Technology in music series; (part 10) the internet – friend, foe or just a tool? (V)

Of course, just because legal downloads were now available, it didn’t stop people from downloading from P2P sites. Estimates put the ratio of legal to P2P downloads between 1:14 and 1:150 in 2004. The biggest downloaders, naturally, are younger people, who have a larger time-to-budget ratio and are generally more internet savvy than their elders.

A survey of Canadians showed that while 12- to 24-year-olds composed about 21 percent of the Canadian population, they accounted for 78 percent of P2P downloading, and that Canada had the largest per capita percentage of file sharers in the world. However, another study revealed that among that same demographic, the heaviest downloaders are also the most apt to buy.

Despite (or perhaps because of) all this, record sales rose 2.3 percent in 2004. So the downturn that the industry placed squarely on the shoulders of P2P may well have to do with the general global economy, as a report from Pricewaterhouse Coopers observed:

In mid-2004, the entertainment and media industry is in an upswing following three years of sluggish growth in reaction to economic weakness and terrorism. While terrorism remains a grave threat, economic conditions in most countries have improved, and the entertainment and media industry is expanding.

Or maybe not. Early indications are that sales dropped precipitously in 2005, falling close to 8 percent. By the middle of 2006, CD sales had fallen over 5 percent comparable to the same period in 2005, and even digital sales were reportedly slowing down.

One of the positive signs in all of this is that over a decade of first sticking their heads in the sand, and then becoming the ninja ostrich and going on the attack, the record companies finally seem willing to explore, if not embrace, the possibilities of the internet, and show signs of beginning to accept that a goodly chunk of their future involves electronic transmission of their “product.”

Evidence of this could be seen in the industry’s reaction to the shutdown of Grokster in 2005, as compared to the victory dance surrounding Napster only four years earlier. “However valid the industry’s desire to protect its products,” reported the New York Times, “trying to stop file sharing has become Sisyphean exercise.”

Even Hilary Rosen, who in her former role as head of the RIAA had been the single most vocal anti-downloading champion on the planet, noted with a certain air of resignation that while the Grokster ruling might have been “important psychologically, it really won’t matter in the marketplace… [Knowing] we were right legally still isn’t the same thing as being right in the real world.”

The internet, via sites like MySpace, which offers exposure to half a million aspiring artists, has become a key tool in finding new talent for both record companies and managers. That assumes, of course, that the bands want to get involved in the musical industrial process at all. Artists can sell downloads, ringtones, and CDs, and build a following worldwide via websites and internet affiliations. “Fifteen years ago bands would have had to build up that audience with constant touring,” said Paul Smernicki of Fiction Records. “Now you’ll see groups without a record out and 300 people will turn up for a gig.”

“Sales of 20,000 on a major label would have you kicked off because of the enormous overheads,” said David Cool of Stand Alone Records. “But as indie musicians, that’s a good living… . More and more artists are realising they can do it themselves, build up a fan base and keep control over their art as well.”

Aiding in this endeavour are sites like CD Baby, an online record store for independent artists that sells both hard product and downloads, keeping $4 on the sale of each CD and 9 percent on the sale of each download. The site offers a free web page for each artists, along with practical advice and a weekly check (provided, of course, the CD sells). Historically, it claimed to get 150,000 hits a day.

In his use of and attitude toward the internet, as in so many things, Rundgren proved about 10 years ahead of his time. In 1997, when he opened up his subscription website, he recommended it to record companies as a means of subsidised artist development:

A record company can underwrite a band, promote them through the internet, and build a core audience of even as few as one or two thousand people. Let’s say they get 5,000 people to commit at a level of $20 [a year]. That’s $100,000 in cost defrayment right up front, $100,000 that would essentially be loaned to the artist to do production or whatever. All they have to do is build that small, core audience who are willing to pay around the cost of a CD.

If I’m distributing electronically, I can make music that I might not normally put on a CD. It wouldn’t fit the concept, it’s only a minute long, or it’s 20 minutes long. All kinds of restrictions to giving up real estate on the CD don’t exist when you’re distributing electronically.

This sounded surprisingly similar to an announcement his (Todd Rundgren) former record company, Warner Bros., made nearly a decade later, in summer 2005, about the coming of its e-label subsidiary. “An artist is not required to have material for an album,” noted Warner Music Group chairman Edgar Bronfman when he made the announcement, “only just enough to excite our ears. Rather than releasing an album every couple of years, every few months the label will release clusters – three or more songs – by the artist.”

Additionally, the artists signed to the e-label retain ownership of their masters and copyrights. The parent company saw this as a way to exploit the web as a means of talent development, slashing the cost of marketing a new artist from millions to minimal. By November 2005, that label had taken shape and hit the web as Cordless Records, headed by Jac Holzman, who had founded Elektra Records 40 years earlier. “Physical product has its place in the world,” Holzman said, before pointing out that using the web let him find and test artists with greater speed and far less cost. With the same money that it would take to make, market, and distribute a single CD, Cordless could release songs by between 7 and 10 artists.

Even during the darkest days of the internet’s relationship with the record business, there have been cheerleaders for the digital music business. EMI’s former senior vice president of digital development Ted Cohen took his record company position rather than a similar one offered by the emergent Napster in 1999. In that position he cajoled and needled the business to the point where it then teetered on the brink of dealing with online music as businesspeople rather than combatants – and he has started his own consultancy to further and broaden that effort. “The future has never been more exciting,” he said. “We’re going to figure out how to make this work!”