Has The Recording Industry Reached The Bargaining Stage Of Grief?

from the seems-like-it dept

Mon, Feb 1st 2010 10:53am — Mike Masnick

This is the second year that I was privileged to attend (and speak) at Midem, the big music industry conference that takes place each January. Once again, it was quite an experience, and I had so many fascinating conversations with those in and around the industry (including many folks who I have disagreed with quite publicly on the blog, who were kind enough not to take swings at me in person). Last year, in writing up my summary post, I discussed how there was optimism and opportunity, but there was still this undercurrent of anger. Even as new business models and new ideas were being discussed, it would always come back to anger at "pirates" and "piracy" and declarations of how it needed to be stamped out. While there was still some of that on the periphery, what struck me about this year's Midem was that there was very, very little talk about "piracy" or how it needed to be stopped. While there was still some chatter about things like ISPs agreeing to blanket licenses or three strikes rules, even that was a pretty minor part of the discussion.

Instead, the word that I kept hearing was "quiet." Almost everyone you spoke to mentioned how "quiet" Midem was this year. Attendance was down (apparently about 10% from last year, when I remember them saying that attendance had also been down about 10%), but that's not too surprising given the state of the economy and the general turmoil of the industry. However, it was still quite well-attended, and the thing I noticed was that there was actually quite a lot of activity going on behind the "quietness." And that activity was dealmaking. Lots of it. I talked to many people working for companies that are enabling and embracing new business models, and they were swamped with deal opportunities and discussions. Sure, the major record labels have all but disappeared from the show, but the companies that are enabling what comes next were quite busy -- just behind the scenes.

In thinking about it overall, I began to think about the famous Kubler-Ross model of the five stages of grief. You know the one: denial, anger, bargaining, depression and acceptance. I'm beginning to think that the recording industry has reached the beginning of the bargaining stage. Last year, we were still seeing the end of the anger stage, which followed a long period of denial. I think the bargaining stage is what we see with things like the pressure to get three strikes laws passed around the world, rather than suing individuals. It's what we see in the ACTA negotiations behind closed doors. While it's not as loud and as angry as what we've seen in the past, it's still a bit questionable. As Wikipedia notes:

The third stage involves the hope that the individual can somehow postpone or delay death. Usually, the negotiation for an extended life is made with a higher power in exchange for a reformed lifestyle. Psychologically, the individual is saying, "I understand I will die, but if I could just have more time..."

That sounds about right for the recording industry, doesn't it? Of course, rather than a "higher power," it's politicians around the world. I have no idea how much longer this stage will go on, but it's worth noting that the fourth stage is still depression, which apparently involves much "crying and grieving" and during this stage "it is not recommended to attempt to cheer up" those going through the grieving process. I'm not quite sure how exactly that will play out in the recording industry, but if this is accurate, then the industry will need to go through that process before finally reaching the acceptance stage that it needs to get to.

All in all, though, like the stages of grief, this is part of the necessary process, and it should be seen as a good sign that the industry at least appears to be moving through them, rather than hanging onto denial and anger completely. Midem itself was actually quite encouraging in that regard, and I'm hopeful that going forward we see more and more positive signs of an industry coming to grips with the changes thrust upon it, rather than still trying to hold back the tide. So while Midem may have seemed "quiet" this year, I think it was actually a sign of good things happening.

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Filed Under: midem, music industry, recording industry, stage of grief

22 Comments

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nullbull (profile), 1 Feb 2010 @ 11:15am

Anachronism
I was active in the recording industry back at the turn of the century (I love saying it that way).

Needless to say, the internet was just beginning to act as a distribution and promotion channel for musicians then. The recording industry doubled down on their anti-competitive, ever-chasing-the-blockbuster business model, as they have done many times since.

The industry failed to grasp the importance of the internet, and now there are many, many examples of artists thriving financially WITHOUT a major label, and with audiences in numbers the labels normally wouldn't have bothered with. It's almost the economics of scale in reverse. Recording costs have PLUMMETED thanks to digital recording and project studios. Distribution costs have plummeted, and now promotion costs (thanks to social networking and "going viral") have plummeted. Put it all together and as an artist, you no longer need someone else to "manage the business end" for you.

