What is the music industry, anyway?

The recent, utter faux pas by Sony BMG to hide copy protection software the computers of unsuspecting individuals raises a number of interesting questions about what kind of service music companies are trying to provide to their customers. This debate is raging on, and yet another opinion on the subject won’t particulalry help at this stage, so I thought I’d take another tack and consider exactly what the so-called “music industry” is for in the first place. Through my various roles I have met a number of people inside the biz, whose opinions are directly opposed to the general perception of what the industry stands for – so are they wrong, or not being heard, or is it that the industry itself is far more complex than we allow?

Following various discussions I’ve been led to believe the music industry occupies a number of roles. Firstly, it is a loan agency. Musicians and artists are considered in terms of market potential and business risk, and are loaned money to make recordings and pay for their management, marketing and distribution. This latter point is important – there are plenty of artists that didn’t realise it was their own money being used to these ends, when they signed the initial contract. The “advance” is exactly that – an advance payment against expected royalties, a.k.a. a proportion of the money made from each sale. Some bands – Marillion is an obvious example, but there are now plenty of others – have twigged the fact that they can get this money from elsewhere, on more reasonable terms. It is surprising that other financial institutions do not get wise to the potential of funding the arts, but in all probablility they just do not understand how to underwrite the risk.

Second, the music industry offers a recording and packaging service. Many music companies own their own studios, as I understand it, and there are independent studios (each with their own specialist skills and reputations) that can be booked. At the end of the day however (as illustrated by David Gray’s White Ladder), you don’t always need an expensive studio to produce a good album. Once the music has been mixed (final arrangements selected) and mastered (made to sound on the DVD like it sounded in the studio), there is a manufacturing process involved – again, each stage can use in-house facilities or can be outsourced, the same as with any business.

Then there is a global distribution network. There’s no magic here – the creation of a global organisation is a painstaking task, requiring the creation of local offices, relationships with suppliers, channel partners and the media in each geography, an understanding of legislation and market dynamics, and so on. This is probably the real battleground for music companies, as it is the only area where they can really differentiate themselves (apart from the artists, but they are subordinate to this in importance – the best artists in the world will not make as much difference to profits as having the better ditribution network).

There is a sales, marketing and promotion service. Again this is global – once a major label has decided to put its marketing muscle behind an artist, they will appear on every street corner and in every magazine, whether they are any good or not. This is a hugely valuable service, but it is not essential that it is carried out by the label itself – indeed and again this role is often outsourced.

Finally, there are other areas to the biz, for example the publishing business, which protects the rights of artists in its stable. Anyone can own the rights to an artist’s music – Michale jackson owns much of the Beatles catalogue, for example, and David Bowie has sold the rights to his own back catalogue as a going concern.

While this may be an oversimplification, these five areas give some indication of how complicated things can get. While the recording elements may just want to get the music heard, the distribution elements seemingly work in cahoots with the publishing elements to protect their existing models. Enough for now – the sad thing is, that while certain parts of the biz may be demonstrating their intransigence, it is the industry as a whole that suffers. There is a huge market for music, and it may be even bigger than the existing market suggests; however the proportion of the market that depends on traditional models will inevitably shrink.

The bottom line is this: give value to the people – make the benefits outweigh the costs, and they will pay. There are too many examples to state here, from Simon Cowell to Steve Jobs, from Marillion to George Michael. There is every indication that people want to spend a good proportion of their money on music in all its forms; ill-conceived attempts to implement rights management technologies are only doing damage to what is already an industry in trouble.

What is the music industry, anyway?

One thought on “What is the music industry, anyway?

  1. In all the arguments over copyright and DRM the issue should be about what is best for society as a whole, rather than whether this group or person is able to do this. What we all want is an environment where we those who contribute to our culture are able to be fairly paid, and those that enjoy these works are able to do so within clear and sensible rules.
    At the moment we have the rights owners saying if you hum a tune in the street you have to pay me, and my copyright lasts forever. Initiatives like the Creative Commons set a sensible balance but I cant see any of the big media players coming down to something like this for a long time yet.

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