Only read this if you’re a complete music business geek. Like me.

This is the kind of thing that keeps me up at night.

Upside Down: What Really Killed the Music Business

In 2000 I said to a friend, “the music industry is dead. It’s just a carcass that hasn’t been drug away yet. Little things feeding off the remains but soon it’ll just be dust.” Not a pretty image, but not inaccurate either.

When I expressed this sentiment to longtime fellow-music business colleagues, about ½ of them scoffed, ¼ nodded in agreement, and another ¼ had the saddest response of all: belief in the system. Belief that some fresh form of music would act as a rising tide that lifts all boats and “save the business,” just as disco, hip-hop, and punk did in the 70s/80s, and as the introduction of the compact disc did in the late 80s/early 90s. Then we grownups would shake our heads and go well we sure didn’t see that coming but let’s make hay with the recordings and the radio promotions and a zillion endcap displays in Musicland and Walmart.

Whenever someone said something like this—that a new kind of music would rise up to save us—I’d ask, do you see any signs of this right now? Any underground club scenes? Regional sound that’s got good buzz? Crazy stuff coming out of the radio at 2 AM? Kids speaking some incomprehensible music scenester-inspired lingo? No, they’d say. But we’re too old to know. Anyway there’s techno and electronica and we hate it so maybe it’s the next thing… It’s got to be happening somewhere. Well, it isn’t, I’d say, I don’t care how old I am. There is no next thing.

A “next thing” isn’t a derivative mix of existing sounds, no matter how mind-blowingly creative, beautiful, or shocking. A next thing is like Rock and Roll. R&B. Reggae. Soul. Disco. Funk. Metal. Hip Hop. Punk. We got all these forms from the 50s through the early 80s.

And since then?

No new forms have evolved since the early 80s. Go ahead. Argue with me. Tell me that Alternative or Grunge or Techno or Emo or House are new forms and we can be certain that even now the young people of America are experimenting with music that is going to blow us all away. Go ahead. (They’re experimenting all right, but with how to share music, not how to play it…) And I’ll tell you what I would have said to a classical music aficionado in the late1800s: no new shoots are going to grow on this plant. You had your Medieval, your Renaissance, your Baroque and what have you, but after the Romantic period, what new forms evolved? I’m not talking about the occasional astonishing instrumentalist or crazy avant garde soundtrack that catches mainstream attention. You classical people, you had your—what?—500, 600 years of evolution and we popular music people had our 30 years. For both of us, it’s over. All there is to do is mix existing forms together to create hybrids or play the old stuff in new ways.

I’m not saying there aren’t amazing musicians making extraordinary music. There are.

I’m not saying people don’t care about music anymore. They do.

I’m not saying extraordinarily interesting and creative new amalgamations of sounds aren’t being produced. They are.

But it’s still not a sign of evolution.

For the music business, new forms of sound are not the future. Delivery systems are.

How did it get this way?

It’s very popular—and understandable—to blame the stunning rise and fall of the music business on digital downloads and the hubris of record labels execs. But this is not sophisticated enough. The decline didn’t happen because kids started downloading music and old guys didn’t get it; the seeds had already been planted. Downloads are the symptom, not the disease.

Downloads didn’t kill the music business. It killed itself long before downloading became widespread.

Here’s how it happened.

Shift in purchasing patterns from regional to national. In the 90s, there were things called record stores. They sold recordings. There were things called appliance stores. They sold appliances. There were things called grocery stores. They sold food. Somewhere in the early 90s these things started to get all mixed together. When it became apparent that the CD was for real and not only were people going to buy new releases in this format but also replace every single thing they already owned, the industry kaboomed. In a good way. Suddenly every retailer wanted to stock CDs. (I’ll never forget the time Rounder Records got a 3000-piece bluegrass catalog order from Blockbuster video stores.)

