How Digital Production & Distribution Are Making Things Worse For Musicians, Not Better
Related link: http://www.amazon.com/gp/product/140008198X/qid=1138945700/sr=2-1/ref=pd_bbs_b_2…
Thanks to digital media & the Internet, anyone can record their music and make it available to the world, and that's a good thing, right? Not necessarily for musicians. One way to explain why is in terms of the Fallacy of Composition, as cited by Jeremy Siegel in his new book The Future For Investors.
Siegel is also the author of the classic Stocks For The Long Run. In the new book, he decries what he calls "the growth trap", the disappointing returns earned by people who invest in new, fast-growing technologies. Such technologies end up rewarding society as a whole with economic growth, but not, in most cases, those who invest in them--think fiber optic cable.
In the course of making his argument, Siegel explains the economic principle of the Fallacy of Composition:
Any individual or firm through its own effort can rise above the average, but every individual and firm, by definition, cannot. Similarly... if all firms have access to the same technology and implement it, then costs and prices will fall and the gains of productivitty will go to the consumer. (p. 105, 1st ed.)
Siegel tells the story of Warren Buffett's early days running Berkshire Hathaway, when it was a money-losing textile company, not the colossal holding company of today. Buffett's managers brought him a series of productivity-boosting proposals to lower labor and other costs. But Buffett rejected all of them, realizing that all his competitors had access to the same "advantages". He realized the net effect would be like what happens when each person watching a parade rises on tiptoe to see better--seems to make sense to the individual, but collectively it's self-defeating. Buffett got out of the textile business. As Buffett wrote in a 1985 annual report: "After each round of investment, all the players had more money in the game and returns remained anemic."
The same thing happens when every musician in the world can make and distribute recordings for next to nothing. The aggregators of this content--the MP3 community sites--often highlight the thousands of uploads they each receive every day. It's good for them, and it's good for consumers, but for the musicians? Maybe not so good. Or let me modify that. It's fine for musicians who aren't looking to get paid. The other ones are watching their already low average income fall even further year over year.
Some digital musicians have long ago absorbed this idea in one form or another and concluded that recorded music might as well be free. As Derek Sivers of CDBaby points out, for an unsigned musician, file sharers are not the enemy, obscurity is, and so unsigned musicians should encourage piracy. I agree (and I think Derek is a good guy running an honest service). But for me the question remains open, for now at least, as to what will really replace the potential revenue--and how much guerilla promotion it takes to be noticed among the 120,000 plus artists on CDBaby or, say, the more than 1.5 million songs on soundclick.com, as those numbers keep growing, every day.
This doesn't mean we should (or could) somehow stuff stuff digital music back in its bottle. But I think we need to look a little closer at some of the Utopian assumptions about it. The truth is likely to be more complicated.
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Comments (9)
Read More Entries by Spencer Critchley.
the net works for some
Yes, I think this is a viable model, and I advocate it strongly for artists I work with. Texas country/alt-country is another example - people like Pat Green and Robert Earl Keen have done very, very well just touring and selling CDs.
the net works for some
I have talked with a few small scale musicians who are using the Internet to their advantage. The genre is folk music. People in the US tend to tour in the West, Midwest and East and live with a mix of concert performances and selling music.
Some of the more recognized guys do 10000 to 25000 cds a year. Peanuts in comparison to the stars of the larger genres, but enough with the concerts to live comfortably.
The CDs are sold at concerts as well as to their fandoms - and these guys often have focused and rabid fandoms. Keeping in touch with mailing lists, webpages and sales of plastic through the mail are very critical components.
A few have tracks on iTunes through places like CDBaby, etc. but this is far from significant. Their fans like the liner notes and even the handwritten notes that come with the packages.
Signing just wouldn't work for these guys. I know a few who are large enough to sign, but are doing much better managing and promoting themselves. Touring and the Internet are important components for some of these guys.
Visibility
No, I can't provide you with any figures. The only example that comes to my mind is an ubiquitous one: the Arctic Monkeys that rose to fame within MySpace and then also in the offline world, i.e. traditional charts.
Visibility
One interesting place it points us is to an old marketing stand-by of creating and dominating thin vertical markets. Find a small market that you can be the big cheese in, then move from there into adjoining markets, growing your share as you go.
Music does have vertical markets, but they are fairly wide, and the marketing dollars required to reach wide markets are huge. Smaller markets are less expensive to reach, and give you a larger conversion ratio from ad to sale.
Would lots of niche, vertical markets create room for everyone to make money, and more specifically meet the needs of the music consumer? It's an interesting idea...
Visibility
Yes, I think this is a very interesting area and I want to explore it some more in upcoming posts. I feel intuitively that despite incredible glut of content, people will still respond to extraordinary talent, which remains rare, and, maybe more than ever, they'll respond to a sense of real human connection. I haven't seen convincing numbers to support that feeling yet though - i.e. details of a credible, reproducible financial model in which artists make enough money to support a solid career (not a sleeping in the van kind of career). Can you point me to any?
Sell merch, not music
Comic artists on the ’net have been giving away their art for years, make a living instead by selling merchandise. It works for them, and the ones I know of who made their comic their fulltime job managed the leap when their fan base hit several thousand regular readers. This sounds like an easy goal for decent musicians who play out.
If that model works out, we will probably revert to something more like the pre-MTV days, with many local acts of moderate fame and significantly fewer artists of nationwide/international fame; in a generally much more heterogenous landscape. And now that I’m thinking about this, the more I ponder it, the more attractive it seems in many ways – it could be a renaissance for music.
Visibility
I think these cultures will complement each other. While Maria Carey might have huge visibility in mainstream media, she has only a few thousand "friends" in MySpace. Whereas musicians that are obscure in the offline world may have tens or hundreds of thousands of fans within online communities.
I think the only thing that will change is the nature of the struggle for popularity. It is also not easy to tour with a limited budget or get airplay. And even if you have made it and signed with a major label, there's still that 1:10 number when it comes to positive vs. negative cash-flow.
Visibility
I agree about marketing. But what about the effects if the plummeting costs, leading to greatly increased supply and, for most artists, lower prices? Ironically, I think one longer term effect of digital technology might be to widen the gulf between stars, with large marketing budgets behind them, and the rest, who will be trying to be noticed in an ocean of content.
Visibility
I think this is about searchability. Being online and distributed digitally is not all it takes to become successful. But with the advent of powerful and intuitive search engines, this might change.
So of course it takes more than just being listed on an online portal. But in analogy, this is the same situation as CD. When CDs were the new technology, your music needed to be accessible via CDs.
Then it was for the marketing department to get your CDs sold. Marketing would be community and searchability now.