Record Company Rant

The record companies real problems go back almost another 20 years. During the 50s and the 60s, the recording industry was booming. The record companies were run by people with musical backgrounds who could recognize talent and sign them to a contract. The record companies offered promotion & tour support to new artists even when their first albums were not immediately successful. Going back to the earlier example, Pink Floyd made 7 albums before the hugely successful "Dark Side of the Moon". Most of those albums did not actually make any money until after the release of Dark Side. With the boom of the 50s and 60s the music industry became "Big Business", and in the 70s there was a changing of the guard at the top of the recording industry. The people responsible for the success were gradually replaced by Harvard Business School types. People with no musical background who thought they could use the same techniques for selling laundry detergent and paperback novels to sell music. The first thing they did was shift the focus from music to money. "How can we increase our profit margin?" they asked. Stop spending so much money on artists who were not profitable seemed the obvious answer. Promotion and tour support were only given to top acts. Rather than develop new talent, record companies got into bidding wars over established, best selling artists. Some rock stars were becoming rich while the rest were struggling just to be heard. Going back to the Pink Floyd example, if they had been signed ten years later, they would have been dropped for lack of profits long before Dark Side. There is a distinct possibility they would not have been signed at all in the environment of the 70s. This short sighted approach did improve the bottom line in the short term. The Harvard Business School executives were greatly aided in their quest for profit with the advent of disco music. Here was a product they could understand. Formula music with a predictable profit return. A single production team could crank out hit after hit. It did not matter whose name was on the album, the producers were the ones responsible for the music. As long as the disco craze lasted, the record companies were flying high, recording record breaking profits.

Several things happened in the late 70s and early 80s that caused the record companies concern. The disco fad died and took the predictable profits with it. A new sort of music was becoming popular, Punk Rock. Punk Rock was another revolution against the establishment. Fans who were fed up with the staleness of the current pop music scene flocked to it. The record companies chose to embrace it rather than be consumed by it.
Technological breakthroughs allowed the production of low cost multi track recorders, and suddenly independent record companies were born. A new medium, MTV, allowed these independents access to mass markets. There was an explosion of variety in popular music. The major record companies were forced to act. They still controlled all CD distribution and used this to leverage the independents. Most of the successful independents were bought or absorbed by the major labels. Many of the rest simply went out of business. Recognizing the marketing potential of music videos, they created formulas for them, based on the most successful. In response to the variety, they created niche marketing strategies. Absorbing the independents gave them the talent base and impetus to carry them through the 80s.

In the 90s the major labels short sighted approach finally began to affect their bottom line profits. Music videos were so stale and predictably boring, MTV moved on to entirely different programing. To fix the bottom line, they decided what they needed was more formula music with predictable profits like 70s disco. They spent millions on boy bands and flavor of the month teen idol singers. Rap music offered the closest thing to 70s disco. The formula was even simpler, the profit margin even greater, but still CD sales are declining. The record companies began pointing fingers at the internet.

Another technological advance may prove to be the death of the major labels. With an ordinary home computer and an internet connection, musicians can now make the same quality digital recordings as the major labels and market them to the entire world. Why would todays musician sign with a major label, when it would only add a middle man and reduce profits on each sale? If I am an established artist, why would I resign with the record company if I can sell just as much from my own website with greater profits? If the record companies wish to survive, they will have to do what they did in the 50s and 60s. Develop, support and promote new talent. Talent not formula. They will need to adapt their marketing and distribution strategies to include the internet. Adapt or die.

In the future, if there are any record companies left, I think they will be run by people with musical backgrounds and good business sense - not good business men with no musical background. That is my prediction.