Marketing isn't a messy, bothersome business, but merely a way to connect with your fans. Distribution can be handled on iTunes, eMusic, and other sites with ease. And if you love your music, you can put together a fairly cheap (compared to the costs just 10 years ago) studio in your basement capable of producing a quality that people are willing to pay for.

Record labels are an anachronism.
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The Anti-Mike (profile), 1 Feb 2010 @ 11:15am

I talked to many people working for companies that are enabling and embracing new business models, and they were swamped with deal opportunities and discussions.

Sort of reminds me of the old dot com days, plenty of meetings, plenty of deals, plenty of everything, but in the end, very few survivors and very few new business models that really survived.

There are plenty of people out there making deals, I suspect too many of them are trying to position themselves for a buyout or a public offering, and not for any great long term success.
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REM(RND) (profile), 1 Feb 2010 @ 11:20am

Do you like movies about...
"it is not recommended to attempt to cheer up" those going through the grieving process.

I am suddenly reminded of the scene in Airplane involving a hysterical woman (RIAA) and the long line of people there to "console" her (we, the consumers). Click to see it
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Dark Helmet (profile), 1 Feb 2010 @ 11:23am

Re:
"Sort of reminds me of the old dot com days"

Err...why? I thought the issue with the old dot com days was over-valuing potential monetization of site traffic and coupling that over-valuing with over-valuing stock prices and the potential revenue to be generated through buyouts or public spinoffs. How is this a parallel?

"I suspect too many of them are trying to position themselves for a buyout or a public offering, and not for any great long term success."

Okay, if that's what they're doing, that's a valid concern. Any partiular reason you think this, or is this all just speculation?
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Anonymous Coward, 1 Feb 2010 @ 11:29am

Re:
But the ones that did survive, meaning the ones that didn't just throw their hands up and say "Hey, give me money!", came out far ahead of businesses stuck in old business models.

Say you want about the likes of Google, Amazon and eBay, but they are among the most powerful and lucrative companies in the world...and all came straight out of the dot-com-bubble.
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The Anti-Mike (profile), 1 Feb 2010 @ 11:38am

Re: Re:
Generally I think that many of the sites are not building long term business models, but rather are doing the whole concept of aggregating the most eyeballs possible (or in the music case the most ears possible). But as many of the online radio station types of shown, many of these sites don't have business models that properly allow to pay the costs of being in the business.

it is very significant in a business when the models pushed often involve free product. Someone has to pay for things to exist, and if the product is given for free, the money has to some from somewhere else. For the most part, that somewhere else is still pretty murky.

Even YouTube, which is the biggest eyeball catcher of all isn't really a profitable business model.

10-15 years ago it was all about the IPO. Now it's all about having Apple, Microsoft, Google, or similar buy you out (as the IPO market is pretty dead right now in North America). A couple of years from now (maturing time for some of these companies) might be the right time for an IPO.

I just think that in a time where most of the business models are untried and untested, and many show little sign of a route to profitability, it has to make you wonder where they are really going.
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Anonymous Coward, 1 Feb 2010 @ 11:39am

Re: Re:
Any partiular reason you think this, or is this all just speculation?

That's our TAMMY!
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Philip (profile), 1 Feb 2010 @ 11:42am

Re: Re:
"Err...why? I thought the issue with the old dot com days was over-valuing potential monetization of site traffic and coupling that over-valuing with over-valuing stock prices and the potential revenue to be generated through buyouts or public spinoffs. How is this a parallel?"

Wow. That sounds exactly like what the recording industry is doing today: over-valuing the content (music [not to forget movies and publishes, too]). Potential revenue generation from forced user-purchases (bundles; delayed digital releases, etc).

I think Anti-Mike hit the nail on the head with his parallel. That was definitely my first thought when I thought of a recording industry depression (lost of exec jobs, etc).

