Politics, Technology, and Language

If thought corrupts language, language can also corrupt thought — George Orwell

Entertainment ecosystems, part 1

Posted by metaphorical on 27 January 2008

I’m not sure video killed the radio star. But we know who’s killing the record store. Actually, I think in many ways the causes of the two deaths are the same, so let’s start with who killed the radio star.

One cause was the deregulation of media in the 1990s, which allowed for station consolidation. Suddenly a single company could own hundreds of stations each, and a few emerged to do so. As a consequence, we saw the emergence of national DJs, national playlists, a disregard for everything except the Top 40, and radio’s contribution to the dissolution of what we might call the ecosystem of music.

I’ll have more to say about entertainment ecosystems in a bit. Let’s turn now to the record store. Dave Larsen, a staff writer at the Dayton Daily News, had a good article this weekend asking the question, “Has digital killed the record store?”, arguing that downloaded music is eclipsing CD sales.

The growing popularity of digital music downloads could send compact discs the way of cassette tapes. Music retail stores might soon follow.

Overall music sales were up 14 percent from 2006, according to Nielsen SoundScan’s 2007 music sale figures for the U.S.

Downloaded song and album sales hit record levels in 2007, rising 45 percent and 53 percent, respectively. But explosive digital growth wasn’t enough to make up for the loss in physical CD sales, which fell nearly 19 percent.

The steady decline of CD sales in recent years has led to the demise of such retail chains as Tower Records and the Musicland Group, which operated Sam Goody, Media Play and Suncoast Motion Picture Company stores. Locally, independent retailers such as Renaissance Music Media and the original Dingleberry’s have closed.

“Most of the independent and national chains that sold CDs have gone away,” said Hans Buflod, president of the local CD Connection chain. “It’s changed drastically, especially in the last five years.”

Larsen doesn’t really go into it, but it’s the record labels who killed the small stores, by cutting deals with the big box stores, especially Wal-Mart and Best Buy. By 2003, Wal-Mart alone accounted for 20% of all major-label record sales. It did so by selling CDs at a loss for $10, to draw shoppers into the store. By 2004, it decided it didn’t need to lose money anymore, and, as Rolling Stone reported at the time, it demanded price cuts that let them sell CDs for $9.72, without a loss. (Isn’t that a great number, by the way? It doesn’t feel arbitrary or random at all.)

Instead, Larsen notes that the record labels blame illegal downloading, especially filesharing networks. And indeed, though he doesn’t mention it, the battle against college students has gotten particularly hostile in the last month or so, with the students resisting in a number of places, such as Maine, Stanford, and MIT, and even countersuing.

But he also notes the poor evidence for that claim:

However, a 2007 study by Felix Oberholzer-Gee of Harvard University and Koleman Strumpf of the University of Kansas found that file sharing has had a negligible effect on the decline in CD sales. “Moreover, by exposing users to new music, sharing may actually have increased sales,” they wrote.

I wrote about the same thing anecdotally at work back in July 2002 in an article that’s ironically no longer freely available.

But back to Larsen:

Gary Staiger, owner of Omega Music on North Main Street, blames record companies for phasing out the CD single.

“When you put out a crappy album that only has two (good) songs on it and you can go buy the two songs for a buck a piece (online), why would you spend $15.99 on the whole album,” Staiger said. “Consumers have brains.”

Competition from other sectors is a more likely explanation, according to Oberholzer-Gee and Strumpf’s statistical analysis of file sharing activity in 2002.

“A shift in entertainment spending toward recorded movies alone can largely explain the reduction in sales,” they wrote. “The sales of DVDs and VHS tapes increased by over $5 billion between 1999 and 2003. This figure more than offsets the $2.6 billion reduction in album sales since 1999.”

The rest of Larsen’s article looks at some small chains and individual stores, and their strategies for surviving.

Chain music stores for the first time dropped below 40 percent market share, falling to 36 percent from 41 percent in 2006.

Independent record stores held steady with 6 percent of the marketplace. Some independent retailers, such as Massachusetts-based Newbury Comics, have opened new stores.

