What Is Going on with the Record Industry?

Image via Big Stock

Over the last ten years, I have been responsible for the sale of about half a billion dollars worth of art music, including classical music, new music, and contemporary jazz. I now have a successful business helping people to get the most out of their recordings and other media activities. I read a lot of commentary about the modern music business, and I’m guessing you do, too. It drives me slightly crazy.

Here are ten things I wish people said more often. They don’t represent a blueprint for success or a complete explanation of what’s happening, but I hope they give you a clearer idea of what’s going on and what you might do about it. Here goes:

1) Almost everything you read about the state of the record industry is, at best, totally useless.

It’s tough to stay on top of the changing state of the record business. The more you read, the more confusing it gets. Contrary viewpoints seem equally convincing, and people recommend opposite courses of action to solve the same problems. Above all else, when it comes to earning cash money for recorded music in 2012, nobody seems to be able to answer the question, “Just how screwed are we, really?”

The roots of this confusion have more to do with the challenges facing journalists than those facing people who make (and try to sell) recordings.

It’s hard to write a story about a massive and complex industry undergoing numerous complex simultaneous changes without either getting boring, becoming defeatist, fussing over issues we cannot change, resorting to wild speculation, making sweeping generalizations based on weak statistical analysis, or reducing the whole vast ecosystem to a simple narrative:

It’s all about crowdfunding. Streaming is the answer. Streaming services will kill you and then themselves. Vinyl is the future. There’s no retail any more. Amazon is the enemy. Amazon is your friend. The labels are dead. Long live the labels. It’s all about distribution. We need a new format. Formats don’t matter any more.

All these things are probably true of (or for) somebody, but certainly not for everyone. If we’re going to read this stuff at all, we need to be careful: the most pernicious falsehoods in music business punditry aren’t the overt statements, but the assumptions hiding out between the lines.

If we read enough articles predicated on the assumption that we’re in trouble, we’ll come to accept it. Ditto for conversations about new models, new audiences, and speculation about the future. Any argument predicated on conventional wisdom is likely to be more conventional than it is wise, and while it’s easy to identify the facts and check them, the tone of an article is a pernicious thing that creeps into our subconscious, creating unhelpful biases while we’re not looking.

Does that mean you should stop reading this article now? Possibly. What follows is almost entirely opinion. I haven’t quoted a single statistic, report, study, or expert. If you’re going to read past this first point, I implore you to consider that I might be an idiot who mistakenly believes he has some degree of expertise after a series of lucky career moves put me in a position where I couldn’t fail. Plenty of lucky fools have done a lot better than me.

2) It does not matter how the market is doing. Stop asking.

The dumbest question—and the one seemingly most frequently asked—is: “How is the industry doing, as a whole?”

It seems important, because if the numbers are going down, they’re heading towards zero. The reasoning goes that if they’re heading towards zero, they might actually reach zero. If they do that, we’re definitely stuffed. The flaw in this line of thinking is that going down and reaching zero are not the same thing.

Even if they were, what would we do differently?

So. Unless you own the whole industry, this is the last thing you should worry about. An obsession with how everybody else is doing is unhealthy and unhelpful.

I’ll say it again: there is literally nobody for whom this is an important question. Customers should worry about getting what they want. Everybody else should be trying to outdo each other in getting it to them, and you won’t win that race by looking over your shoulder at the other guys.

The goal here is not to make a typical record or have average sales and average costs. The goal is to succeed. We have to define success, make a plan to achieve it, and then go out and do it. This isn’t macho posturing or the “you can do it” pseudo-wisdom of the inspirational seminar speaker. It’s just the sensible way of doing business in any field.

We don’t set out to create mediocre art; there’s no reason to aspire to mediocre commerce either.

Image via Big Stock

3) It’s not supposed to be easy.

The music market is always changing, but the last ten years have been a rollercoaster. We’ve lost some retailers and critics, but we’ve gained a huge number of new ways to communicate with (and sell to) our audience. It is cheaper to make and release a record than ever before, and as a result release schedules are more crowded than at any point in history. For the first time since the invention of the gramophone, there are retailers who carry every recording on the market, but there’s no one voice telling the consumer what to buy. New technology provides an ever-increasing number of competing distractions, but with this comes the unprecedented availability of information, ease of exploration, and chance for discovery.

