Lee Scoggins

I have been thinking a lot recently about where music business may be headed. Recent reviews in audiophile mags raving about the iPod and today's Wall Street Journal story on the retailers getting squeezed have led me to think where the world is headed.

Here is my personal view of the future of music:

1. Niche Heaven - I see many audio segments developing even more specialty niches. I see mass market popular music splitting into many niches of musical tastes, and I see audiophiles having a 2-channel option, and home theater fans maybe having a video based option.

2. More Resolution Please - I think that high resolution in either Super Audio or DVD Audio form is here to stay. Whether one believes it can widen or will be just a loyal laserdisc-like following is hard to gauge and anyway we don't want to discuss any format wars. The idea here is that there are some more vocal, more rabid music fans who DO want to hear their music in the best possible fidelity.

3. MP3 Mass Market Mania - I think the cat was let out of the bag a long time ago so the RIAA should spend its attorney's fees on building a massive iTunes instead of suing 12 year old girls. The consumer convenience of choosing their own songs and carrying them anywhere is too tempting for most of America, even if they have to pay. Downloads are not going away and the idiots running the music companies should "face the music" as soon as possible.

4. iPod of the Future - In the future, one will be able to pay more for better fidelity. iPods will have tremendous storage space and be able to handle hirez music from both SACD and DVDA. Record labels will charge more, of course, but many will pay for the extra fidelity as remasterings improve sonics and gear gets better chip decoding. This may still be limited to just a portion of one's collection and the rest is at 128 or 256k, but the labels may still profit from the premium charged.

5. Local Artists Thrive - More portable audio will allow local artists to have a cheaper path to sales by leveraging the web. I am concerned that there may be a period of time where the specialty retailers cut back severely on independent but high quality jazz and classical and only focus on big sellers due to the profit margin squeeze. I hope it does not happen.

6. Specialty Retailers Consolidate - I think more and more specialty record stores will struggle. Many have too much debt (from acquisitions and bad management) and the squeeze on profit margins will hurt them. The only winners will be the Best Buys and Circuit Citys that have better margins on electronic items; they will keep music as a big draw for foot traffic however.

7. Audio and Computer Convergence - High end companies will prosper by remaining small and serving the audiophile and home theater niches. The big change, however, will be that computer copmanies like Dell and others will enter the market and start offering additional devices like iPod-like playback and new "media storage" boxes. Consumer electronics copmanies will have a disadvantage in keeping up since it is about digital storage. Maybe some alliances between audio and computer firms will result.

Well, that's my take. What do you think? What do you see happening differently and why?

no fears alone at night she's sailing through the crowd
in her ears the phones are tight and the music's playing loud
~skateaway

Carl Miller

I like your vision, and I hope you're right Lee. I don't have a lot of confidence right now in Niche Heaven though. The largest purchasing demographic is still going to be the 15-24 year olds, and the investment dollars by the music industry as a whole is still going to be marjoritively directed toward this demographic.

The eventual acceptance of technology will indicate a shift in the distrubition methods of music, but not necessarily a shift in the music industry business model...Which is currently hell bent on selling 20 million units by finding the next big thing that will sell 10 million, and 2 clones that will sell 5 each...Rather than seeking to sell 20 million units via musical diversity where 10 diverse artists combined might yield the same sales level.

It's this business model IMO that is the music industries biggest problem. It invests big money in the next big thing, and then quickly clones that big thing at lower investment and capitalizes on it until it dies. It's the quickest, easiest path to maximum profit until they can't find the next big thing..Which I think is where the industry is now.

The music industry will have to both accept the iPod distribution model and the idea that with the iPod model, they can make more money embracing a business model built around diversity in music.

The RIAA will have to accept this, and then move other segments within the music industry to get on the same page. MTV will have to support the change, and radio will have to as well. As much as people like to think MTV and radio are diverse today because they're less segregated and "multi-format", they're really quite the opposite with an incredibly short and homogenous playlist for each individual genre.

I hope the iPod model will lead the music industry in this direction, but with the RIAA largely representing and leading it I don't see this happening...Not until the RIAA wakes up and accepts the notion that file sharing isn't the only significant cause of sales decline.

Carl

TheLongshot

Now, my turn:

1. Going back to small, speciallized labels: The problem with the big label system is that if you are a niche artist, they probably aren't going to be serving you the way they should. I'm seeing this a lot already.

2. Artists doing it on their own: Following the Marillion example, I can see second tier artists who have a rabid fan base deciding to do things on their own. Some by choice, some by necessity.

3. Hi Rez continues to be a niche product: Lee says that Hi Rez audio is here to stay. I personally think that, unless the industry shoves it down our throats for DRM reasons, it will be a niche product at best. While there are some that do care about the quality, most don't. They are quite happy with CDs.

4. Portable audio being further developed: I do think that we will see improvement with what I call "Portable audio", which is stuff like MP3s. Improved storage capabilities and compression, with probably DRM will still push things.

5. The death of radio: What I mean by this is radio as the primary promotional tool for music. Radio will still exist for people to listen to their favorite genres, but not nearly as much for finding new music. I see this moving more towards internet and satelite radio, which can offer more variety than OTA radio can.

Jason

My DVD Collection

Lee Scoggins

I agree with this as well, but I do see the music labels supporting the genres of jazz and classical which are definitely niches these days. These are arguably two areas (which I feel are essential of course) where the economics of the profits are not favorable at all.



