And The Hits Just Keep On (Not) Coming

I worked for Paul Drew when he programmed the Drake format in Philly and one of our Bill Drake-voiced station breaks said, "...And the hits just keep on comin". Back then it was true. Radio was thriving in the late 60's in large part because the music business was thriving. The Beatles, British invasion, Motown, Philly sound. Radio had hit the wall with too much talk and not enough music (sound familiar?), but the music kept radio hot.

Now the recent news that things for the record labels -- already stuck in a time warp by imitating themselves -- have gone from bad to worse.

EMI, the European member of the big four, cut its profit forecast because music sales are declining in the U.S. This is EMI, the label that signed the Beatles. To quote EMI regarding the downgrading of its forecast, it was due to "unprecedented level of market decline".

If that's not enough, Warner Music's profits dropped for the most recent quarter by 74% due to fewer albums being released and poor sales in the U.S. and overseas.

The only thing that keeps on coming is a decline in record industry sales. Yet the labels continue their strategy of trying to save the CD, suing customers it suspects of stealing music and stubbornly insisting on digital rights management (DRM) for online downloads driving a potential boom market to a potential bust.

This is all insane. The next generation has redefined how they want their music and the labels are not listening. But just as bad is the lack of new music from the labels at a time when consumers have more ways to discover new music than every before. Plainly put, a few more hits and a few less budget cutbacks couldn't hurt.

As the record labels go so goes radio, it's former hit making machine. Let's say it's a far cry from the 60's. Radio can only play what is available to their stations (with the exception of the Dixie Chicks, of course). It seems like radio and records really do deserve each other. One can't make enough hits and the other has too many misses.

So, here we are with the news not getting any better for the record labels and Steve Jobs out of the closet on DRM and MySpace, Facebook, YouTube and other social networks replacing radio as the source for discovering new music.

The record industry's problems (and radio's, for that matter) are so not due to new technology. In fact, it's the other way around -- technological breakthroughs stand ready to help transform the music business, but label execs are stuck in "label think", a strategy for operating in the future by holding onto the past at all cost.

Here is "label think" in action:
  • DRM -- Fight removing rights management from downloads at all costs. We don't like Steve Jobs anyway. It's personal now. Overlook the fact that legal digital downloads are now declining and DRM is likely the reason.
  • New Artists -- We know we need more hit acts, but corporate wants us to cut the budget. After all, we are public companies under scrutiny by shareholders. Let's just concentrate our efforts on our few big acts and squeeze as much out of them as we can. We've gotten by on that strategy for years since the record industry consolidated. This is no time to be innovative.
  • Save The CD -- It's not declining, alright? And we're not in denial, really. It doesn't mean anything that individual group or artist album sales are dwarfed by compilation albums and that even Hannah Montana can outsell Beyonce. We can't do anything to jeopardize the CD. Like it or not that's how albums are meant to be.
  • RIAA -- You have to sue these kids that steal music. They couldn't go into a record store and walk out with a CD they didn't pay for. Why should this be any different? If we drop the ball on this everyone will be stealing music. So stay tough and stand up to thievery at all costs. We in the record industry never believed peer to peer would sell more music that the music that might be stolen.
Any record label that wants to come forward right now and come up with radically different solutions to the above illustrations might discover that there is life after the CD, that the RIAA should be scaring the labels not their customers, that you have to spend money to make new hit artists and dropping DRM now will make you money sooner because one way or another -- sooner or later -- DRM is history.

Try -- try as you may -- not to be history along with it.