Most of these changes are better news for the new music community than they are for the hit-obsessed world of popular music. If we aren’t turning it into a win, we should be, but that’s not going to happen without imagination, hard work, and the willingness to accept that some projects simply aren’t meant to be.

Any time it’s genuinely easy to make money doing something, a bubble ensues, and when that bubble bursts, lots of people lose their shirts. Everything else is hard work.

4) Every record is different.

If you’re looking for a convenient adjective to criticize the way music is recorded and sold, you need look no further than the clichéd panacea of music business analysis that is the word “formulaic.”

We use it to describe everything from the music itself to the marketing plan and even the album art.

Why?

Well, because a lot of records get released, and they can’t all be totally different. When you sit in an office, far removed from the composers, the artists, the fans, and the music, with 100 new releases each month to shove out the door, it’s all too easy to think of them as basically the same.

This is, though, fundamentally wrong. If a record isn’t unique, it shouldn’t have been made.

This uniqueness will inform the A&R, the marketing plan, and the business model you use to bring it to market. The more closely these can be tailored to the needs of your project, the closer it will come to achieving all of your goals.

5) Every genre’s market is basically the same shape.

I really wish I could find a large dataset in the public domain to illustrate this point, because it’s really cool. It’s easy to think of niche markets as being all about the long tail, but this isn’t true at all. Music sales follow a fractal distribution: you keep zooming in, and the picture looks the same.

What do I mean by this? Well, the sales curve in the pop chart is the same shape as the sales curve for country, classical, and new music. The hits make up a huge proportion of sales, and much of the catalog goes unsold for long periods.

Why is this important? Because it gets rid of another excuse, that “it’s a long tail business.” Rubbish. New music is shaped like old music and everything in between. The top sells well, the middle doesn’t, and you really don’t want to be at the bottom. Aim high, understanding that not everyone can win.

6) #1 doesn’t tell you much.

It’s hardly surprising that we obsess about chart positions. Most of the time, a record sells better in its first week than at any other time in its sales cycle. We want to know how we’re doing, so we log on to iTunes and Amazon, and see how our sales compare to the competition.

One of the most useful tools I’ve made for myself is a spreadsheet where I can look up how many copies an album is likely to sell in a week based on its position on the iTunes chart.

It’s quick and simple to use from anywhere. I can check the sales of a product from somebody else’s computer or my phone. When a promotion causes a sales spike, I can make fairly good estimates of how many copies that email, broadcast, advert, or viral video actually sold. This sort of immediate feedback helps to work out what’s working.

It’s pretty reliable, until an album reaches the top of the chart. Here’s why:

All the albums in the top 100 are outliers. In the classical chart, they are the best-selling 0.1% of all albums. Nobody really breaks out new music into a convincing separate genre-specific chart, but the outliers will show up here.

Something happens to propel these albums into the charts: advertising campaigns, media exposure, touring, even the death of an artist. Sometimes you get lucky, or very unlucky, and lots of people buy your album.

There are limits, though. We can’t all be on the cover of a popular music magazine. Gramophone doesn’t make everything Editor’s Choice. It’s a good week when one composer appears on prime-time TV, but they need to save at least some time for reality shows and procedural crime drama.

Because of this, we never seem to all have an exceptional week at the same time. We have to wait our turn. This means that the 100th best-selling album in any chart sells almost exactly the same number of copies from week to week, with a small seasonal variation due to labels saving their best records for the holidays, and a corresponding quiet period in the New Year, when we’re listening to all the music we were just given.

Things are pretty boring for the top 0.1%. The #1 album, though, is the most outlying of outliers: over a specific time period, it has sold more than all the others. It’s the 0.0001%.

To get here, something really exceptional had to happen, and, as a result, the weekly variation is pretty big. We know it’s selling more than everything else, but not by how much.

Now, it tends to be that the #1 classical album will be somewhere in the overall top 200 and, so long as it isn’t #1 in that, too, we can make some pretty useful guesses about how it’s doing. Sometimes we need to sell a lot of music to recoup. For many of my projects, I’ve known that anything but #1 on a specialist chart will be a financial failure. It’s a good target, but once you’ve got there it doesn’t tell you much.

7) There are many reasons to make a record.

It’s tempting to say there are two reasons to make a record: to make money and to look good.