I completely agree-in prior threads I have proposed the better business model would be to create independent producers that act with smaller staff like Music Venture Capitalists. I want to promote equity based contracts for artists (an actual claim on record cash flow or profits is owned by the artist) and nimbler, more diverse A&R people who can cater to local markets. No doubt stopping the insanity of $150 million recording contracts is key. After all, when was the last time you bought a Robbie Williams CD?



Good point and I agree-I tried to capture this concept in my #5.



I wanted to avoid the controversial subject of how "wide" hirez goes, but you can have niches which stay around for a while. SUVs may be one example...



I think this holds great promise because you are giving the consumer what they want - no commercials and you get stable monthly cash flows so the provider wins also. I also think the different niches will allow more diverse and talented artists to build followings, not just Britney.

no fears alone at night she's sailing through the crowd
in her ears the phones are tight and the music's playing loud
~skateaway

Rachael B

IMO, the music biz is caught in a stalemate that they brought on themselves by bullying the market. They're working on new copyguards for discs. They haven't seen the light IMO. They seem bound and determined to create the status quo that they want, damn customers wants and desires!

SACD and DVD-A are floundering and the emergence of either as anything more than a "toy" format seems uncertain, not proabable.

The next phase will proably be to try to replace the CD format with contra-CD's (copy-guarded). The public will reject them, of course. I don't see how any format can replace CD presently as much as the suits wish it could be done. We all want an "open" format like CD is because it suits the way folks manipulate their music, record, burn, rip, ect...

One of my questions is at what point will the industry refuse to sell "open" CD's?

How long till the industry starts pushing for players with NO ANALOG OUTPUTS??? Think about it, that would be the way to take control here in the DMCA age.

I think that the big 5's music business is going to go into a long slow decline that they cannot or won't stop. They want to rule the market with an iron hand not a handshake and a smile like other industries do.

The music biz has turned so many customers into enemies. As long as the R.I.A.A. exists, many potential customers will walk away from new disc sales and buy used or download.

Hi-rez is not going to be the biz's savior IMO. They've identified a small percentage of the market that will buy vinyl, SACD, and DVD-A and are willing to pay more to get something better. That small percentage of the market are predominately middle-aged IMO. That's why they won't do day and date release of pop muzik. The young people they crave wouldn't buy into the better format thang, anyway, not at the prices that the suits desire IMO.

I think that the best that we can hope for is that indie labels rise and that the big five gradually sink into oblivion. I'd say we're stuck in a stalemate, for now. Fingerpointing is fun isn't it!

My fundamental premise is that music is worth about 20% of what the big five sez that it is. Universal's price reduction pledge just isn't nearly enough. Old music, sometimes 30 or more years old, should be really cheap, even if it is the Beatles, Elvis, Zappa, or whoever! New music has some justification for costing a little more.

My crystal ball sees file trading, disc swapping, home recording, and continued resistence to high, fixed prices....

Rachael, the big disc cat! I used to be looking for Hi-Vision Laserdiscs & D-Theater tapes, now I'm looking for HD-DVD's and Blu-rays.

I survived the AFI top 100 Film Challenge! I've seen them all.

favourite saying: hard feelings are for park benches... sit on that!

Lee Scoggins

My opinion is that they will try to make open CDs more competitive price wise and they are not likely to be phased out anytime soon. They represent too much profit.



I don't see this happening because more record companies do not control the audio companies and there will always be replacement sales so audio mfg. firms will continue to produce them. The PR backlash would be a tidal wave as well.



I can't disagree with that, but power is shifting to the file sharing generation - "Generation Download" Sooner or later they will be forced to wake up and smell the coffee.



If you read David Kawakami's comments in Stereophile, he stated that Sony believes that they can improve hirez share by upgrading MP3 buyers to hirez as they age. There are some "day and date" releases happening in pop music as well. John Mayer's Heavier Things was going to be but hit production snags and got pushed back a week. There are some other examples that escape me right now.

My point is that the labels do not expect to get younger people into Super Audio but they think they have a shot at older people who may spend more for their 2 channel or HT systems. Again, we may not see hirez replace redbook or MP3, but we may just see a high quality niche. After all, LP is like that now. So many people went out and bought a turntable the past four years that issuing LPs has become a very profitable business for both small audiophile labels and the Big 5.



Maybe that can happen faster if the independent's craft record deals that allow a musician to have a claim on his work product and its profits.



The size of the cut is such that many retailers are hurting - see today's Wall Street Journal. But they also need to create a download service for the majority of their songs in addition to doing this.

no fears alone at night she's sailing through the crowd
in her ears the phones are tight and the music's playing loud
~skateaway

Carl Miller

Agreed. What bothers me about this is that I don't quite understand why the industry seems to give so little play to the 25-40 demographic? The disposable dollars are a lot lower for this group than the 15-24 year olds, but they're still purchasing plenty of music. A solid half of this demographic grew up without MTV, and almost all grew up with a greater diversity in music than there is today regardless of genre.

The industries failure to invest in, develop and promote music that would appeal to this demographic seems self-limiting and short sighted to me. Especially if you consider that this is the group of people who will soon be financing the next generation of 15-24 year olds.

It would be wise to keep these folks interested in new music and not allow them to reach the conclusion that all new music is crap.



I like this idea. It wouldn't hurt to throw music video in along with the wild recording contracts. Music videos are an effective and valid promotional tool, but they lose some value when their costs become as extreme as they now are. Increasing the budget on a new artist by 3 or 4 million dollars to do a couple of videos places the new artist in a do or die situation based on the success of the debut record. If record companies view million dollar videos as an absolute necessity, they're far less likely to allow a new artist two albums to develop a following.

Carl

BrianB