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Major Money, Major Problems
Big music is in big trouble
Over the last few years, each fall has brought bad news for major record labels, as well as predictions of their imminent demise. There are two reasons for this. First, the major labels are, indeed, in trouble. Second, the tech types that tend to write about the media business often see the future as more imminent than it actually is. It's still safer to invest money in a major label than it is to give it to a futurist.
So instead of looking at the music business through geek-colored glasses, let's examine it from the ground up. Simply put, the majors enjoyed significant structural advantages that allowed them to dominate the music business in the '80s and '90s. But, at the risk of disappointing indie diehards, they weren't running some vast left-wing conspiracy. They had three quantifiable advantages: A much more efficient distribution system, a lock on commercial radio, and far more money than any indie could hope to amass. And all of those advantages are eroding at once.
The first advantage is gone thanks to the labels themselves. In 1995, when the Warner Music Group launched ADA, most independent labels had trouble getting product into stores – and more trouble getting paid after they did. Now, most indies of any size use the "indie" distribution arms of the majors: Warner's ADA, Sony's RED, EMI's Caroline, or Universal's Fontana. For the majors, this means extra money – but also more competition.
With radio, the majors turned an advantage into an albatross. When Elliot Spitzer cracked down on payola, he freed the majors from a promotional structure they could no longer afford. Whatever your opinion on the morality of radio promotion – and I'd argue that Spitzer should have spent his time cracking down on the subprime mortgage business – it had become too expensive. When a pop act could move 8 million units, it made solid economic sense to give programming directors a trip to Hawaii to hear the album. In the age of file-sharing, when the biggest hits barely crack 5 million, it just doesn't work. These days, the investment required to launch an album on commercial radio often just isn't worth it.
So instead of looking at the music business through geek-colored glasses, let's examine it from the ground up. Simply put, the majors enjoyed significant structural advantages that allowed them to dominate the music business in the '80s and '90s. But, at the risk of disappointing indie diehards, they weren't running some vast left-wing conspiracy. They had three quantifiable advantages: A much more efficient distribution system, a lock on commercial radio, and far more money than any indie could hope to amass. And all of those advantages are eroding at once.
The first advantage is gone thanks to the labels themselves. In 1995, when the Warner Music Group launched ADA, most independent labels had trouble getting product into stores – and more trouble getting paid after they did. Now, most indies of any size use the "indie" distribution arms of the majors: Warner's ADA, Sony's RED, EMI's Caroline, or Universal's Fontana. For the majors, this means extra money – but also more competition.
With radio, the majors turned an advantage into an albatross. When Elliot Spitzer cracked down on payola, he freed the majors from a promotional structure they could no longer afford. Whatever your opinion on the morality of radio promotion – and I'd argue that Spitzer should have spent his time cracking down on the subprime mortgage business – it had become too expensive. When a pop act could move 8 million units, it made solid economic sense to give programming directors a trip to Hawaii to hear the album. In the age of file-sharing, when the biggest hits barely crack 5 million, it just doesn't work. These days, the investment required to launch an album on commercial radio often just isn't worth it.
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