In truth, there are lots.

If we want people to buy it, then we must be able to answer the following question: Why did this recording need to exist? There are as many answers to this question as there are records that need to exist.

As for our motivations in releasing it, I’ve heard plenty of different stories from artists:

“I want to be associated with a prestigious label.”
“I want somebody else to invest in marketing my work.”
“I want to get paid at some point.”
“I want to get paid now.”
“I want as many people to hear this as possible.”
“I want reviews.”
“I want something to sell at gigs.”
“I want proof that I once played this.”
“I want to reach people outside my immediate geographical area.”
“I want to emulate more successful musicians.”
“I want to see my face on the cover.”
“I want something to give to presenters.”
“I want something to give my mother.”
“I want to be on iTunes, really.”
“I want to stick it to my old label.”

Now, I’m not here to judge, so let’s say these are all equally valid reasons. For many artists, their motivation will be a complex combination of some of the above, plus other reasons of their own.

So what do you do?

You look at all your options…

Image via Big Stock

8) Your choice of business model depends upon your goals and your resources.

- You can make your record and start your own label to release it.

You don’t have to be a control freak to do this, but it certainly helps. You get to decide exactly how your record reaches the market, but you have to pay for everything. You can pursue a deal with physical and digital distributors, or you can do it all yourself.

If you’re more interested in making lovely things than making money or selling a lot of CDs, this is certainly the way to go. You can start off on a relatively small scale, so the investment needn’t be huge. A combination of digital downloads for the worldwide market and direct CD sales at gigs will give you high margins and relatively little risk on stock. On the downside, it can be a lot of work and you might end up with an attic full of unsold CDs.

- You can make your record and give it to somebody else to release.

This is a popular option because, while you won’t make any money back, your risk is limited to the production costs, and you have some assurance the label will spend money promoting it, and, as a result, you.

The obvious downside is that you’re giving away something you paid to make, and you’ll never own it again, no matter how popular it turns out to be. If it doesn’t do well, the label may delete it: your recording won’t be available, and there’s not much you can do about it.

If this fits the level of risk you’re comfortable with, it’s worth considering some other options too:

If your primary goal is to get your album heard by the largest possible audience, and you’re willing to give it away in order to achieve this goal, why are you giving it to a label? Why not simply give downloads away on your website? You can still make a nice PDF of the booklet, you get to control the way it looks, and you could even ask for their email addresses in return for the music. If you want a few CDs, you can usually cover the cost of a short run if you sell around 15% of the stock yourself.

- You can make your record and pay somebody else to release it.

Much like the above, except that if you’re paying for it, you may have a lot more control over both how big the marketing budget is, and how it gets spent.

- You can make your record and sell it to somebody else to release.

In general, the more they pay you, the more they’ll spend marketing your record. The bad news is they own it now. If you want to sell copies at gigs, you have to buy them. If you work hard promoting it, you won’t see a penny of the cash they make.

- You can make your record and sell a license to somebody else to release it.

The same as the last one, except you get it back one day.

- You can make your record and do a royalty deal.

You make the initial investment, and you get a share of the return. There are many variations on this type of deal. Sometimes you get an advance against future royalties, sometimes you’re asked to contribute towards marketing costs. The upside is you have an incentive to promote the thing.

All the options so far involve you finding the funding to make your record. This might be from your own bank account, a wealthy donor, a crowd-funding campaign, or a bank loan. If it’s your money, make sure it’s money you can afford to lose. If a donor has the money to fund your project, they may also have the skills to help you make (and stick to) a sensible budget. Kickstarter campaigns are very fashionable, but they’re also a minefield of untested precedents: What happens if you’re not able to deliver the promised rewards? Is it really okay to ask your fans to pay you to create something that will be given to a profit-making entity? What degree of financial transparency is appropriate? A bit of miscommunication can bite you in the ass – just ask Amanda Palmer, who encountered a whole world of trouble after using volunteer musicians on a tour funded with a $1m Kickstarter campaign.

Finally, if you’re thinking about getting a bank loan to make a recording, my one word of advice is: Don’t.

The remaining options cover getting a label to pay for your record. This is the way it works with a major label, and plenty has been written about this elsewhere.

There are two main variations on the deal:

- The label gives you a budget and you spend it.