It makes sense. One of these days, the recording industry will discover it takes 1/3 or even 1/5 the man power they currently posses to do the necessary jobs using the internet. That means a potential 2/3 or 4/5 layoff of industry jobs. Looks like a bubble burst to me!
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Anonymous Coward, 1 Feb 2010 @ 11:43am

Re: Do you like movies about...
Oohhhh! Can I console the RIAA?

Pleeeaaaasssseeee?????
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Dark Helmet (profile), 1 Feb 2010 @ 11:56am

Re: Re: Re:
"Generally I think that many of the sites are not building long term business models, but rather are doing the whole concept of aggregating the most eyeballs possible (or in the music case the most ears possible)."

Absolutely, but a very important distinction with regards to artists/labels utilizing new business models: the dot com-ers were aggregating traffic to sell to someone else (as in ads), where as in this case artists/labels are aggregating traffic in order to sell to THEM, but they're selling them something other th recorded music, which is being used to aggregate the traffic in the first place.

"But as many of the online radio station types of shown, many of these sites don't have business models that properly allow to pay the costs of being in the business."

True...for now. It'd be instructive to investigate how profitable music radio stations originally were in their infancy. It seems to me the issue with internet radio is that there is little to no market dominance as there is in air radio. It's tough to build an ad-supported model w/o a huge majority of traffic in a specific demo. This is why, even in major markets, you have one or maybe 2 oldies stations, but usually not more. I wonder if it took some improfitable time in early music radio to shake out the market dominance issue as well...

"Someone has to pay for things to exist, and if the product is given for free, the money has to some from somewhere else. For the most part, that somewhere else is still pretty murky."

Yes it is, but you'll find that much of that has to do with how much artists think they should be making. I believe what you're going to see over the next decade or so is more overall revenue being generated in the music industry, but with far less outliers on either end of the income spectrum. This isn't to say that it's morally WRONG to make 50 million a year as an artist, just that it's perfectly acceptable to be a touring artist making 200k/year. At those expectations, these newer models are far more palletable.

"Now it's all about having Apple, Microsoft, Google, or similar buy you out"

Really? I'm no industry insider, but I can't recall mass buy ups by Google/Apple/Microsoft. They take on an occasional site or company...but why would anyone expect to make their money through buyouts in this way?

"and many show little sign of a route to profitability"

Keep in mind how incredibly new this all is. The internet is still in a relative state of infancy, all the more so with regard to ways for private business to make money using it.
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Richard (profile), 1 Feb 2010 @ 12:20pm

Re: Re: Re:
it is very significant in a business when the models pushed often involve free product. Someone has to pay for things to exist, and if the product is given for free, the money has to some from somewhere else. For the most part, that somewhere else is still pretty murky.

I think part of the problem is that - just before they died - the old business models became insanely profitable.
This was caused by rapidly falling costs whilst the retail price remained fairly stable. Add to that the fact that the baby boomer generation was still re-buying all it's old vinyl from the 60's and 70's on CD and you can see that business was very good.

When an organisation has had such a large amount of "fat" slimming down is very difficult.

I suspect however that "paying for the product to exist" does not require anything like the revenue base of the old industry -even if it is done by the industry's old an inefficient methods. Of course it can be done a bit cheaper.

My suspicion is that "paying for the product to exist" is something that requires public education (and I don't mean teaching the public to acquiesce to copyright law here) - as well as new business models.

Ultimately the public acts as patron of the artist (whatever the system) and thus gets to choose what is produced. The copyright mechanism makes the patronage rather indirect. What is needed now is to find a more direct mechanism that the public can connect to and support.
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Rex, 1 Feb 2010 @ 12:23pm

it might be insider knowledge of ACTA
I have no clue, but consider the possibility that the RIAA/MPAA have insider knowledge of provisions of ACTA that will go a long way to reducing or eliminating media trading. Exactly what those provisions might be, I have no idea.
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The Anti-Mike (profile), 1 Feb 2010 @ 12:45pm

Re: Re: Re: Re:
Absolutely, but a very important distinction with regards to artists/labels utilizing new business models: the dot com-ers were aggregating traffic to sell to someone else (as in ads), where as in this case artists/labels are aggregating traffic in order to sell to THEM, but they're selling them something other th recorded music, which is being used to aggregate the traffic in the first place.

