Broken Record

A musician's look at the changing music industry with Jeff Balke

Posted by Jeff Balke at July 23, 2008 10:14 AM

Most everyone who follows the record industry knows that it is
slowly imploding and most don't care seeing as how its leaders have
basically ignored technology and tried to sue people to push their
profit margins back in line. But, the demise of the record industry
actually began long before technology gave it the final push over the
edge. It started in the 80's with the birth of the CD and the
swallowing of independent record labels by major corporations to the
point that now there are only four majors left.

In each critical moment, record labels had the opportunity to think
ahead and look beyond their immediate revenue streams. Like many large
corporations, they were unable to do so. As a result, they forgot that
music is about people and they continue to ignore that fact at their
own peril.

For myself, I believe the record industry - and this includes radio
- made four mistakes that preceded their ignorance of technology and
lawsuit happy antics of present day.

1. CD sales are not the same as record sales.

At first, this may seem like semantics, but my distinction is
between the actual compact disc - the physical item - and the concept
of a record - the music an artist records to put on a CD. When the CD
was invented, profit margins for what were once moderate sized labels
shot through the roof. If you had a back catalog of good music, you
were about to become a millionaire if you weren't already because
everyone was replacing their vinyl with CD's.

Record profits resulted and multi-national corporations took notice.
In much the same way "dot com" start ups managed to convince venture
capitalists to back questionable opportunities, independent labels
began to entertain offers to sell themselves to the highest bidder.
Corporations saw this as a long-term money making venture that would be
great for their portfolio and their shareholders.

What they failed to realize is that the CD gravy train would soon
come to an end as people finally replenished their collections and went
back to their normal buying routines. The years of off the chart sales
came to an abrupt end and corporations were stuck with bloated record
divisions and they had no clue what to do - the end result when you
replace creative minds seeking talent with bean counters seeking profit.

2. Longevity trumps the flavor of the week.

Because labels were feeling the pinch and because they were now
subject to corporate budget constraints, annual reports and
shareholders, they began to look for ways to cut costs. One of the
first places they looked was artist development and promotion. I
remember reading about how A&R departments were slashed to the bone
and promotions departments saw their budgets cut dramatically.

Labels, in a desperate need to justify their existences, cut off
their noses to spite their faces. Instead of trimming corporate expense
accounts and the bloated salaries of their higher ups, they decided to
rely on things like cross promotion, radio, television and other forms
of media to do the legwork their promoters had done previously.

Worse yet, they focused on one-hit wonders and bubblegum pop to push profits ignoring their own rich history and tradition.

It's expensive to develop an artist. It is common knowledge that for
every 12 artists signed to a label, 10 lose money, 1 breaks even and 1
makes enough to pay for the development of all the others put together.
It's a really risky business. But, the small independent labels didn't
care because they wanted to discover the next Bob Dylan or Bruce
Springsteen. They knew that one major success could make up for a
string of costly failures.

Unfortunately, that equation doesn't work in the corporate
environment. You have to justify your budget every year, every quarter.
If the only way to do that was to release lowest common denominator
music that would sell fast but fade just as quickly, you did it.

They even managed to forget how they got to this point in the first
place somehow missing that what are now termed "heritage" artists like
Springsteen, Tom Petty and others were what sustained them over the
long haul, not The Backstreet Boys and Britney Spears. Those were bands
and musicians developed over years and they didn't come cheap, but they
made up for it in the long run.

3. Destroying the chain of distribution is death.

For years, the way music got from artist to fan was the same. One
department (A&R) would discover and develop artists helping them
with everything from day-to-day expenses to making records. Another
department (Promotions) would take the finished product and promote it
using teams of college interns, radio promotions staff and others. They
would pass the actual product on to distributors who would send their
representatives to record stores to convince stores to buy records. The
promotions interns would put up displays in the store and hold
promotional events designed to help artist, distributor and record
store. The employees at the store would talk to their customers and
play the music in the store.

That system worked really well for a very long time. But, once
again, the big corporations saw an opportunity to cut costs by making
independent deals with big box retailers like Wal-Mart, Target and Best
Buy. The result was the death of distribution companies and independent
music stores (as seen today with the legendary Morninglory Music going under after 38 years in business) and even chain music stores. This may have seemed like a smart financial decision, but they got it wrong again.

What the suits failed to realize was that the chain of people
working on selling music for them was key to making sales. Even now in
the age of blogs, people still listen to what others suggest when it
comes to buying music. Prior to the internet, those people included
DJ's (we'll get to them in a second) and record store employees. After
your friends, these were the people you trusted to know music.

Even worse, retailers like Target only put about 300 titles per year
on shelves out of 3000 or more possible releases, honing it down to
ONLY the most salable (according to them) artists and records. A good
record store could not only steer you towards a great alt rock record,
but also to a blues record that influenced that alt rock band you like
so much.

I'm not naive. I realize that with iTunes and other forms of
downloading, the days of the music store were rapidly coming to a
close, but the labels, instead of acting as partners with stores as
they always had, turned their backs on them prematurely before anyone
had ever heard of an MP3 or Napster. It not only cost thousands of
people their jobs, it placed limited stock on the shelves narrowing the
choices for people even further. Like cutting development, they were
forgetting that it takes more than just a pretty face and a catchy hook
to sell records and the more options you put out there for people, the
better your chances of developing artists who will sell for you for
more than just a few years.

4. Killing the DJ

I think there is real truth to the idea that video killed the radio
star, but the radio industry helped it along by killing off the primary
link between listeners and stations: the dj.

Much like the chain of distribution, there was a long history of
record label staffs sending music to radio stations where program
directors and DJ's would play what they thought their audience wanted
to hear. DJ's took chances and, as a result, broke artists for labels
and made them an awful lot of money. There was always corruption and
undue influence exerted on DJ's, but a large percentage were in it for
the music

When the Telecommunications Act of 1996 was signed into law, large
corporate radio empires like Clear Channel destroyed the listener-DJ
relationship by flooding markets with stations owned by a signle entity
with programming decisions made at a regional level, far removed from
the DJ and his/her show. DJ's were replaced with "on-air personalities"
more about selling ad revenue than "spinning hot wax" as they used to
say.

While the record industry may not have been directly involved, they
sat by and did nothing and even encouraged the centralization of power
because it made it cheaper for them to peddle music. They didn't have
to call or visit hundreds of DJ's anymore. Now, they just went to a
central nexus.

Just like destroying distribution removed variety from the shelves
of retailers, centralizing programming ended variety as we once knew it
on terrestrial radio. In the Steely Dan song "FM" they talk about how
FM stations in the 70's would play pretty much anything from reggae to
blues to rock and everything in between. It was all about the
relationship between DJ and listener, between people. Once that
relationship was destroyed and stations began playing the same narrow
play list, people began to abandon radio in droves.

---

Long before the record industry was, in their estimation, attacked
by downloaders and people believing music should be free, the record
industry itself compromised its own business through questionable
decisions, corruption and the corporatization of music. Art and
commerce always have and always will have a tenuous relationship. But,
when the pendulum swings so far to one side, it is no shock when it
eventually comes flying back the other direction. So, record execs, the
next time you look into a camera or into a room full of onlookers and
try to tell us that file sharing and video games killed your business,
don't waste your breath. Instead, take a look in the mirror and you'll
probably find the culprit.