No Tears for the Music Companies

by Jeff Siegel

The news was dispensed with the appropriate rending of garments and gnashing of teeth. Album sales continued their decline in 2005, falling eight percent from 2004. Sample the reporting, and everyone – from Wall Street analysts to retail consultants to industry executives – was wondering how the Big Four record companies were going to survive.

Well, how about by not shooting themselves in the foot?

Much has been written about the end of the record or CD or album or whatever it’s called these days, and much of it is true. But anyone who thinks that downloads and digital music are killing the record business isn’t paying attention -- or works for one of the record companies, where they prefer to blame someone else. After all, when’s the last time you heard a $6 billion company like Universal Music Group admit it screwed up?

The mostly unwritten truth is that the record companies have no one to blame but themselves. Consider just these four points, none of which the record companies seem to have figured out:

• The collapse of the album retail system, without anything to replace it: When Tower Records closed at the end of last year, the last great traditional record store chain disappeared. This means that anyone who wants to buy a CD has to go to a discount store like Target, an appliance store like Best Buy or a bookstore like Barnes & Noble. Max Fraser had a terrific piece on The Nation’s blog about what this means.

• Album pricing: The record companies have overcharged for years, and even got caught fixing prices in 2002. The cost to manufacture a CD is about $1, so where does the rest of the money go? The Recording Artists Coalition argues that it goes to the same record companies who are complaining about their losses. Want to increase sales? Cut prices.

• Changes in the radio business: As late as the mid-1990s, you listened to the radio, heard new music, and then went out and bought it. This is happening less and less, because radio stations are playing less music (news/talk was the most popular format in 2004, according to the Project for Excellence in Journalism), and those that do play music increasingly play the same songs, according to the Future of Music Coalition. It’s not that Beyonce is good or bad. It’s that all you hear, regardless of format, is Beyonce. This doesn’t help sell all the music that isn’t Beyonce – and, again, the record companies don’t seem to know what to do about radio’s current sound.

• Suing your customers: Uncopyrighted downloads may or may not be the Black Death of the business (a 2004 study by researchers at Harvard and the University of North Carolina said they weren’t), but it’s never a good idea to flagellate your customers in public. You want people to buy your product? Don’t threaten them with six-figure penalties. And, just to show how little the industry understands this concept, its trade group is suing XM, the satellite radio company, over file sharing -- and XM is supposed to be on their side.

The record business, despite the glitz and the glamour, is retailing. It’s not all that different from selling shoes or heads of lettuce. Offer a fair product at a fair price, make it convenient for your customers to buy the product, and you’ll do well. The Big Four, though they control 85 percent of the U.S. market, don’t do any of those things. And no amount of alibis from the business press are going to change that. Which is why you won’t see any rending of garments or gnashing of teeth here.

(Photo by Iván Melenchón of Barcelona via morgueFile.)

music
corporate media
media economics
internet
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