Music exec says business model is 'done'
Rick Rubin, the man who coaxed some of the best studio performances out of the Beastie Boys, L.L. Cool J and the Red Hot Chili Peppers, threw the curtain open on the music industry this weekend. What was exposed was perhaps more uncertainty and frustration than many may have expected.
A celebrated record producer who was recently named co-chairman of Columbia Records, Rubin made startlingly candid statements in Sunday's edition of The New York Times Magazine about the effects of the iPod, digital downloads and piracy on the music industry.
"Columbia is stuck in the dark ages," Rubin told the Times. "I have great confidence that we will have the best record company in the industry, but the reality is, in today's world, we might have the best dinosaur. Until a new model is agreed upon and rolling, we can be the best at the existing paradigm, but until the paradigm shifts, it's going to be a declining business. This model is done."
I repeat: the man making these statements is co-chairman of Columbia Records. He's kicking dirt on the music industry's business model before the industry has come up with a replacement. His statement couldn't have been more shocking had he picked up a bugle during the interview and blew "Taps."
What this means is that Rubin doesn't think the record business can survive unless it reinvents itself into....into what exactly?
Rubin spoke about an industry-saving technology that will render the iPod obsolete by allowing people to hear their digital music from cars, TV sets, cell phones--almost anything--for a $20 monthly subscription fee.
Sounds like a music locker to me or some version of the so-called jukebox in the sky. This is an idea that several companies have been pushing for a while--including Michael Robertson and his MP3tunes, which lets people store songs on the company's servers and then access them from any Web-enabled device.
Somebody should tell Rubin that the public has largely ignored such offers.
Another jaw-dropping revelation in the piece is that Columbia is flirting with the idea of asking artists to cut the label in on as much as 50 percent of their touring, merchandise and Internet revenue. Performers have typically been allowed to pocket concert and T-shirt money. As for revenue generated from digital downloads, I did a story recently about how a growing number of artists and music publishers want a larger share of Internet profits, not less, and are girding for a fight.
I cringed at some of Rubin's quotes. I appreciated his honesty but I'm guessing the suits at Columbia will probably castigate him for going public with his doubts. While it's no secret that CD sales are falling and Internet revenue isn't making up the difference, his statements won't do much for morale at Columbia.
Rubin's interview also underscored the music industry's determination to reduce its dependence on Apple and iTunes. The good news for Apple CEO Steve Jobs, judging from Rubin's comments, is that the record labels appear clueless as to how to make that happen.
Greg Sandoval covers media and digital entertainment for CNET News. He is a former reporter for The Washington Post and the Los Angeles Times. E-mail Greg, or follow him on Twitter at http://twitter.com/sandoCNET. 
What the IP guys, software included, don't get is that if they make a good product they will make money, despite the thieves. If their product is crap, nobody is going to buy it. Economics 101. There will always be hackers who will get around digital rights. History is full of thieves who work harder at stealing than they would at a real job. That's just the world. These folks need to move on and serve their customers before the customers, and artist, decide to go somewhere else.
Simply put, artists make the bulk of their money from concerts (assuming they are popular or at least known) and merchandise. There are a few that still rely on CD sales (independents mostly) but these also make money the same way as well.
Now with the music getting out 'free' and powering the concert and merchandise side of the industry they see their days numbered and are grasping at whatever they can to live.
The only way their will survive is to become agents of change, get rid of the idea that subscriptions and high CD cost will save them and start looking to the real money makers for their slice. The artists. He hints to this in the idea of getting more for related sales but that's not going to work as it's simply another way to hurt the customer in the end. Better to make the artist pay more for all that the label offers. Package deals and such maybe. Become a service company and not a licensing one. Then, if they execute well, the artist will want to pay them for the premium. If not then well they were going to die anyway. :)
Greed, we all have it. It's called the desire to earn a living and survive. But till the record labels get out of the IP business they are doomed.
without incompatible DRMs, I will buy it for a reasonable price.
I'll pay $20 for an album, because coming from the UK
originally, thats still cheap for me.
iTunes DRM free music is pretty good, you were making
progress there, at least it works for Mac & PC.
If you lock me into a DRM solution, or subscription models, or
require me to use MS whatever, then I will find another way to
get my music, such as illegal downloads.
Please, lets just drop this DRM mess, lets have mp3, aac or other
widely supported formats - just like how the CD is widely
supported & without DRM.
I'm obviously not in the position to make threats, but if you can't
see the resistance by now, here's whats going to happen - new
labels will arise, they will have more open rights management,
bands will move to these labels, you will be left with your
existing catalogues, those catalogues will become old, but all
new music will be open.
The world moves on, I'm sorry but you can't dictate how it
moves because so far, your ideas stink.
It's not just the business model that is broke, it's the corporate
culture of the record industry that is dead, and while they may
be willing to change the business model, they are not willing to
change their corporate culture, because if you had power, you
will not easily give it up. Can you say, sadam, noriega, sen.craig.
