Tuesday, 9 February 2010

Your Guide to understanding the Music Industries today.

Theo Smith

First, I would like to let you know the music industries are the largest they have ever been. Contrary to the doom and gloom predicted by the press, it is only the plastic jewel cases for CDs that are declining in numbers and some very public copyright lawsuits that reflect some archaic business structures in the industries.

Secondly, it might be good news to you that now is the easiest time to enter the music industries as an artist as due to new technologies introduced at exponential rates over the last decade, we have a plethora of mediums through which to present our art.

We have seen some apocalyptic predictions for the recording industry, with articles such as this BBC speculation, ‘Rock Profits and Boogie Woogie Blues’, which suggests that the ‘music industry’ will never be as it was in 1996. This is a misrepresentation of the truth and a misunderstanding of the distinction between ‘music industry’ and ‘recording industry’.

The Recording Industry

The recording industry has seen a change in economic structure from Oligopolistic competition (The 4 big labels) into monopolistic competition, where there are many, much more equal, lower turnover recording labels, studios and artists. This means that the barriers to entry (that elusive record deal we all used to strive for) are lowered and the audience (consumer) decides based on exposure. The music industry is an exception to typical economic structures as there are no substitute goods – if you like one band and another band that you don’t like is cheaper to buy, you will not buy the lower priced band instead. We have seen that audiences instead find cheaper ways of attaining the same product such as the well publicised Napster or more recently Pirate Bay. It is the development of the artist’s fan base that is key in creating any income stream and the consideration of the economics of abundance – use the .mp3s and illegal downloads purely as a marketing sunk cost in the development of a fanbase in order that brand recognition can focus your audience on scarce resources you can then charge for: live events, merch, publishing, etc. More about income streams for artists can be found at Dave Kusek’s Income Streams for Musicians.

Startups and Early Career Development for Artists

There is no longer a lottery as to who will be the next big name, instead it is much more of a focus on the individual musician and their business prowess. The age of the rock star throwing things through hotel windows has finished, in order to survive in the industry today you need a strong marketing mind, good pr outlets, a concrete internet presence and the following formula represents the effective combination of required skills:

In summary, the music industry today has a lower barrier to entry, but is still focussed on the artist’s fan base. Because of new technologies such as social networking, mobile devices and other internet portals, along with the traditional marketing and PR techniques, artists are given a more equal chance of beginning their careers and a much more quantifiable way of measuring their impact through page views, fans and interactions. The new chart shows for each country’s top 40 are shifting from the amount of CDs bought (or even the much reduced .mp3 industry’s statistics) towards who makes the largest impact online which is reflected in live performances long term.

The Recording industry has declined whilst it reforms, but all other areas of music industries are increasing and taking over the focus of success for an artist in today’s climate.

Theo Smith is an occasional contractor to Wood Wind & Reed and a studio musician. He is currently studying Music Industry Management at University of East London, focussing on how the industry is changing and the development of new talent to embrace its ever-changing structures. The views expressed here are personal and do not represent the views of Wood Wind & Reed or its subsidiaries..

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