The Music Industry

I hate the recording industry. Part of it comes from my Punk Rock/ Fuck the Man/ DIY dogma that was essential to being "in the scene" during the early and mid nineties. Part of it comes from reality. The industry rips off bands. They take them to the cleaners and destroy valuable and creative music projects while foisting teen pop on the airwaves.
There was an interesting article in the U.S.A. Today awhile ago that gives you a breakdown of how an average record contract works. Two things I want to quickly point out in the section marked Royalty Math. First "independent promotion" means payola. It's money that people, that the record companies have hired, give to radio stations to play songs. It's the major cause of the dull homogeneous radio culture. Second most CDs are sold under the $18.98 suggested retail price and that skews the math, especially as Best Buy/Circuit City/Walmart make deals with distributors to buy the CDs for a lower price because they can sell more. And this quote

"You have artists represented by very sophisticated counsel who understand the ins and outs of the industry. The length of the deals and the complexity of the industry results in contracts that are lengthy and complex. It's not as if the provisions are a surprise to the artists."

is just a bald faced lie. Madonna does have excellent counsel, but that came after her first contracts with the labels. When a label sends an A&R guy to talk to a band the scale is definitely balanced in the labels favor. Most bands are young and barely have money to keep their tour van running. They aren't sitting down and reviewing a letter of intent on the same footing as the Sony Music lawyer who wrote it. They sure as hell can't hire a lawyer to look over the letter of intent. A band doesn't usually get a lawyer until it's too late.
Steve Albini also wrote an essay which is a little more vituperative but a little more accurate in my opinion on how signing a label works.
Anyway, the musicians, who deserve support, had a big meeting in D.C. with some lobbyists and others to figure out what to do about illegal downloading. Generally this downloading stuff doesn't affect me, I download independent music and I almost always end up buying the CD. When I don't buy it,it's usually because it sucks, and so I delete the track. However I recognize that most people don't operate that way. So how do you make downloading work to pay musicians and songwriters?
What I find interesting in the whole discussion is that people still seem interested in using the major labels to do it. Why should they be involved? Is it because they have the capital? If you look at the atrocious way they run their business why would you want them involved. The U.S.A. Today article said only one in ten records they put out makes money. That doesn't sound like a successful business plan to me. I recognize that some business operate with different losses than others, but look at small labels. They either break even or make money on most of their records, or they fold. They do this by following bands and releasing records they think will succeed. Basically they research a band before they invest in it. It makes sense. Meanwhile the Washington Post had this article about some A&R guys surfing the web and then signing a band to a five record deal. That's a lot of money to invest in a band that's never toured. No wonder the majors have a failure rate of 90%.
Another instance of how unimpressive the major's financial strategy is how they're managing their online music. Almost nobody has made any money off of their downloading services. I think that's for two reasons. One, it's a hassle and two, it costs too much. The services have too many rules on transferring or recopying songs. When you buy a song you should get the song free and clear. I know they're worried about people pirating the music, but once they've put it out on a CD it's out there to be pirated and there is not a lot that can be done about it. Why pay 99 cents to download a song that can't be transferred around from your minidisc, to your computer to your lap top, to a burnie when you could get the same song for free and do all of that. And that brings up price. 99 cents is too much for a song that doesn't come on a CD with any artwork or a jewel case. The majors don't have to pay for storing or distributing this stuff. The money they could save on each CD should easily offset the costs for servers and tech maintenance.
So when I look at how inefficient the majors are I start to wonder what exactly they do that is so important. They don't really make anything. The band does the music, an engineer records it, a CD presser and printer get the CD ready for market. So they are a distributor and marketer. Remember the "independent promotion" from the U.S.A. Today article? That's how they stay in business with a 90% failure rate. You're market strategy is basically bribes. Majors bribe music outlets to limit what is played on commercial radio, in movies, and on TV. It creates purchase options that are limited to mostly their own products.
With internet and satellite radio and massive downloading services around the horizon the majors won't be able to keep a strangle hold on the media. If they don't get on the ball soon they'll have a hard time convincing anyone that they're still relevant. Bands have traditionally made their money by touring. If bands can reach enough of an audience directly through download services and these new types of radio to support a tour it will be really hard for the majors to justify their existence.

Downhill Battle has some decent information on the state of illegal downloading. They are not always that realistic about the business aspects, but the majors don't seem to be either.