While somewhat fictional, you can get a grasp of the industry
through the movie with John Travolta called, "Be Cool".
His idea of taking up to 50% of touring and merchandising is just pure greed. This is where artists really make their money. The average artist gets around a dollar or less from each CD sale. Out of that dollar they have to pay back the record company for all of the production costs to record the music. There are also other costs that they take out of that dollar so by the time they get their cut, the artist has very little while the record company has made lots of profit.
Most artists that don't have a record deal can make more selling 1,000 CDs out of their trunk than they can to sell 1,000,000 through a record company.
As was stated in another reply, new artist friendly labels will emerge and the old labels will die off.
When this happens we will finally start to see some real music rather than the homogenized, Clear Channel ready fodder that they keep pumping out.
By cutting out the recording company, the cost of my music will be a lot cheaper, and people will be more willing to make purchases rather than illegally copy the music.
Why do we actually need recording companies?
Sure you can record your own album, but it won't sound professional unless you are an experienced engineer. Sure you can get your music on MySpace and iTunes, but who will notice you out of a million competing bands?
It's not just about cutting the cost of making a record, that's always been the cheapest part. It's getting your music heard by enough people to make money... that's the hard part. The record companies have the contacts and the marketing dollars to get an album heard.
Oh yeah, and it helps if you can write hit songs.
companies like Apple to distribute my music" because that is in a
sense what a record company would do for you. Apple isn't a
record company and it will most likely not be one thanks to Apple
Corps Ltd.
BUT the only problem and the ONLY real power the Recording Industry still carries is its relationship with the big radio conglomerates. They have been busted in past with kick backs to the radio groups to play certain songs and in some cases exclude smaller labels or independent artists. With out radio play its VERY tough to break into the National scene. You may get small town radio stations to play independent artists but thats not going to get you far. And YouTube or any other web based social networking site is also limiting. A good example is BareNaked Ladies (BNL for short). They for a short while where a hit. They sold allot of albums. But got into a dispute with there label on money, so they dumped them and went independent. They have made I believe two albums while independent. Heard any of new songs on the radio lately. Doubtful if you live in NYC or LA or anywhere else where the radio stations are all owned by the major conglomerates such as Clear Channel. Now BNL's new stuff can be found on eMusic.com and iTunes only carries the "Essentials" or best of. album. None of the independent albums. And they still have good stuff but you'll probably never hear it thanks to no radio airplay!
And for those who think Internet Radio stations will save the day. I doubt it. Its still in its infancy and the Big Boys are already trying to place the squeeze on them money wise. They are making them pay a huge increase in royalties to where it will kill off the smaller stations and really only leave the larger more well funded ones. O ya by the way, guess who don't pay any extra fee to play over the web, Yup the big over the air radio stations, the royalty is paid only once when they transmit the song, they don't pay extra when its also streamed via the web. its in there royalty contracts.
I really think Music companies are out dated when new Mac's come with Garageband free that is a multitrack recording software and CD's are cheap and plentiful. But until the Govt decides to breakup the "Over The Air" radio monopolies and the Music Companies still give "gifts or service fees or what ever they want to call them, I call it a kickback" Independents will have a near impossible time breaking out of playing local dingy clubs and selling there CD's from the back of there car.
check me out:
www.myspace.com\chevaliermusic
For many artists it can cost a great deal to record, mix, dub, master, and print these CDs. The production companies are the ones that do most of that but let's take them out and use an independent artist as an example. So an independent records a CD, this isn't done in a vacuum. They have to pay people to help in the production and mixing of the music, on recording and overdubbing, of a myriad of other things. So lets say they go all out and it costs $45k to get it all done and out the door.
So now they have to push enough CDs to break even. At $18 that means they have to SELL 2,500 CDs and they don't make a single penny on any of them till that 2500th one is sold. Now fast forward to the big production houses that have so many more employees and facilities and equally larger costs. You think that they want to do it all for free? Would you do it all for free?
Then there are the middle men, the stores, and they need to make a buck or Sally in layaway gets laid off and there goes Christmas for her 3 kids. So a $15 CD (bigger artist, more CDs made, which lowers overall cost) becomes a $18 CD so the company can make payroll.
It's so easy to say price is the problem when you don't look at the big picture. What truly needs to be done is for the big companies to lower their costs. Either by doing more digital downloads or trimming the production costs at recording time or, better, cutting out some of the dead weight at the very top. But I don't see the situation improving till people start recognizing that people do need to eat and that "free" costs others their lively hood and that is not good for anyone.
