Through the recent history of contemporary music, record sales have been the primary source of economic fuel for the industry. Essentially, labels advanced their activities by selling records in various media formats. Cassettes, vinyl records, compact discs, and 8-track tapes all enjoyed periods of time when they were the preferred forms of physical media for a majority of consumers.
However, as each of these media formats became popular, the demand for older ones declined. In such cases, record labels often adapted to adapt as their inventories of older media needed to be liquidated. These brief periods of economic calamity were always followed by a new type of prosperity.
An example of this was the rise of BMI during the Great Depression. Since the economy underwent a period of significant deflation, radio stations needed to renegotiate their licensing agreements. BMI had a full catalog of jazz that it was willing to part with at the lowest price, and, as radio stations began licensing with this new organization, an entire cultural movement rose to prominence.
The Internet Forced a Market Correction for the Music Industry
When the internet first became a mainstream phenomenon, the record industry was immediately harmed by file sharing. Web savvy fans often shared new albums by their favorite artists, and this hurt record sales. At the same time, most labels were spending more and more on records and charging higher prices for albums. These two conflicting trends represent poor business fundamentals for the industry at large. To make matters worse, this business model was largely cemented into place by 30-page record contracts that no longer produce profits in most cases.
This market correction is currently underway. In the future, we may view this as a crash in the music industry. That said, the crash itself exists primarily to send signals to bands and labels that it is time for a new model that takes advantage of the benefits of the internet.
On the Cusp of a New Era of Prosperity in Music
For new musicians, it is far easier to build a worthy career as an artist in the internet era. In the past, getting gigs required catching the attention of a big-time booking agent. Now, bands can trade shows with each other. This allows two local bands to essentially become regional artists by inviting each other to play shows in front of their home town crowds.
Home studio software delivers professional-quality sound files. With so many HD video cameras available at low prices, hobbyists can make music videos that impress online viewers. Companies offer free content management systems for bands that allow them to stream music for free. In the past, music could only be delivered on the radio or on a piece of physical media. This expensive process alienated those bands that could not find a powerful record label with deep pockets to fund their marketing efforts.
Mobile phone apps for popular smart phones like the iPhone help bands stay in constant contact with fans. Online music distributors allow musicians to offer downloads for sale with little out-of-pocket cost.
Ultimately, the music industry needs to explore some new ways to monetize its content. Also, bands should stop borrowing such massive sums from labels in the first place. Since recording, marketing, and delivering content can be done at a fraction of the older price, sensible economics call for a more inexpensive capital formation process.
While time has doubtlessly lead the recording industry into a market correction, the internet will soon usher in a new era of prosperity for most musicians. When the power of information technology is fully unleashed, expect an explosion of creativity that rivals the one that occurred during the Renaissance.
Source by Mike Barry
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