Digital Industries Part 1:Does recording music make commercial sense?

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If you visit most torrent sites on the internet, there are certain categories that are placed near the top of the page on the menu bar. These are music, games, movies, and applications. Sometime you may be lucky enough to find books. What does this very feature signal? It signals the coming of an age where intellectual property could easily become worthless.

When Bill Gates came up with the Windows Operating System for office computers in 1985 he did not foresee an age where digitization of products would proliferate to such gigantic levels. He simply wanted to create something that can make managing office work a walk in the park; a simple unified station where you can draft up documents, communicate them to others, design business presentations, analyze  and maintain important figures for your organization and the list keeps getting bigger each year. It was everything a white collar working man needed on his computer.

Soon, with the advent of the personal computer, communication became a more prominent function of this system and the publicly available version of the internet broke loose in 1995, ten years after Windows emerged. It was clear that human connectivity was about to see a serious overhaul. But what many did not understand is that communicating messages was one part of the grand picture. This tool would help us communicate information in whichever form it comes in. Microsoft had set it all up years before by inventing the copy paste function where information can be shared in two short keystrokes. Yet nothing was done to prevent the great torrent of internet piracy networks that was coincidentally named the bit torrent. So the gradual decline of various intellectual industries WAS inevitable. Given that most communication on the net is completely free of charge and that ISPs have no regulatory concerns over content flow, intellectual property owners were up for a major challenge; protecting their work from piracy. Today anyone can send a song they bought to someone else using their email for free. Where does this leave the artiste?

The Music industry

In the nineties, Warner Music  Group was generating figures that were over 3 billion dollars in revenue but in 2004, the company was being sold off to a group of investors for only 2.6 billion dollars. Sounds to me like a major drop in value. Apparently they did this to offload the major debt baggage that they were carrying at that time. Expenses were flying high and production was not meeting sales. They strategically decided to close and sell off their compact disc pressing plants which produced physical copies of the records they sold. This was the same thing that EMI, another big name in the recording industry did before them. And that ended their physical record production business right there and then.This forced them to shift their focus to digital distribution and live shows.

On a much rosier scale of things, iTunes the new cat in the music industry was posting yearly revenues that surpassed the sell off price for Warner’s music division making to date over a billion in revenue per QUARTER! And what did it cost them? A software application. Clearly the digital revolution was impossible to ignore. While the big five, EMI’s, Sony Records, Universal, Warner and BMG, had tried making digital distribution work with Spotify, it was no match for iTunes’ popular and scalable model. They eventually collaborated with the digital music giant.

Where do you stand as a musician in this wave?

Taylor Swift released her fourth album Red this year and it sold 1.5 million copies worldwide in one week of its release. Adele’s 21 was the highest selling alum last year with over 5 million records to show. But before that all the top selling albums in the U.S since 2005 have all sold less than 5 million records. Interestingly though all top selling records from the previous ten years before 2005 have all sold above 5 million records with some even approaching 10. The signs are pretty clear that albums sales are becoming more and more diminished. There is less money to be made by the super successful pop icon today than there was 10 years ago. This might trickle down the ladder of fame but only to a certain point.

If you are a less known act you might be at an advantage especially if you plan to distribute your music globally. Years ago, a lesser known act was overshadowed by the prospect of not getting a record deal from a major company. The biggest merit to a record deal was always the major distribution opportunities for their music. Today, with online tools such as iTunes and Amazon one can easily do their own distribution and even build a fan base through other sites such as Soundcloud. Accessibility to music is becoming very fast and so is distribution. So in a situation where one would only make 10 sales a month off their debut album from that local indie record label near your home, now you can hope to make 10 times or more through such affordable online avenues. The rate at which new talent is being discovered is exciting and all it takes is a click on a link to see a whole list of new acts. Music taste can be fully accessed and therefore artistes are freer to explore their options.

There has never been a much better time to become an independent musician than now and likewise there has never been a worse time to be an icon. But all this is within the lines of record sales. In the second part we will analyze live shows. Meanwhile the following infographic sums up your commercial prospect as a recording musician.

Music sales infographic

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