Record Industry Collapse

Radiohead frontman Thom Yorke is saying that it is the end of the world as the record industry knows it.

Yorke is predicting the total collapse of the music industry and is warning young musicians to hold off signing record deals as he anticipates some big labels going belly up in the next few months.

Radiohead left their label, the troubled EMI, three years ago and went whole hog into digital distribution. You may remember In Rainbows was offered on the Internet and fans were allowed to set their own price from free to whatever – with mixed results.

This comes as the record industry may have just survived its worst week ever in the last week of May.

Worst for album sales – at least in twenty or thirty years.

Absolutely the worst since Soundscan came around.

According to Digital Music News physical and digital albums totaled just 4,978,000 units for the week ending May 31st. Compare that to 45 million plus for the highest weekly total in music history in late 2000.

The CD continues to melt down.

Touring is in trouble.

Radio has lost its influence as a hitmaker.

Even merch isn’t selling all that well. After a concert event, who needs a CD bundled in? Most concertgoers have all the music they need before security pats them down on the way into the venue.

Meanwhile, the labels are trying to find a way to survive yet none have an original idea.

Suing consumers hasn’t worked.

The labels are two weeks away from shutting down LimeWire convinced that filesharing is their problem.

Twelve years have passed since the CD first hit the skids and an entire generation of young people have been raised on bit torrent sites or, at best, legal downloads from a consumer electronics company – you know, Apple.

Labels, in an effort to trim expenses, have cut back on what they need to do more of – find new acts and new genres.

Not even rebels like Radiohead have found the answer to the music industry’s digital future.

Here are the problems that are not being dealt with that adversely affect today’s major labels:

1. Steve Jobs is the Commissioner of Music – just as Bud Selig is the Commissioner of baseball except Jobs has even more power. He has relegated music as a byproduct for his electronic devices. Previously, music drove everything. Forced radio airplay. Commanded live touring dates. Fueled merch sales. Not so now. Music exists as an add-on to an Apple device. The labels let Jobs get away with it.

2. The radio industry has lost its influence over the 80 million strong next generation. They grew up without djs and stations telling them what was good and young consumers now look to each other bridged by social networks and filesharing to spread the word.

3. Growth by lawsuits has failed miserably. You can understand why the lawyers of the music industry played the only hand they know but filesharing is impossible to stop and what is worse is that time and focus has been diverted from innovating to litigating. As we write this, the labels still pursue punishing pirates instead of embracing them.

4. The labels inability to make deals with Steve Jobs that are accretive to them shows how they have missed the mobile digital revolution. After all, Jobs always gets what he needs, but the labels somehow wind up left at the altar in a marriage of convenience.

5. It is inadvisable to pursue all you can eat strategies such as Rhapsody and Spotify when Apple is about to make music available online to its 100 million credit card holders. Their iTunes store will someday stream music to mobile Apple devices everywhere and the labels need to get with the changes that are driving cloud computing because the cloud is coming. And, the labels will be supplying their music to Apple and getting kissed by their sister again.

6. Labels need to get out of the record business and into content creation using the artists that they own. In the past programming was outsourced to radio. Then Apple conned the labels out of their music but didn’t go to the expense of creating programming. The labels need to be tomorrow’s radio using their artists. Hire creative radio types. Make sure video is included. Add social networking. Why? Because the labels own the best assets and because they fail to see the new business model ahead, leave their music to others from which to profit.

I am not sure the record industry is ready to implode.

I think it already did.

From inaction, reaction to filesharing and lack of traction for the digital future.

There will be a lot of bad weeks ahead for the music industry, unless and until they get out of manufacturing and get into content creation.

There. I’ve said it.

Record labels that act more like Apple and less like widget makers.

Thom Yorke is quoted as saying, "It will be only a matter of time - months rather than years - before the music business establishment completely folds. (It will be) no great loss to the world."

But the music business folded when the labels let Steve Jobs take over pricing, delivery and now promotion.

There is nothing left for a traditional record label to do except find and sign artists – and that is precisely what they are not doing enough of.

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