Around the same time, we saw the rise of big box stores selling music. The famous phrase “loss leader” came into our lexicon. CDs became those inglorious leaders. They were imagined to be just the thing to lure unsuspecting customers into the big box with the hope, I suppose, that they’d realize they needed a new washing machine while shopping for Nirvana’s Nevermind, or perhaps the other way around. To capture market share, Best Buy, Circuit City, and others priced music below even wholesale costs in some cases. What knucklehead thought of this, I have no idea, but this was the beginning of the end. Suddenly regular record stores had to compete on price in order to survive. But they couldn’t achieve the economies of scale, so instead they ate each other. 20-store chains became 100 store chains. 100-store chains became 800-store chains. Independent stores began to die. First individual stores and then small chains.

So what, you might think, it’s the American way to compete on price and anyway bands were still making music, so what’s the big deal. The big deal is that purchasing became centralized. This had two important consequences:

One, Regional bands or labels couldn’t sell records to a buyer in their own hometown, thereby building a local base, and, drum roll please,

Two, Central buying can only succeed with hit-driven product. When one guy in an office in Albany is deciding what’s going to go in 1200 stores throughout the country, he can’t buy this for Miami and that for Ann Arbor. He doesn’t have time to buy 500 copies of a new release this week and then monitor sales patterns and buy another 500 (or 10 or 1000) the next week and then keep 2 copies in the bin just in case someone wants to buy it in a year. Too labor intensive. Plus he has no idea what people care about in Miami or Ann Arbor. He needs quick turns on music that’s going to blow up out of the box and then be gone. For good.

Buh-bye regional music.

Nationalization of music distribution. Central purchasing systems do not thrive on having a multitude of vendors, each with different terms, sales cycles, pricing structures, and styles of customer service. They want to buy a bunch of stuff from as few people as possible. Distributors had to figure out a way to do business with retail behemoths. They had to become behemoths themselves. Major labels actually began scouting indie labels and offering distribution deals to the bigger ones. Smaller indie distributors and one stops began gluing themselves together to form national distribution companies. Though they were once the bastion of new music, indie labels and distributors had less and less time for developing artists themselves.

Buh-bye developing artists.

Nationalization of radio. The final nail in the coffin came in 1996 when President Clinton passed the Telecommunications Act removing ownership restrictions for radio stations. Instead of being limited to how many stations one company could own in one market, they could own a whole bunch. Programming decisions would no longer being made city-by-city, but format by format. You could turn on the radio in Sacramento or Scranton and hear the same exact thing. Local radio lost its local-ness and all the pride, quirkiness, and opportunity for new artists and creative programming that went with it. Again, a few people making decisions for a huge number of outlets. And, again, only hits serve an infrastructure like this.

Buh-bye new music.

Shift in creative locus. Hits, hits, hits. Have I made my point? Instead of a record label being able to survive by selling a few copies of a zillion different recordings, they had to sell a zillion copies of a few recordings. Product lines became less and less diverse, less and less risk-taking. What can sell a zillion copies without artist development? Only already-established artists or those lucky few who a label would choose to get behind and push, push, push until they made it to the top (as long as it happened within the first month after the record came out). To do this would literally require millions of dollars. To spend millions of dollars, you have to have a sure thing. To have a sure thing, you look at what has already succeeded and try to copy it by going out and finding an act that fits the bill. When you copy others, you end up with bullshit.
So at this point, instead of music coming off the streets and up to the marketing office, it was imagined in the marketing office and then shoved out onto the street. Of course with this kind of creative process, someone new is going to win the popularity contest today and by tomorrow, Mr. Today will be Mr. Yesterday. It’s just what happens when instead of starting with the musician and working forward to find the audience, music starts with the audience and works back to what kind of artists it will sign.

This is the only model the industry can support now.

And the saddest thing of all? We didn’t even notice that music itself was dying. We can no longer tell what is music and what is posturing. If we could, when it came to A&R decisions, we kept it to ourselves.

The introduction of digital downloads could almost be seen as a desperate measure on the part of consumers to listen to music in an unrestricted, un-mandated, un-stuffed-down-their-throats, tits-and-ass-flying-every-which-way-to-get-their-attention way. When you add to this the rise of social networking as the distribution means of the present/future, and word of mouth as the primary marketing took, I think we have an incredibly hopeful and optimistic situation. For music. Not for music executives.

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