Music can not be free to all unless it's free to make. And in the REAL world that just isn't the case.
change; it lacks intellectual integrity at a fundamental level (the
ability to take a good long honest look at itself and address its
existence/meaning/purpose). As such, the industry?s
perspectives are immaterial because the industry?s point of
reference is totally incorrect; without an ability to create an
accurate self appraisal of itself in combination with a total lack
of understanding of the digital age and the changes in consumer
behavior in the digital age, they?ll never be able to address the
causes and conditions that they need to survive; things either
adapt, evolve or die. Rick is brilliant when it comes to developing
talent and producing works of enduring value but sin has always
in the accounting and perspective is based upon a point of
reference. The MBA culture that currently runs the entire
industry doesn?t care if it survives or dies off ? they only care
about themselves. As for Rubin?s comments, well, the entire
music industry doesn?t understand the digital consumer or know
what the music customer really wants.
I can buy a few 1980's tunes from ITUNES but ITUNES does not carry everything.
This is a very sad online world we live in.
> soundtracks or music bands and I can no
> longer buy their CD's.
Dude, you need look harder I find tons of stuff at either GEMM.com, Secondspin.com and at the used CDs stores all the time (Amoeba) and it's ALWAYS marked waaaaay down. You CAN find 80's stuff. It's all there. You just have too look.
really brought about by the initial revo. Napster, until Metallica
showed the world what they really cared about. The public has
had an incredible opportunity to discover new music. And the
fact is, they are discovering more than ever thought possible.
And in many cases they are buying a wider variety of music from
lesser known vendors. This has done incredible things to the
independent legs of the music industry, but is crushing the big
dogs. The real problem the big guys have has nothing to do
with whether or not people are still buying music. It has every
thing to do with the kind of formulaic kiddy crap the big dogs
have been shoveling up for us for the past two decades.
You want a hint Rick? Drop those overpaid jerkoffs that write all
those candy hits for your lineup of performers, and hire some of
the excellent Musicians that are already out there writing and
selling their gems through smaller vendors. Oh, wait, that is if
you can convince them to take a pay cut and jump from their
dinghy to your sinking Titanic. Good luck, you bastards.
I knew the nanosecond Napster got popular that this was the case. Big Music(tm) finally admitted as much (or at least someone in there did).
So, now what?
/P
coverage of the internet for Salomon Brothers and Kevin Conroy
was the head of Strategic Planning at BMG North America) it was
evident that the labels wouldn't embrace the web and the advent of
new technologies; they simply weren't willing to jepoardize their
relationships with the retailers (they were owed about $7 Billion
dollars). It's always been about the arrogance and greed of the MBA
culture that rewarded kiss ass politicians and syccophants and
ostracized creative genius.
A viable solution would be to utilize iTunes plus. Release higher quality songs and profit from the extra 40 cents per song. Maybe have higher prices for new releases and lower prices for classics (i.e. a popular 90s song would be 40 cents and a new Kayne West song would be $1.50).
Those numbers are not calculated out, but they provide an example of how variable pricing could make iTunes more profitable for the record labels.
Why does the music industry take it upon themselves to make hasty decisions, namely, "THE CD IS DEAD." No it's NOT - it's very much ALIVE, at least in my Legal, Lawful and Licensed life.
I rip new music, net cost per track, US$.50, and that's the Gospel Truth. In fact, excluding top 100, I can buy, rip, new music for about US$.30 per track.
What am I, a GENIUS? Tried to call SONY MUSIC - impossible to reach anyone human - tried to call Bertelsmann (BMG) - sorry, wrong number.
So, while there looms an exciting and dooable instant fix for the music industry, which would benefit all music lovers (buyers and sellers), the industry cannot be reached - OUT TO LUNCH.
WOW - GOSH - GEE WHIZ......"what we have here is FAIULRE TO COMMUNICATE" (check out Cool Hand Luke, the movie) or visit the nearest GOLF Country Club and find someonen wearing a SONY MUSIC Tee Shirt about ready to become a DUFFER!
Well that's it music industry - you've sealed your own fate, while there currently is an instant fix to benefit music lovers and buyers as well as the Recording Studios, Major Labels, and distributors.
Thanks CNET for this forum.
Have a great day!
Group of artist can build their own music studio, record their own songs and sell their own songs in the internet, and it can be done without any of the recording industry.
The only reason why the Recording Industry existed is that it used to be expensive to record on vinyl tapes and to distribute the music. Now this is ancient history, we don't need the Recording Industry anymore!!!
The only reason why they are still here is due to the contracts where the "not-so-smart" artists have been tricked into signing their souls. future artists should not support the recording industry, not even itunes or other. The artists can record and distribute their songs for a pittance and get a lion share of what is supposed to rightfully belong to them.
No more recording industry needed. That's ancient.
- Crazy ass long island white boy!
- by rido777 January 7, 2008 8:22 PM PST
- That's right...the whole world's changing.
- Like this Reply to this comment
-
(33 Comments)Just like people got mad at Elvis....People got mad at Eminem...
That era is over...
We are the future, and the future is this:
"AND WE" named best song you haven?t heard yet!
http://www.myspace.com/branchout