“There will be physical buyers for a long, long time,” [Rob Perkins, CEO of Value Music Concepts] said. “Some people just want to touch it and feel the product and communicate with folks that are addicted to music, just like they are. That’s what these independent stores provide. We have people who spend an hour at a time in our store just looking at the product and speaking about music.”

Larsen quotes Hans Buflod, president of the local CD Connection chain, as saying,

“I think at some point in the future all music and all video and probably all books, as well, will all be available for download directly from the manufacturer.”

And sure enough, even a year ago, Wal-Mart was down to 15.8%, Best Buy’s share at 13.8%, and iTunes was a just under 10%, according to an SFGate.com story.

As it happens, I recently did a radio commentary making the exact same prediction, for DVDs — even high-definition ones. (It can be downloaded here.)

I want to linger over one thing that Perkins said:

We have people who spend an hour at a time in our store just looking at the product and speaking about music.

This is the ecosystem at work. The more people know about music, the more time — and money — they want to spend on it.

And music has never had to fight for mindshare like it does today, what with television, videogames, movies, books, YouTube, message boards, email, and so forth. At the same time, it has fewer tools than ever with which to capture that mindshare, and in particular, for people to discover new music.

Radio used to be in the center of that. Stations would promote, and in many cases sponsor, and sometimes broadcast, live events. DJs — local DJs — would interview touring singers and bands on the air. DJs played a much broader mix of music, not just the top hits as defined by record label promotion.

And music stores used to be in the center of that as well. For true fans, perhaps they still are, but a vastly greater number of music purchasers abandoned them some years ago in favor of lower prices, disregarding the meager selection. Today’s music stores — the big box stores — don’t have knowledgeable salespeople recommending stuff, and they don’t have the stuff that a knowledgeable person would recommend anyway. Walmart.com has 90,000 CDs, but the stores themselves carry only a small fraction of that.

And don’t underestimate Wal-mart’s power. According to a December article at MTV.com, “The Eagles’ Wal-Mart-only LP, Long Road Out of Eden, [debuted] at #1 on the Billboard albums chart with sales of more than 711,000 copies.”

My hunch is that movie soundtracks and now videogame music are incredibly important now because they’re one of the few ways we have of hearing something new without seeking it out. It’s not surprising that ever since at least Buffy, television shows have also been introducing new music.

The music ecosystem is vast and deep, and it includes everything from cover bands to sheet music to marching bands to high school musicals to elevators and bars and banks and your own desk when you’re placed on hold on the phone. But the traditionally biggest sources of new music for most people aren’t delivering it. The ecosystem is out of whack and new predators of people’s time, from videogames to mobile phone calls, are rushing in.

The question the major labels should ask itself is whether music fans have enough ways to find new music even when we include sampling it on file-sharing networks. The last thing the industry needs to do is shut down its last best hope for the ecology of music to find a new balance.

5 Responses to “Entertainment ecosystems, part 1”

  1. […] <b>Entertainment</b> ecosystems, part 1 […]

  2. digglahhh said

    A couple of comments.

    1. When Napster and the whole music file sharing revolution jumped off, the genie was let out of the bottle, or whatever the expression is. If pay per song downloads would have pioneered the digital music craze, then people like me, who spent years getting this shit for free, wouldn’t laugh at the notion of having to pay for it now. In short, this old dog ain’t interested in learning any new tricks, especially when I have to pay for the classes too!

    2. Get off your ass and tour. Many of my friends don’t pay for music but do go to lots of shows. I’ve supported artists whose music I would have never heard if I had to pay for it.

