recording industry paradigm shift

recording industry paradigm shift

Aizlynne linked to a woman who is self-producing her own records. Listening to Wing butcher such songs as Dancing Queen and Lucy in the Sky With Diamonds is pretty funny, but there is a serious side that is being overlooked. I think that this sort of self-published music is the wave of the future for the music industry.

Most bands don't make money from album sales unless they go platinum. A recording contract might be worth say a million dollars. Then the record company charges the band fees for recording the tracks, engineering, creation of a master, manufacturing, distribution, and so on.

If the album doesn't go platinum, the artist ends up - at best - coming out even. Usually, though, the artist ends up broke.

This was the way that albums were produced in the past, when it required a big company to make a set of master plates to press the vinyl. Now however, anyone can make a CD on their home computer. They can also do all their own recording and sound engineering with the right software, much of which is free.

One can even print out labels on toner transfer paper, transferring the image to a CD once it has been recorded. And an album jacket is just stiff paper, a laser printer can handle that easily too.

Distribution and marketing are greatly simplified with the internet as well. A band's website (such as this lady's) and internet ads leading back to that site are the marketing. Sales are by MasterCard or Visa or PayPal; distribution is via UPS or FedEx. With self-publishing, the CD doesn't even need to be burned until the order is placed.

The cost of producing an album drops down to the cost of the blank CDs (and that cost keeps dropping every year), some paper, internet access, postage, and time.

Wing is charging $5 for a CD plus $3 for shipping; it probably costs her three bucks per copy to make. It's only a little bit of profit per CD, but she's probably pulling in 10 to 20 times as much per copy as any (successful) artist who goes through a record company. Her risk is lower too; if she expects to sell ten thousand copies of her latest CD (Wing sings AC/DC) (!), but only ends up selling five thousand, she doesn't have to have the sunk cost of 5000 unsold copies sitting around collecting dust. A copy can be produced in a matter of minutes once she receives an order, so she only needs a stack of blank CDs. If they aren't used for the present albums, then those blanks can be used for future albums. She would break even on sales numbering in the low hundreds rather than hundreds of thousands.

Of course, file-sharing over the internet is a fact of life now. Any successful artist is going to have their songs shared. While record companies despise this practice (since they want to sell as many CDs as possible), for a self-published artist this is a good thing. Filesharing is viral marketing.

If a band makes money, it isn't from record sales, it is from the merchandise they sell at concerts: T-shirts, hats, keychains, coffee mugs, percentage of beverage sales, you name it. The concerts themselves are usually pretty much break-even; ticket sales pay for the travelling and show expenses. It is the three dollar T-shirt with the band's logo printed on it, sold for forty bucks, that makes Metallica its money.

Once musicians realize that they no longer need a record company to produce their albums, it will be all over for the record companies.

It isn't just record companies that should be sweating about this concept either. Movie studios should be looking over their shoulders, too. Inexpensive digital cameras are everywhere, computer animation gets better and cheaper all the time, and burning a DVD is no harder than burning a CD.

And again, it isn't really the DVD sales and rentals that make the money in movies, although those totals (including the theater release) can be substantial. The real money in movies is made the same way that the real money is made in music. I'll let Mel Brooks explain:


Yogurt: Merchandising, merchandising, where the real money from the movie is made. Spaceballs-the T-shirt, Spaceballs-the Coloring Book, Spaceballs-the Lunch box, Spaceballs-the Breakfast Cereal, Spaceballs-the Flame Thrower. [turns it on]
Dink, Dink, Dink, Dink, Dink, Dink: Ooooh!
Yogurt: [reacts to dinks] The kids love this one.
[a dink hands him a doll that looks likes Yogurt]
Yogurt: And last but not least, Spaceballs the doll, me. [pulls string]
Doll: May the schwartz be with you!
Yogurt: [kisses the doll] Adorable.

Technorati Tags: Media