On reflection, I realize that music has been a big part of my life since childhood. When I look at the record music industry over the past 30 years, I can see that my passion for music and resulting purchase behavior, contributed to the overall trend of US record industry sales. In the 70’s and 80’s, I amassed an impressive collection of vinyl LPs and 45’s. CD’s of course followed. My first Apple purchase was the iPod Touch and today you will rarely find me without my earphones listening to a long and growing list of songs downloaded from iTunes. I played piano and clarinet, and sang in the school chorus and church choir. I love seeing live music, both in stadiums and small clubs.
Today, as an avid social media user with over 1,600 Twitter followers, I am quite engaged with a very active Rock & Roll community on Twitter, where Artists seek to grow their fan base and ultimately their livelihood. I understand their need to promote themselves in this new era of the music industry, where social media is a “must have” advertising & promotion tool. While the internet has impacted the music artist in a profound way, it’s great to see that the same creative brilliance that produces musical masterpieces and chart topping hits, is now used in increasingly creative ways to engage the music audience.
For instance, would you consider investing $50 in a band to help fund production of their second recorded album, if you received a tee shirt and were given an opportunity to sing a little back up chorus? Would you consider investing $50 in a horror film if the sound track was from a rock & roll Hall of Fame guitarist and you participated in recurring conference calls with this artist on the progress of the film? If you’re really paying attention, perhaps you’ll find an affordable and tax deductible opportunity to socialize at a party with some legendary rock & roll performers, and expand your music network, to support a public radio station whose goal is to bring the music listener closer to the Artist.
So why am I telling you all this? As a person passionate about music, and as an analyst who discerns insightful analytics to drive P&L growth for my clients, I think it’s important to frame this problem and raise awareness. Since 1999, most agree that the sharp decline in US Record sales is threatening the future of the creative musical environment that gave us such classics as “Dream On” and “Paradise City”.
So let’s analyze this.
In 1983, US Record Industry sales revenue totaled $9.1 billion on 578 million units sold at a total average price of $15.69, with vinyl making up 51% of total revenue. By 1988, revenue had grown to $12.5 billion with cassette tape sales making up 55%, vinyl shrinking to 11%, and CD sales surging to 34%. The industry would soar to record highs by 1999, reaching $20.7 billion in sales revenue, more than doubling sales volume since 1983, at a total average price of $17.86, fueled by commanding growth in compact disc sales. Since then, the industry has experienced seismic change with the advent of the internet and the MP3 digital music format, beginning in 1999 with Napster, a pioneering peer to peer (P2P) file sharing internet service, and the subsequent growth of internet music piracy. The NPD Group estimates that only 37% of music acquired by U.S. consumers in 2009 was paid for. If you do the math, that’s $14 billion in piracy value, compared to recognized sales of $8.6 billion.
https://riaa.com/physicalpiracy.php?content_selector=piracy-online-scope-of-the-problem
By 2014, total revenues have declined to a mere $7 billion, down 23% to 1983, and down 66% to the lofty highs in 1999, at an average price of $3.75.* The problem is even larger for the individual Artist where large pools of royalty revenue end up beyond the Artist’s reach in a “Black Box”. Technology has failed to keep pace and rightful owners of royalty revenue cannot be accurately identified because of a lack of an industry wide system tying usage to ownership.
Also problematic for US Artists is the lack of full performance right for sound recordings by Broadcast Radio, to match the rest of the world. Musical Artists in the United States do not receive any sound recording revenue for terrestrial broadcast on AM/FM radio stations, unlike webcast and digital streaming services like Sirius XM and Pandora who do remit sound recording revenue though Sound Exchange, with 50% to the Record labels, 45% to the Performers, and 5 % to the AFTRA Fund for background musicians.
A final point centers on pre 1972 sound recordings, where a loophole exists in US Copyright Law for sound recordings made prior to February 5, 1972 for digital sales and interactive streams. This issue is currently being resolved through negotiated settlements between the interested parties.
The music industry is in the fight of their lives with multiple advocacy organizations issuing informative reports with calls to action for Artists to be compensated fairly and transparently for their work. The Future of Music Coalition, a Washington DC Not for Profit, is hosting the Future of Music Policy Summit. http://futureofmusic.org/
The Berklee College of Music’s Institute for Creative Entrepreneurship (ICE), as part of its Rethink Music Initiative, has issued a report “Fair Music: Transparency & Money Flows in the Music Industry” and is hosting a fair Music Forum. http://www.rethink-music.com/
The newly established Grammy Creators Alliance is promoting the Fair Pay Fair Play Act, and is launching a major grassroots initiative with the US Recording Academy called GRAMMY’s In My District Day (GIMD). On October 14, more than 1,600 Academy members will ascend on Capitol Hill to pressure lawmakers to make needed changes to decades old law based on recommendations made by the U.S. Copyright Office in the “Copyright and the Music Marketplace” report issued in early 2015. https://www.grammy.org/recording-academy/advocacy
The mission is huge and complex where the ultimate solution will require a coordinated and innovative approach by a team of thoughtful and committed people to the following key points:
- Update US Copyright Law for the digital age
- Create a Musical Artist Bill of Rights and provide education & support
- Private sector creation of a Music Rights database with a unique universal identifier structure
- New technology to manage and track online payments through the value chain directly from fans to music creators
- Greater transparency in royalty calculations
The ultimate goal is to create an efficient and transparent business landscape where musical artists are compensated fairly and the pool of musical creativity continues to grow.
The Rolling Stones said it best in their classic hit “Salt of the Earth”, in 1 of 5 rare live performances, with some special musical guests…. Let’s drink to the hardworking people!
https://www.youtube.com/watch?v=_Bt7g3H23Fc
Cover photo credits: Marti Fredericksen, American songwriter, record producer, and musician; 2002 Grammy Award Nominee Best Rock Song with Steven Tyler, “Jaded” ; 1999 Golden Globe Award Nominee Best Original Song with Chris Difford and Mick Jones, “The Flame Still Burns” from “Still Crazy”.
*All data is sourced by the Recording Industry Association of America database, with all $ figures expressed in 2014 inflation adjusted dollars. Also note that certain forms of streaming music revenue cannot be quantified in units sold and are therefore excluded in the average price calculations.
