The Changing of the Music Business

Universal Music Group says that the traditional music business isn’t dying (at least not as much as it seems because the 6% decrease shoots up to a 1% decrease when you account for the strengthening of the dollar against other currencies.

What happened? CD sales are still declining, of course. But Vivendi said the rise of digital music–that means you, Apple (AAPL)–is finally beginning to balance out some of the decline. Digital sales increased 33 percent in the first nine months of the year, the company said.

And then Live Nation has announced that they will begin selling DRM-free MP3s for their artists making LN a one stop shop for everything involving your favorite artist (so long as they are a Live Nation/Music Today band).

Essentially, Live Nation is turning into a microcosm of the music business at large. If you’re a fan of one of its bands, you’re going to spend money on them eventually, whether its a concert ticket, a T-shirt, a CD, fan club access to exclusive “VIP” content, an MP3 from an artist page or whatever. And when you do, Live Nation will be there to take a slice of the pie — a savvy business strategy when no one knows for sure where the bulk of music revenue is going to come from.

This touches on something I got from Kevin Kelly’s True Fan thoughts from several months ago. Musicians don’t need record labels to do most of the stuff for which they used to need record labels. They don’t need large advances to record in expensive studios (they can record in Garage Band). They don’t need help with distribution (they can upload their music themselves to iTunes and social networking sites). And they don’t necessarily need marketing help (they can use Facebook and MySpace to organize street teams, directly target their fans, and create and manage a community that increases a fan’s passion for the band).

Many savvy bands will be able to manage all of this (the community especially) themselves, but many also won’t or will not want to. I think this is going be where music businesses of the 21st century make their money. The record label dinosaurs can stick to their business model, or they can adapt to offer community management services from which they may once again become prosperous.

I’ve always been envious of Music Today as someone who used to work for a band (and I’m still sending out CDs twice a month! How’s that for long tail?). They figured out that it’s mostly impossible to make any money offering services to bands because band’s don’t usually have any money. The way to make money off of bands is off of their fans. That will always be true.

The Changing of the Music Business

0 thoughts on “The Changing of the Music Business

  1. Isn’t the one exception to “things bands can do for themselves” radio play? I think a band can make it biggish on their own on the college or indie scene, but it’s probably still impossible for someone to break into Top 40. Not that anyone would want to, but still.


  2. ac says:

    There’s companies that can help you get onto college radio which are either paid for by you or by a label and I didn’t think of radio. It didn’t occur to me and maybe it’s because radio isn’t necessarily something bands need for success. Bands might need radio for giant crossover domination, but if they’re generating buzz on their own, the radio will find them.

    I don’t ever listen to the radio, besides EEI and NPR, which is why I didn’t think of radio as an entity bands need to court.


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