Dead meat? The decaying prospects of the music business

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Are you yearning to see Robbie Williams rejoin his bandmates in Take That this summer? More than 1.3 million are. Demand for the tour is so colossal the tickets were gone in a couple of hours. Ticketmaster, only one of the ticket agencies selected, received 20 million page views that day — far in excess of the number seen when tickets for Michael Jackson’s planned comeback went on sale a couple of years ago. Plenty of Take That tickets are for sale online — at up to five times the original price tags.

Indeed, the music business is still a big boom for the hottest acts. The past few years since online illegal file-sharing became rampant, live concerts, the sale of songs to advertisers and the sale of all sorts of merchandise, have not done a bad job of offsetting the decline. Will Page of PRS for Music, which collects royalties on behalf of writers and publishers, has added up the entire British music business. Although the sale of CDs and records have since 2001 slid by 40 % in Britain, he reckons the music business in total turned over £3.9 billion in 2009, 5% more than in 2008. It was the second consecutive year of growth. The longest, loudest boom is in live music. Between 1999 and 2009 concert-ticket sales in America tripled in value, from $1.5 billion to $4.6 billion, pretty much mirrored by the British trend.

However, trouble seems to lurk below the stratosphere. The way the music business has adapted to disruptive online piracy does now show significant signs of being insufficient to counter stagnation or decline. The research firm Pollstar estimates that the 50 biggest worldwide tours grossed $2.93 billion last year — 12% less than in 2009. StubHub, a large website on which tickets are traded, says the average concert-ticket price dropped by 18% between 2008 and 2010. The head of Live Nation Entertainment said last year that 40% of seats routinely went unsold. Another sign of decline is that some labels seem to be abandoning A&R (talent scouting and artistic development).

Bands appear to have pushed average ticket prices about as high as they can go, and tested the limits of supporters’ appetites with long tours.

The rise of digital music is scant compensation. Growth in sales of digital music halved last year despite increased action on behalf of governments to tackle digital piracy globally. Some say pricing of tickets in live music is a main problem, though airline-type pricing and methods where prices float with demand is being experimented with.

The lack of innovation in the music business to tackle declining CD sales may partly stem from the current structure of the industry. The power in the music business is perhaps too spread between too many different types of middlemen who are fighting for their share of the pie. Record companies are working against change, because they don’t see themselves as important in suggested business models.

This problem of dispersed power and insufficient leadership is seen especially in the marketing and branding of not-so-famous bands. So many different players are involved in this that the outcome is often very inconsistent — hence inefficient in engaging the crowds. The musicians themselves, the music management agency, the record label, the booking agent, the producers, different designers, venues and promoters etc. are all very much involved in shaping the perceived brand of a band as a whole. In contrast to the case in most other industries, an authority at the top strategically guiding the entire marketing process is lacking.

Innovation and substantial change in business models is needed if the music industry is not going to shrink significantly over the next decades. As I have suggested before, what looks most promising is collaboration between musicians and brands with marketing agencies acting as intermediaries (not record companies). This is well exemplified by the band OK Go and its viral video hits online. In essence: don’t sell music, use music to sell.

However, it is easy have ideas and to see the main problems; the hard part is finding the creative solutions and executing them successfully.

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Read a later post on the future of music: Digital music at an impasse