Ailing Music Industry?

01 Jul

The music industry is at a very interesting crossroads. The traditional unit of sales, the album, is not selling. Perhaps a by-product of decades of pushing singles and filling albums with one or two “good” songs and ten or twelve “filler” songs, music purchasers are now preferring single songs, picking and choosing the singles they hear on the radio and largely ignoring the other songs put on the album. And it’s not like the industry didn’t have any signs that the market was shifting to this model. With the advent of Peer-2-Peer sharing sites like Napster and Limewire in the early part of the decade, people weren’t downloading whole albums. The large majority of users of these sites used them for single songs. Ten years on, the industry is still fighting this model.

They still see the album as their cash cow. Basic research indicates that an album can run into the tens of thousands of dollars to produce. Let alone the hundreds of thousands, if not millions, that a label may spend on promoting an album, it’s no wonder that the industry feels it has to stick with this method. I have been unable to find reliable costs of distribution for traditional CD albums, however the average cost for bandwidth is about 50 cents per gigabyte. Assuming the average song is about three megabytes, the average song costs 0.15 cents to distribute electronically. I can’t imagine that shipping a CD is cheaper than that; a 10 song CD would cost about 1.5 cents to compete.

Of course this shift would not be without casualties. Record stores across the country are closing. Margins for these stores are being pinched as the price of CD’s falls. The record store will have to adapt and accept the fact that it will be a niche player in the industry. Certainly there will be people who choose to purchase physical media. Record stores will be around to cater to this market. The shift to non-physical media is one that is occurring across platforms. Movies and TV shows are now available streaming through services like Netflix and Hulu. Steam offers computer games over the internet. As computing power and storage continually improves and moves into the cloud, physical media is disappearing.

If the music industry accepts online and non-physical distribution as the method of the future, they will follow the rest of the world in accepting that the internet and other such new forms of distribution can help to cut costs and connect more closely with consumers. By removing a layer of distribution, and by moving to electronic distribution, the music industry will be better able to track and adjust to changes in musical tastes and preferences. Networks like iTunes, the newest iteration of Napster, Rhapsody, and the Zune store are already in place, making any shift to digital distribution much easier to do. Hopefully the industry as a whole accepts the challenge and chooses to strengthen their industry and the music they produce.

Below are three links to columns from USA Today, MSNBC, and the NY Times that show music sales over different media.

Ken Barnes, USA Today, 1/4/2009

AP via MSNBC, 1/1/2009

Ben Sisario, New York Times, 12/31/2008

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Posted by on July 1, 2009 in Opinion


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