The shift from analog to Digital: Why the record companies won't get richer
Shamelessly stolen from my blog earlier today, but it seemed appropriate
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When I was a young man, there were things called "records". I remember them - they were flat, black, and when you put them onto the record player with it's little diamond needle, they would play songs like "Macho Duck" or hits from "Sleeping Beauty". (Hey, I said it was when I was young. Like, six. Give me a break.)
Records had been around for a long time - since the turn of the last century, at least. The problem was: they weren't very portable. So some clever folks figured out a way of getting music not from analog grooves in a record, but from analog recordings onto a tape that could record electromagnetic information - and thus the 8 track was born.
So what happened? Everybody rebought their music! Obviously, they couldn't play their old records in their cars, so they started buying 8 track cassettes. I think I once saw an 8 track - they were big, and could only store a few songs. But people were rebuying music they had already bought so they could play it on the new systems.
But then something *better* came along: the cassette tape. Smaller, able to fit up to 90 minutes of music at a time! Wow! Now you could actually carry your music with you in your pocket. That is, if you rebought all of the music you had already paid for so you could have it on cassette tapes.
The problem with cassettes, though, was the sound quality. So when the CD format came out, it was a boon for quality and storage. No more bulky cassettes - CDs were in, and they were smaller and way cooler. It took some time for them to be as portable as the cassette, but hey - they were better! Of course, you had to - say it with me, my little clucks - rebuy all of your old music.
Now we're in the next phase. Instead of buying CDs in the store, now you just do it from home, over the Internet. It didn't start with the iTunes store, but right now that's how most people get the music online. CD sales are still bigger, but I expect that to change over the next 10 years. The audio quality isn't as good, but for most people who aren't audiophiles, who cares? It's good enough, and instead of shilling out $15 per CD for the one song you want, it's just $1 for the one song you care about - or $9.99 for the whole album. It's a deal!
Except - and here's the rub - you don't have to rebuy all of your old music.
The reason why the music industry has grown so large and rich was because of not talent or marketing, but because technology. Every 10 to 15 years, people were rebuying their music all over again. So a recording studio could stand to make money 4 times off of the same recording - the first time probably paid the bills, the rest was just gravy.
The recording industry is going nuts, saying that they aren't making enough money off of music sales. The problem is, they have it wrong. They're probably selling the same amount of music as before - but people aren't rebuying what they already have. In my case, I have a library of songs collected over the years, as do most people who listened to music over the last 20 years.
To move my song to digital, it's "insert CD, push a button to copy into my computer, plug in iPod (or your preferred MP3 music player". Done. Simple. Whole companies now exist to drive to your house and help you rip your music to MP3 format for you. (Seriously.) And how much money does the music industry get?
Nada.
I expect the next 20 years are going to be hard on the recording industry. Not because of piracy - though that will still exist - but because they aren't getting the same boom as people rebuy old music. Of course, there is a simple solution:
Put more music available for download.
I know what you're thinking. "But John - didn't you just say that people aren't rebuying their old music?"
That's right - I am. But not everybody owns the music they want. Take my case. I was sitting at home when My Lovely Wife (MLW) turned the channel to VH1's "I Love the 80's 3D". Some song came on - I think it was "Kiss Me Deadly", and then Ozzie Ozbourne's "If I Close My Eyes Forever". I remember those songs.
5 minutes later I was $1.98 poorer after I hopped on the iTunes music store. Why? I didn't already have those songs in my library!
There are tons of music rotting in record company warehouses just waiting to be unearthed again. Jazz recordings, old rap, folk songs, comedy skits, radio dramas - things that lie forgotten. Why should they? Put it out online, for $0.99 apiece. and people will buy it. Not everything will sell, of course, but based on the "long tail theory" of economics, everything will sell at least once, making it worth the effort.
Even that won't stave off the record industry shrinkage to come - but it will at least soften the blow, and give them a chance to decide what to do. Odds are, the world is going to become a lot more fragmented for a time as independent music publishers - now free from having to push their CDs into every music store in the country, when they can just sell it online and bypass all of the middle men between them - start to rise, and the market will become more even until the next round of consolidations happen.
Either way, the record industry is just going to have to realize that the days of massive profits every 10-15 years are over. Things are moving to digital, and they aren't going back.
