Appetite For Self-Destruction

I’m intrigued by the so-called “fall” of the music industry because it coincided with a distinct rise in my interest in music. Maybe I’m a contrarian, but I re-started listening to music and purchasing albums after a long, post-college layoff that ended with my first digital music player. I now listen with a relatively selective ear and buy considerable amounts of music because of digital. But if you listen to the record executives, they blame digital for the precipitous decline in album sales over the last 20 years.

That’s bullshit! This book explains why it’s not digital’s fault, but the record executives themselves.

Here’s the thing: the record industry was dead by the early 1980s! It started to decline in the 1970s; record sales were down 11% in 1979 from the previous year (ref loc. 292–3) and the downturn continued into the early 80s. But shortly, the industry would embark on a 20-year run that would send profits through the roof and result in the record executives getting fat, dumb, and happy, thereby prompting another record industry downturn that’s still being felt today. This recent downturn happened to coincide with the popularity of digital in the early 2000s, but to place blame on digital and piracy is misdirected and uninformed.

This blip, the leap in profits that occurred from the early 80s and continued through the turn of the century, occurred because of a perfect storm – a confluence of invention and innovation that directly benefitted record companies. They were MTV, Michael Jackson’s Thriller, and the CD.

Thriller singlehandedly rescued CBS from its late ’70s doldrums—the company’s net income jumped 26 percent in 1983, to $187 million—pushing fans back into record stores and propping up the industry. (loc. 380–1)

MTV and Michael Jackson was a one-two commercial punch that began the resuscitation of the record industry. (loc. 405–6)

Those are interesting, but check out how the CD changed the industry. Hint: it doubled per-album profits for the record companies but did almost nothing for the artists. It was difficult getting the record executives to buy off on CDs, until they saw dollars:

But the hype was not why the hold-out record labels (and retailers) finally came around. The true reason had to do with one number: $16.95. This was the opening price for a CD. (loc. 765–7)

Here’s the simple math on discs vs LPs:

After labels factored in these newfangled deductions, a typical artist received roughly 81 cents per disc. Under the LP system, artists made a little more than 75 cents per disc. So labels sold CDs for almost $8 more than LPs at stores, but typical artists made just six cents more per record. (loc. 776–8)

That’s real money injected into an irresponsible and corrupt industry (can you say payola and pay-to-play?) which the industry did not reinvest. Let’s not feel sorry for them.

Then the computer industry and internet got into the game and the record executives were no match for either. Here’s an example:

“It was clear that the computer companies—Dell, Apple, Compaq—had done market research and determined that a great way to reinvigorate laptop sales and computer sales is to bundle them with the implicit proposition that you could have all the music you want, free,” Gottlieb complains. “And what’s the music industry response to this? ‘We don’t sue big companies.’” (loc. 1515–8)

So why did people burn? Here’s one reason:

“It’s no coincidence that the decline of cassettes and the rise of CD burning arose simultaneously,” says Steve Gottlieb, president of the independent label TVT Records. “People realized the only viable way to buy music was $16.99, because CD was the only viable format.” (loc. 2002–4)

Then Jobs came along and the record industry was officially outmatched – way outmatched. That includes Sony, an electronics innovator and inventor of the Walkman, which waged an internal battle for a long time:

Wired magazine termed this internal conflict “The Civil War Inside Sony.” Because of it, the company, which had been so instrumental in developing the CD, merely watched as Apple took over the markets for both digital music players and online songs. (loc. 3165–6)

But why Jobs? How did he pull it off? Can you give me three reasons, book?

One was Jobs’s confidence and charm. (loc. 3174)

Another was Apple’s tiny market share at the time—just 4 percent or 5 percent of computer users owned Macintoshes, and the iPod–iTunes system was initially incompatible with Windows. (loc. 3176–7)

A third reason was that Jobs told Universal’s Galuten that Apple’s marketing budget was $15 million to $30 million every quarter. This was a free artist-publicity machine on par with MTV. (loc. 3183–3)

The rest is history. I’m not sure where things stand today, if the bleeding has stopped or if things have settled down for the record companies. I don’t care, my music habits are etched and I’m embracing digital.