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The Future of the Music Industry

Posted By Barry Ritholtz On August 23, 2005 @ 10:05 am In Finance,Music | Comments Disabled

Music industry insider Bob Lefsetz gives us brief history of the Music Business, and a fascinating vision of what the future of the industry might look like:

"What if it’s over.  What if everything this business was built upon, everything we know, is disappearing.

Well, this business WAS built upon music.  But that was a long time ago. 

That was before everybody got greedy.  Before it was demonstrated how much MONEY there was in the music business.

Oh, there’s always been a music business.  Back to the days when cavemen were banging on rocks and people sat around and listened.  But the sixties were different.  We had recorded music, and a large ready audience, i.e. baby boomers, with the money and wherewithal to buy it.

Before the sixties the single was the dominant format.  First 78s, then 45s.  You can’t make much money selling singles.  Just ask the labels how profitable iTunes is.  And, there wasn’t much money.  There was a depression.  And then a war.  But when rock and roll hit, when the baby boomers came of age, when the Beatles turned it into an album format, purveyors started COINING DOUGH!

You HAD to have the Beatle album.

And the Beatles and the San Francisco sound begat concert venues.  And press to cover the scene.  And suddenly, music was the driver, the hippest art form extant.

And the MONEY!

First there were the records.  Then, Led Zeppelin changed the live deal.  To 90/10.  And everybody wanted to SEE Led Zeppelin.  There was no venue too big, they could sell every seat of a stadium.

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And there was radio to grease the way.  To turn people on to new bands.

But then FM radio became formatted.  The acts became corporate.  The whole thing tanked.  But MTV revived it.

Suddenly, there was a new way to expose product.  And this new exposure sold TONS of albums.  Killed acts as quickly as it made them, but the public was hooked, they had to watch, MTV was the antithesis of corporate television.

Then came the baby boomlet.  The CHILDREN of the baby boomers.  Whose parents  didn’t believe in denying them.  Lou Pearlman developed a whole new breed of act to appeal to this group, and the Backstreet Boys and ‘N Sync sold DIAMOND! Over ten million albums per record.

Then it died.

Yup, died.

The labels will tell you it’s file-trading.  That’s why we have no more diamond albums.

Concert promoters blame the acts, they’re too greedy.

And if you listen to the public, everybody’s too greedy and the acts suck.

But, is any of this TRUE???

Well, all of it’s true to a degree, but are these the factors that are ailing the music business or are their OTHER, unforeseen, unexplored reasons?

There’s no center anymore.  No town square.  No marketplace that everybody passes through.  We’re no longer one cohesive culture.  And therefore, you can’t find ten million people to buy one album.  It’s not like the sixties, when you heard everything.  Mariah Carey had the biggest track of the summer?  I bet half of America never heard it.  Hell, most Americans are not familiar with the Top Forty chart.  It’s meaningless to them.  They don’t listen to the radio stations and they don’t like the urban-oriented sound.

The acts that sell today, to the degree they DO sell, are overexposed.  That’s what the major label’s business is.  That’s why you sign with a major rather than an indie.  They’ll get you on the radio, MTV/VH1/Fuse, "The Today Show", maybe even "20/20", in "Us", "People", singing the national anthem at sporting events, in movies, at least your songs.  Because if you don’t do ALL of the  above, not enough people are aware of your product, the major label can’t sell enough copies to recoup its investment.

But it gets worse.  In order to get everybody to buy in, in order to get all the exposing media involved, the music has to be palatable.  Must be bland and inoffensive.  Otherwise, it’s a tune-out, and ratings will decline.  UNLESS, OF COURSE, it’s the edge, the danger that you’re truly selling.  It’s not like the days of the Rolling Stones, words are not enough, how many times was 50 Cent shot?

But it’s not only the labels that are in trouble.  The live business is never going to be the same.  It’s got nothing to do with sheds or arenas.  Nothing to do with the quality of food.  It’s just that not enough people know about the touring acts that you can SELL 20,000 tickets a night.

Classic rock acts.  They’re already ingrained in the public consciousness.

The Dave Matthews Band?  Truly, the last one to squeak in.  When MTV still played music, broke bands.  THEY can make the numbers.  And then there’s Coldplay…  One has to ask, is Coldplay selling out because it’s such fantastic music or because people need a rallying point?  To feel SOME connection to the mainstream?

But Coldplay is irrelevant.  Let’s just say there will be a COUPLE of new bands that will break through and sell tickets for a year or two (if you think Coldplay’s gonna be doing 20,000 a night three years from now, you’re dreaming, or else they’re going to make a quantum leap in recorded material, since "X&Y" is so bland, so repetitive, so WEAK as to be laughable to anybody truly listening).

This business was built upon a NUMBER of acts selling out arenas.  Where are those acts coming from?

There’s no mainstream outlet exposing these acts, IRRELEVANT of how good the  material is.

MTV plays almost no music.  Remember when you HAD to get a ticket to the VMAs?  Could there be LESS buzz about next week’s show?

Radio is run by advertising men, not music lovers.

But music lovers still exist.  They haunt the Web.

But the Web is narrowcasting.

Music ain’t gonna die.  It’s just that each album is going to sell fewer copies and each concert is going to have fewer attendees.  You’ll go to a club to see a band that almost no one has ever heard of.  Just you and some other people on MySpace.  It will be enough to sell a couple of hundred tickets in Cleveland, but it won’t ever sell 20,000 a night.  Unless, of course, the act signs to the major label, which will dumb down the music, sell it everywhere and kill it.

It’s a funny era.  More people are making music than ever before.  More music is AVAILABLE than ever before.  There are so many genres that even an expert can’t keep them all straight.  But it’s bad for the old guard.  The old guard is based on tonnage of individual acts.  Those days are through.

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To subscribe to the Lefsetz Letter [1], please visit Lefsetz.com [1]


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