I think part of the problem lies in the fact that it isn't the artists doing the aggregation, it is being done by third party sites who are still trying to sell or deal the eyeballs to the artists. While some artists do have their own active websites with good interaction and all, many more appear to be outsourcing the job to someone else, and only making guest appearances on their own site.

I am a big believer in the theory of when everyone is doing it, it is no longer special and likely past it's stale date. I think in many ways that is what happens to social media sites in general, and what has happened to MySpace. Too much noise, not enough true signal.

It'd be instructive to investigate how profitable music radio stations originally were in their infancy

I think this would be a case similar to the 18th century UK railway boom (and bust), where plenty of money was made but most of the players failed massively. It might also be a bit like the auto industry, which started out with hundreds of players and has ended up today with a small handful holding most of the cards. Even then, they are prone to failure, it seems.

This isn't to say that it's morally WRONG to make 50 million a year as an artist, just that it's perfectly acceptable to be a touring artist making 200k/year. At those expectations, these newer models are far more palletable.

I think you will discover that 200k is a pretty unlikely number. The number of artists making truly huge money is small, and as more and more artists come into the game, the water gets more and more shallow, not deeper. The numbers shown here in the past have proven that there is a move from recorded music sales to live music sales, but the net consumer spending has remained flat. There is little indication that there will be a huge increase in consumer spending. If you double the number of acts, the average take home is cut in half. It is more and more likely that most acts will be working for beer money, not a living, but having to work very hard personally even to get to that point.

All of these various websites and services are all there to take a piece of that ever more shallow pool, selling upcoming artists "positioning" so that they can get noticed, all while the signal to noise ratio gets worse as more and more noise comes in, and less signal gets noticed.

When the acts can't pay, the services will suffer. When the services can't afford to be in business, the artist will suffer. When they all realize they are fighting for the same table scraps, it could get ugly!
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Anonymous Coward, 1 Feb 2010 @ 12:47pm

Re: Re: Re: Re: Re:
Yes! And the arts will be better for it.
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Yakko Warner, 1 Feb 2010 @ 1:18pm

Re: Do you like movies about...
I don't know if the analogy is accurate or not, but I like it anyway.

Can I be the guy with the crowbar? >:D
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Yeah right, 1 Feb 2010 @ 2:58pm

Hey Mike,

A while back someone made the same the Kubler-Ross analogy:
http://torrentfreak.com/lily-allen-changes-tune-now-wants-to-throttle-pirates-090925/#comm ent-601817
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TW Burger (profile), 1 Feb 2010 @ 3:12pm

Re: Do you like movies about...
Great, now you got me watching YouTube for 45 minutes
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nasch (profile), 1 Feb 2010 @ 6:17pm

Re:
Sort of reminds me of the old dot com days, plenty of meetings, plenty of deals, plenty of everything, but in the end, very few survivors and very few new business models that really survived.

Keep in mind, though, that most new businesses - of any kind - fail within a few years. Successful businesses are the exception, not the norm, so if most of these new music businesses fail, that isn't a condemnation of the industry or necessarily even the business model. It just means it's behaving like any industry.
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LM, 1 Feb 2010 @ 6:36pm

K-M model outdated
I understand that the Kubler-Moss model has been largely discredited, not that this has any relevance to MM's point. Just pre-empting TAM...
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The Anti-Mike (profile), 2 Feb 2010 @ 2:53am

Re: K-M model outdated
That something has been disproved never stops Mike from running with it anyway, especially if it can be used to slag "the industry".
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Crosbie Fitch (profile), 2 Feb 2010 @ 5:09am

Re: Re: Re: Re:
A more direct mechanism for artists and the public to exchange the publication of art for money is precisely what I'm working on (contingencymarket). Unfortunately, very few believe it's either possible or needed, so there's little funding on the horizon.
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Anonymous Coward, 2 Feb 2010 @ 8:51am

Re: Re: K-M model outdated
That something has nothing to do with the point of the article never stops TAM from trying to make a big deal out of it, especially if it can distract from his inability to defend his arguments.
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