Moses Avalon is one of the nation’s leading music-business consultants and artists’-rights advocates and is the author of a top-selling music business reference, Confessions of a Record Producer. More of his articles can be found at www.mosesavalon.com.
Boy, it pains me to have to agree with Bob Lefsetz, but his take on this “Chart of the Day” business is on the money. The chart is pure nonsense. And no, my use of the pun “weak” in the banner is not one of my common misspellings.
For those catching up, a chart on Silicon Alley Insider of unspecific authorship titled “The Death of the Music Industry” has gone viral. Most of the sites re-posting and re-Tweeting it as “fact,” no surprise, are those that cater to the technology industry. If you’re a reader of mine, you’ll be able to see the flaws in its logic at first glance. As the tech industry loses its grip on its insidious campaign to devalue music, biased stories of the “dying music biz” become more and more transparent.
In essence, the chart shows the decline in CD shipments and how digital sales have not made up the difference. Duh. Everyone knows that, but how is a decline in CD unit shipments equal the “death” of an industry that still brings in $10 billion per year domestically, and has been growing in revenue consistently over the past five years (albeit slowly) while everything else in the Western world is falling apart?
ASCAP, BMI, and SESAC all have posted record-breaking revenue year after year, and though it’s true that EMI is headed for the auction block, Universal and Sony don’t seem to be selling their corporate jets anytime soon.
The chart bases its logic by showing a decline in units shipped as reported by the RIAA. It’s no secret to my readers that not only does RIAA shipping data not demonstrate the entire music-revenue picture, it doesn’t even give you enough pieces of the puzzle to render the outline. Why?
You want the charts? Here are the charts. (See my chart of the week.)
Well, I covered a lot of this in my blog several weeks ago (link), but basically, units shipped has little to do with actual sales, number one. Then, streaming revenue is not tracked by the RIAA, nor is licensing data and the fact that movie and TV sync fees have increased over 1,000% in the past ten years. The chart also assumes that because unit sales are down, the profit made from such sales would follow. Charts from my NAMM lecture show that that is not the case. Profit margins are higher now than they have ever been due to reduced costs in production, manufacturing, shipping, adjustments for inflation, and substantial streamlining of old-guard overhead by labels.
The funniest thing about this Silly-con Alley chart are all the haters who post their comments below it. They ramble on about how the RIAA deserves this and that. For geniuses, you’d think they would be better informed. These haters are so out of touch that they don’t even realize that the RIAA is a trade group, not a label; the RIAA does not work off of commission on what their member labels make.
The ignorance of this “music biz revenue down = RIAA is evil” thought process doesn’t even take into account that RIAA members make up only a portion of the music business. Outside their circle we have the entire touring industry, the performing-rights organizations, thousands of independent labels, and what else…? Oh yeah, every publisher on the planet. Then there are the ancillary people who are first cousins to the biz: DJs, clubs, musical-instrument stores, radio stations, unions, orchestras, recording studios, and hundreds of other venues whose sales metrics are not bound to declining CD sales. Are they all evil too? Do they all deserve to die? C’mon, haters, get it together. If you’re gonna hate us, do it right. At least learn who we are first.
Part of the problem is that most bloggers, who fuel the haters with half-researched articles, don’t know how to read a financial report or are not familiar with financial terms. (Probably too much work – easier to have an opinion just slightly more sophisticated than your readers’.)
They read the headline and presume the rest of the story. Case in point: Warner Music’s first-quarter earnings being way down, which was the subject of many a blog banner last week. Their comments were based on a conference call between stockholders and Warner execs. Headlines grabbed that Warner revenue was down about 15%.
But exec VP and CFO Steven Macri stated clearly in the conference that the decline in revenue was mostly due to the lack of demand for ring tones, not recorded music. This, in concert with the large severance packages they’ve paid out in the last 18 months, is what is ailing the company most. In other words, the biggest monkey on the Warner back is debt, not bad talent or weak sales.
Now, every blogger would have caught all these points if they read past the first page in the transcript. But the devil is in the details. And it seems like the music-biz haters don’t have much patience to look carefully at those.
So this chart is just more propaganda by the tech heads who want the content industry to just give up, give in, and give away our entire inventory for free so the tech giants can get more subscribers to whatever they’re selling. Join the Internet revolution and find a way to monetize our product by selling advertising. How and when did selling ads become cool? Oh yeah, when you’re a talentless geek who can’t get laid, because writing code doesn’t get the chicks into your pad.
Next life, try learning guitar.
Meanwhile, we’re not giving up, and the law is catching up each day with people who steal content. Observe…
NET-NEUTRAL NEW YEAR
Given the FCC’s net-neutrality ruling in conjunction with credit-card companies dismissing clients who engage in illegal P2P, Sweden making copyright history and jailing the owners of Pirate Bay, and even Google posting low- to no-tolerance policies for illegal P2P, it’s easy to see the direction that the corporate horse is riding in – and it’s riding in our direction.
The writing on the wall is so clear that even tech-sycophant Paul Risnikoff of Digital Music News is starting to shift the music-industry-hostile spin that most of his pieces take. I’m actually starting to enjoy his work. And music-biz curmudgeon Bob Lefsetz can’t seem to think of anything negative to write either these days. He’s shifted his focus to the touring trade. All the other music-biz naysayers seem to be strangely quiet in their post-new-year posts as well. So I guess this new chart is exactly the fodder that they needed to get back to work.
Yes, it’s a brave new world, one that is beginning to resemble the old world more and more — the one where music mattered, where artists mattered, and people gladly paid for the song they loved. It’s all coming back; iTunes agreeing to variable prices as well as “album only” sales will ultimately make the new online record store look and feel much like the old one where you scrolled through aisles of LPs. (Except you won’t meet anyone cool buying music on your phone. Well, maybe.)
This ridiculous, irrelevant “chart of the day” shows how desperate the tech groupies are to make us blue. But we’re not, because music is what changes the world, and the biz is going to be doing better than ever in the coming years. I know that is of little solace to those struggling now, but looking at the big picture is inspiring, and I for one am glad to be in this space and at this time.
Thank you for hanging in there. It will be worth it.