Music: out of time

This week will see a blast from the past, as embattled music company EMI Group will reissue certain albums from its back catalogue on vinyl. Called ‘From the Capitol Vaults’, the release is an attempt to cash in on one aspect of physical musical sales, which are enjoying a surprise renaissance. Orders for new vinyl LPs -- largely deluxe editions aimed at collectors -- grew by 36% last year, according to industry bodies. However, EMI is fiddling while Rome burns; in spite of such growth, vinyl LPs represent only 1.3 million units sold, compared to 511 million CDs (sales of which fell 17% in the same period).

The fortunes of a music industry struggling with slumping sales as it fights piracy and illegal downloading look bleak. Album sales have recently fallen 15% in the United States, 10% in the UK, 25% in France and 35% in Canada. A whole generation has grown up believing they do not have to pay for recorded music, and are finding their songs online for free. It makes record companies an irrelevance, and may mean that artists will earn their money the old-fashioned way: on the road.

Can the music industry adapt? It can, but it needs to accept some painful truths:

• No harm done: The easy availability of recorded music means it is not the commodity it once was. Few music fans feel guilty when downloading music for free online. It is readily available, feels anonymous and there is little sense of buying something real -- an MP3 file is just so many bytes. Threatening those that download files with stern letters, and spending money on adverts to provoke guilt trips will likely fall on deaf -- if not tone-deaf -- ears.
• DIY: Recorded music can now reach the audience so cheaply that artists no longer need a major label to get their product to the public. In some cases, reaching an audience is free: bands can get noticed and build up a following on online sites such as MySpace. The industry has had this problem before -- punk music had a DIY ethos, which challenged the major record companies by setting up independent labels.
• Going live: The 'special experience' of music is no longer found at the local record store. Live music, if the act attracts interest, is now where most of the money can be generated -- ticket prices have soared even as the price of CDs has tumbled and attendance at arena shows rose in the UK by over 10% last year.  Yet record firms will need to be nimble to capitalize on this trend, since some artists are choosing to bypass the major record companies altogether.  In November 2006, Enter Shikari became only the second unsigned act to sell out the Astoria, a leading London venue. They then went on a major tour of the United States -- without the support of a big record company.

The $2 billion that the industry estimates it will lose in the next five years due to illegal downloading is money that the record companies ought to write off in order to refocus. That means working with, rather than against, music fans who are file-sharing.  Reducing internet speeds for transgressors will likely be counterproductive; the answer is to find a consumer model capable of restoring revenue to the music business while not interfering with music fans' appetite for downloads:

• Free for all: It may sound like commercial suicide, but records, CDs and downloads may now need to function as promotional tools for the real 'beef': concert tickets and t-shirts. Record companies may increasingly give downloads away for free, or make them extremely cheap. Some labels already provide free downloads when consumers buy vinyl records or compact discs. This is the easy part: the industry then needs to learn how to make money from live music and merchandise.
• All-you-can-eat deals: Alternatively, labels could cut a deal with large internet service providers (ISPs) to get paid for songs illegally downloaded by their customers. Many large ISPs would have an interest in such a deal; they need to come good on a pledge to reduce illegal downloading on their networks. 'All-you-can-eat' subscription packages may be suitable for consumers who already have an addiction to downloading free music. Of course, the success of this depends if the ISPs can convince customers to pay a monthly fee for product they already get for free. In the United States, the recently appointed co-chairman of the Columbia label Rick Rubin has considered making the company's entire catalogue downloadable to customers who pay a monthly subscription. Subscriptions would certainly bring more money to the music industry; currently, customers buy only 2.4 albums a year (approximately $48), but may be prepared to pay $10 per month for unlimited access -- and peace of mind.