Jimmy Guterman's blog

media, technology, management, and the rest of it

Steve Jobs rules the recording industry. Now what?

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Last night’s Grammy Awards ceremonies were even less relevant than usual, no small achievement. The TV broadcast began with a “performance” by that cutting-edge new artist Frank Sinatra and fell down from there. The only real emotional charge of an evening celebrating the most emotional of media came when we viewers were confronted with the disparity between the preternatural confidence of Amy Winehouse’s “Rehab” and the shaky, shell-shocked manner in which Winehouse accepted her award for it. Alpha geeks had a moment to celebrate, too, when one of the winners behind Historical Album of the Year (Woody Guthrie’s Live Wire) turned out to be a mathematician.

But, those and few other brief moments notwithstanding, the action in the music industry is elsewhere.

One of those places is Apple’s iTunes online music store. For several days last week, the top-selling track on the store was Yael Naim’s “New Soul,” a song available, at least to U.S. audiences, exclusively via iTunes. The exclusivity isn’t a big deal — the store is powerful enough to offer plenty of high-profile exclusives — but the reason “New Soul” became a hit is a big deal. “New Soul” was a hit solely because it appeared in Apple’s commercial for the MacBook Air. Until the 1980s, record companies looked to radio to break new artists. Until five years ago, the place to launch new performers was music video. For most of this decade, the breakdown of traditional music channels has led to new songs being noticed via video games, television shows, and — most of all — commercials. Whoever is programming the music for Apple’s television commercials may be, right now, the most powerful talent scout in the record industry.

How did Apple gain all this power? The record companies, desperate, vain, and stupid, handed it over. As Michael Hirschorn wrote in the March Atlantic (I’d link to his terrific essay, but the venerable Atlantic tends to get around to uploading new articles to its website weeks after they appear in print), “Steve Jobs shanghaied and basically destroyed the CD business. The major record labels, in giving Apple’s iTunes the right to sell individual songs for 99 cents each, undermind their own business model — selling bundles of songs gathered together into something called an album for up to $20 a pop — because they didn’t see that people were about to consumer music in an entirely new way. The labels saw iTunes as free money; ‘ancillary,’ in the legal vernacular. Jobs took their cheap music and used it as a loss leader to sell his expensive iPods, and the traditional music business now lies in tatters.” The punch line, of course, is that the record industry is trying to shut out Apple by selling music online elsewhere such as Amazon — for a mere 89 cents per cut.

I’ve written before here about clever ways to sell music nowadays. Like the performers I celebrated in that post, record companies have to adopt new ways of packaging and selling if they want to stay in business. Just as twin geniuses Sam Phillips and Ahmet Ertegun reinvented the record industry in the 1950s, we need a new generation of tech-savvy entrepreneurs who accept that recorded music consumed in $20 increments — except for that created by a small subset of veteran performers with large and reliable fan bases — is a dead notion for now. Music is everywhere, just as software is everywhere. We’ve seen an explosion of new models in recent years for selling software — web-based, software as a service, various levels of open source, and so on — some of which have been quite successful. Software may be useful, but for the most part it doesn’t satisfy the emotional need that music does. It should be easy to sell music, certainly easier than it is to sell software. The music industry has much to learn from the computer software industry about reinvention and staying in touch with the customer. (In future posts, I’ll probe what the music biz can learn from the software biz.) If what remains of the music industry doesn’t look to successful technology industries for ideas, it’ll be as lifeless as the Frank Sinatra half of last night’s Grammy “duet.”

This post was written for O’Reilly Radar

Written by guterman

February 11, 2008 at 7:28 pm

Posted in music, work

One Response

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  1. Nice . . I also think there is tons to learn from the online ad industry, in fact the music biz now reminds me of the early days of online ads, whereby the industry is moving from seller-driven to buyer-driven industry; from a volume model (CPM) to a transactional (CPC) one; commoditization of the middle man lack of analytics, showing for example how to value different forms of consumption, etc.

    See: http://tinyurl.com/2rny3d

    A Weissman

    February 12, 2008 at 2:11 pm


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