    3. At least in hip-hop, the crappiness of the music is killing the music, the co-optation has killed it. Take an artist like Saigon, the rapper who was featured on HBO’s Entourage. This guy is easily among the best rappers out right now. He’s gritty, savvy, talented, and authentic. He mixes political and thuggish rap very well, so that fans of either are accepting of the other flavor in his work. In many respects he is a throwback to when sociopolitical undertones were really present in the music and not just a convenient and P.C. way to defend charges of ignorance and minstrel-ism. But, guess what, the record labels have no idea what to do with him! He’s talented and exposed on a show that is a cultural institution among hip hop’s chief demographic. Still, they have him in the studios trying to get him to get that one hit song, and wasting his true talent in the process. Either they don’t know what good hip hop is, or they don’t have faith that it will sell. Either way, that’s a problem that restructuring the distribution dynamic isn’t going to fix.

    4. Advances in technology have made the production and distribution of music easier for the independent artist. Unless you are a superstar, there are many cases in which it is more profitable to be independent.

    An optimistic view of this dynamic is that perhaps as record labels become less influential on the whole, the potential to gain marketshare can more closely resemble a meritocracy.

  3. Great response, Digg, and I agree with all of it except this: “Either way, that’s a problem that restructuring the distribution dynamic isn’t going to fix.” There are already a lot of ways for this guy to make money without the help of a major label.

    He should just for one, or several of them. Find a good small label (hip-hop has several, no?). Produce and distribute through iTunes, with or without someone like CD Baby as an intermediary.

    In the world soon to come, HBO will market a musical act directly. They’re providing the exposure, why shouldn’t they benefit directly? They could sell audio CDs of George Karlin’s shows too, which I know would make you very happy.

  4. digglahhh said

    My comment wasn’t about Saigon, or any artist; it was about the record companies and music industry. My point with there was that if they can’t break such talent, they forfeit their right to complain about their declining relevancy. If the mainstream music industry can’t break big time talent, it doesn’t deserve to be relevant.

    Granted, the case I provided was anecdotal. But, at least in hip-hop, labels have relied on established, successful, artists to break subsequent artists for years. It’s probably not worth it for me to get into a long discussion about it, but the fact is rap music was the highest grossing music in the world for several years and the “industry” was only relevant as a facilitator and financier. As new avenues open, the path of least resistance is taken. The industry was seen as a necessary evil by most rappers, once it’s not necessary anymore…

    There was a public argument, I dunno -last year, between 50 Cent and another well-established, but only marginally comercially-successful rapper. 50 wanted this dude to sign to his label, this guy wanted to go the Indy route. 50 couldn’t understand why this guy wouldn’t want to align with the hottest thing out. The other guy’s response was that he doesn’t make the bullshit 50 does, he makes real music for the streets and he occupies a niche market. He’d make more money selling 80-100K on a small, indie-type, than he would by going platinum with 50.

    And, for what it’s worth, I’ve downloaded most of the Carlin shows/CDs… for free!

  5. digglahhh said

    An excerpted (cleverly, metaphoric) verse from the track “Indy 500,” by (independent) rap group, Binary Star:

    [Chorus] – 2x
    All we need is beats and rhymes to go and spark it
    As long we got the underground, yo we got a market
    I don’t need a major to tell me how to run it
    Cause my goal’s to win the Indy 500

    Start your engines, mo’ pole positions got me sittin
    In the fifth row, you only go if you’re gassed like Citco
    And since my, terrorist, car’s brand new
    My pit crew consists of me, and the Binary two
    For your car, you got the luxuries of a star
    You got a crew of two dozen plus an A&R
    That’s your axle and your ratchet man
    Cause after he get rich, man
    you skid out in the ditch and be abandoned, need refixin
    You also got the pressure, first to second, no lesser
    If you don’t, you think you’ll drive again? You’d never!
    See, it’s not about the car it’s the way you drivin’ it
    If you cats is lame, can’t maintain than you won’t survive in it
    I’m revivin it, the record wreckage I steer though
    Comin from behind, unseen by rear view
    You sleep in your seat, don’t even know what’s the deal
    No suggestions on directions, they’re controllin your wheel
    And if you ever finish first a platinum trophy is risen
    Your prize money? Your staff of 2 dozen got dibs in
    Know the cars, know the race, cause if you get outsmarted
    It doesn’t matter where you finish, you’ll end up where you started

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