10 Membranes

Thoughts on the Music Industry

Last Thursday I was lucky enough to attend Universal Music’s Open Day: an event designed to showcase a new more transparent and discursive positioning of one the biggest of the majors in an attempt, largely successful, to start regaining the street cred lost over the past few years. I learned a lot. Here a few thoughts from the evening:

-          Record labels are the cooler younger siblings of publishing houses. In terms of the style and feel it makes publishing look full on swottish. Hardly a surprise, but just wonderful to revel in the ridiculous reality of stereotypes.

-          Very seriously people in the record industry wonder why they are disliked and called greedy fat cats etc. This is a very good questions – 90% of people working at labels does so not for the money but a profound love of the music and of getting it out there. That’s what matters (ditto for publishers) and the rest is noise. However customers are cleverer than that, seeing what those in the labels themselves choose not to see: the nature of corporate ownership itself. This is the underlying reality beneath the dedication and belief and cool free living spirit of the labels. Universal is stuffed full of talented, hard working passionate people and labels with history and aura: but ultimately it is just an empty money making vehicle for conglomerate owner Vivendi, and not a particularly good one at that. The real share holders and accountants look at the business very differently from the stakeholders on the inside; ultimately those on the inside do not control the business and this is what has been noticed. There is a massive disconnect between corporate profit generating structures and creative industries like music or publishing, but those in the big corporates have basically deluded themselves that there isn’t. The public is not. Andre Schiffrin has outlined this problem with the publishing industry, arguing that actually the industry is unsuited to corporate ownership given the low likely rates of return, and given that the logic of corporate ownership runs counter to why most people enter the industry in the first place.  This is why people hate the record industry – not for the people, but for the ownership pattern, the corporate structure and the knock on effects of both. $50bn groups are not rock and roll, never will be, and the industry tries to have both ways, but it can’t. All the creative industries need to dwell hard on how to reconcile corporate ownership with the production of that which is nominally antithetical to corporate ownership.

-          Music also provides an excellent illustration of what private equity does for a business. Take EMI, one of the all time great British media businesses. Give it to a corpulent, arrogant shit head like Guy Hands. Load it with £3.4bn of debt, simply for the pleasure of his ownership. Watch as many of the key brands flee in horror. Watch as his cost driven lunacy doesn’t work, it can’t finance the debt and a meaningless legal battle is enjoined. Now EMI is owned by Citigroup, and is likely to be broken up and sold off. The whole thing is utterly tragic and utterly pointless wasting economic value, musical heritage and decent jobs in the process. That is what private equity does to the creative industries.

-          Mixed business models are and will work in the long run. You can sell cds and downloads; you can have paid for streaming, add supported listening or bundled music over every conceivable platform; you can have licensing and other commercial arrangements. This is a case of more is more; the more channels and platforms you have, the more business models and means of listening, then the more money you will make. Over the past three years music has exploded everywhere and this time the record labels have been there driving it creating a genuinely diverse marketplace for music. In publishing we still have ebook downloads or cloud hosted. We should pay attention to this.  Interestingly though one platform dominates the listening of music more than any other: Youtube. We saw an extraordinary graphic that displayed music listen in terms of circles – Youtube was off the scale by a large distance, Justin Bieber alone having over a billion plays on Youtube. Figuring out the most effective means of monetising this will be key.

-          Breaking new acts is getting harder. The industry wide trend rates for new acts selling to Gold (100K sales) is around 25 new acts per year; last year there were only nine such acts across the industry. This is thought to reflect both hostile retail environments from people like the supermarkets but also the fragmentation and hyper-localisation of music taste driven by the web. Confidence in new acts and new music seems to be very high, however. In general this is a problem across creative industries, the need to franchise, the imperative of the Big Brand, the winner takes all slow decimation of the midlist, the consequences of retail monopoly and the fissioning of taste engendered by mass personalisation online. The more you look across the creative industries the more you begin to realise there is a certain shared problematic; the problematic of late-capitalist techno-populist monopolism, if you will.

-          The majors still dominate to a huge extent, with Universal, then Warner, then Sony and lastly EMI hanging on with Katy Perry and Tinie Tempah. The only non-major released album on the bestseller lists (headed by Universal’s Take That with 1.8 million sales) was the xx on the fabulous and important indie label XL Recordings. Sales in the charts are generally on a much higher scale than books although this doesn’t seem to affect profitability to any great extent.

-          Patterns of download and demographic are fascinating and possibly the most interesting thing for other sectors. Downloads still only constitute around 17% of album sales, which have pretty much held steady although with a trend decline. CD sales then are still the mainstay of albums to a much greater extent than is commonly imagined. In the singles market however the CD has all but disappeared with the overwhelming majority of sales downloads. Moreover this has seen a rapid increase in the overall size of the singles market. Crucially though, there is very little overlap in the content and the buyer profile of these two. Downloads (e.g. singles) are mainly dance, urban and R’n’B poptastic yoof choons downloaded by, well, yoof. Albums are downloaded by the older (rather than old) demographic and could be anything from Florence and the Machine to U2, the point being that there is a clear stylistic break between the markets. The two obvious conclusions are that firstly specific types of (populist, disposable, commercial) content are well adapted for digital download and secondly that the younger age groups are preponderant in the digital space.  Yet neither quite holds for digital reading where the typical ebook buyer is an older – 50s- heavy reader far removed from be-hooded teens and while commercial content is bestselling we shouldn’t forget that it was academic monographs and journals that pioneered the whole form.

Plenty to think about.