This can give you more control, but if you take the money, you owe them a record. If you don’t have a record by the time the money runs out, you can’t record for anybody else until they get their pound of flesh.

- The label makes the record.

Safer, but you lose some control.

Either way, you’re going to trade risk for control and ownership, and you probably won’t see any royalties until all the costs have been recovered.

9) Making a record doesn’t have to be expensive.

The most expensive record I’ve ever made cost $80,000. It sounds great, and we somehow managed to stop before it became a vain exercise in soulless perfectionism. The least expensive used borrowed equipment and recycled tape in a friend’s living room, and cost just $12. It doesn’t sound quite so great, but it does justice to its content, and we only needed to sell three copies to break even.

For most people in the new music world, the path to happiness will lie somewhere between these extremes, but it is useful to remember where they are.

10) Please make a budget.

Almost every artist-led recording failure I’ve ever encountered has gone wrong because nobody made a proper budget at the outset. There are two ways of going about this:

(a) You can work out what it will cost to make what you want, and then figure out how many copies you need to sell to pay it off later

(b) You can work out how many copies you might sell of the thing you want to make, and then figure out how much you can spend making it.

I see a lot of (a). I recommend (b), as it’s the only approach that will stop you betting the farm on a project destined to fail.

This is still a gamble, and sales projections aren’t 100% reliable, but the sales director at a label or distributor should be able to give you a rough idea of how your album is likely to sell.

If you don’t have a distributor and plan to make all your sales directly, you’re in a good position to conduct some research yourself. You know your audience better than anybody. Talking to them about your plans is a good way to make your fans feel involved in the process, and you’ll get a clearer idea if this is really going to work for you. If you can’t ask people if they’ll buy your record, you certainly can’t ask them to buy it.

Anyway, those are my ten things.

However you approach bringing a recording to the public, unless you make all your sales before the red light comes on (which, with Kickstarter, it’s just about possible to do), there is always an element of risk.

It is attempts to eliminate this risk that have led so many labels down the “derivative” and “formulaic” route that we so readily (and often rightly) scorn.

Most truly great records disobeyed what had, up until that time, been accepted wisdom. Imagine somebody explaining the concept of Thriller in a marketing meeting, or pitching Kind of Blue to a room full of people who, if they know anything about the jazz business, it’s that frenetic bebop sells. Just about everything seems like a bad idea until it is done well.

If we’re going to create something wonderful, we must prepare where we can, make sure our shoelaces are tied and check that we can afford to fail, but at some point we have to take a leap of faith.

Good luck.

***

This article has since been translated into French with permission. It is available at Cordes & Ames.

***

Andy Doe

Andy Doe

Andy Doe is one of the pioneers of the digital music industry, running iTunes’ classical business as it grew from an informal experiment to become the biggest music store in the world. He joined Naxos as chief operating officer in 2010, and founded Proper Discord Ltd in 2012. He now helps artists, labels, and other organisations to sell more music. You can read about his past projects at andydoe.com, read his far less serious blog at properdiscord.com, or find him on twitter @andy_doe.

19 thoughts on “What Is Going on with the Record Industry?

  1. Gina Genova

    Thank you Andy Doe for this honest and enlightening article. Makes no sense to me for composers to pay for everything AND lose legal control, when there are companies (CD Baby?) that can serve to distribute quite well without taking the composer’s rights.

    Reply
  2. Ron Davis

    Fabulous. Thank you, Andy. A helpful, insightful and inspiring piece. I am going to spread this piece to every musician I can, like a preacher spreading the gospel.

    Reply
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  6. Nigel Lucas McBain

    How about operatic recordings and longer classical works. Wouldn’t they naturally cost more money to produce, because of the number of musicians and people involved?

    Reply
    1. Andy Doe

      It would certainly take more to record a big work in a studio. You’d need a bigger studio, more artists and, in the case of an opera, probably more editing, too, especially if you give all the singers approval. It might never be finished.

      If you can do it live, though, it needn’t cost a huge amount more than recording a string quartet. With maybe two performances and a couple of rehearsals to choose from, the editing should be a little less painstaking, too.

      Reply
  7. Tom O'Connell

    Good article. Disintermediation is sometimes helpful and sometimes hurtful but always inevitable. The walls between content creation and consumption continue to crumble. This is an interesting commentary. Thanks!

    Reply
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