet Schweizer (2009) justifies that artists are still able to gain profits. The makers of mobile devices are now making deals with musicians and music companies where digital music songs can be downloaded legally through the smartphone devices. YouTube will also allow artists to get a piece of the pie through the amount of visits to their videos. Schweizer (2009) puts it simple, there will most likely not be a sole business model. Consumers are now able to search for and recognize the music they enjoy, and disregard the rest, due to growing Internet and the likes of wireless and broadband.

The manager of acts like Avril Lavigne knows the reality that the majority of music will be soon be accessed through Apple's iPhone and Research in Motion's BlackBerry. All other ways of consuming music will take the backseat and in the future, smartphone devices will be the main way of consuming music. The evidence: 36.5 million smartphones were shipped in the third quarter of 2008, a growth of 12 percent over last quarter. In the future, Schweizer (2009) argues that record labels' support will no longer be deemed important because the music industry will be established and managed online. Therefore, the comprises of licensing payments will be received by the amount of views on YouTube or the sale of online tickets. High-speed Internet connections were able to change the consumers' tastes and lead to the illegal downloading frenzy. By making agreements with smartphone companies, record labels are taking the first step in accepting the path that music is taking.

Perhaps the only way to look at the "revival" of the music business is through May and Singer's (2001) business model. Economics, technology and the preferences of the consumer will lead this new revolution. The model will consist of a multi layer subscription rather than the product-sales one we are all accustomed to. May and Singer (2001) compare this model to a "jukebox in the sky" which ultimately be able to contain every single track ever recorded. The catch: a small monthly fee. The benefits: consumers would have access to any genre and as much music as they desire. Comparable to a radio signal, the music would be streamed to Internet-enabled electronic devices. If this model were to lift off, and it shows extreme potential, one could see the disappearance of downloading, CDs, and music stores. The model is similar to cable, consumers pay $40 when they could receive basic television at no charge, showing consumers demand more variety. Although, this model would take some time to develop, but everyone would benefit.

The average consumer of music spends up to $70 on CDs a year. If a $10 fee per month was established for this subscription based music model, that would mean the expense of $120 a year. The music industry would virtually double its revenue from $40 billion to $80 billion. Record labels will finally win their war against technology! They will then be able to own the rights to these catalogues of music. The vital structure of record labels, marketing and promotion, will still be able to play an important role for the new and struggling artists out there.

Yet the age old problem of sticking out with the growing amount of artists will still remain. According to Bruno (2005), research from NDP Group, a statistical firm, indicates that only 37 percent of consumers are interested in the subscription based model. The rest are more interested in sticking with their regular ways of downloading and transferring it on to their MP3 device (also called sideloading). However, the CD took about five years to revolutionize the listener and eliminate the cassette. Perhaps the question is up to the consumers, will they go for this new subscription based way of listening to their music in the distant future?

Conclusion

As can be seen, the future of music will bring about many changes and many great ideas. Which ones will actually catch on? The sales of CDs have been on the decline since the emergence of file sharing networks, causing a scare for the music industry. The industry worried their flawless business model would go down the drain. We are seeing rock bottom album prices in a desperate campaign to attract consumers to buy CDs. The future of music could see every song appear on the internet or on a "jukebox in the sky," where one would pay a small monthly subscription fee to receive all the music their heart desires. Musicians are now finding new ways to become big, bypassing record labels and using the internet to feed their wallets and the growth of their fan base. Copyright laws have to be reviewed in this digital age. More and more internet websites are offering free streaming music at the touch of a button.

Perhaps the two concluding directions the music industry will turn to are as follows. All music will be available to consumers for a monthly fee. Record stores and CDs would vanish, music radios too. The music labels' profit would in turn double and record labels would finally win their war. Artists would also be able to receive profits. Although this model may not apply to all. Music would also be available on smartphones, like the iPhone and the Blackberry, for a small fee. Musicians would also be able gain from the music on smartphones, YouTube and the subscription music model. A new subscription based model would take form. The real conclusion to the future of the music industry is conceivably up to the consumer. Are you in?

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