Major Labels

Is The Sky Falling On The Record Industry?

Legal scholar Mark Lemley has published an insightful draft paper titled, "Is the Sky Falling on the Content Industries?" In it, he documents the history of content industries crying foul every time a new technology disrupts their current business model. His quote, as it turns out, juxtaposes rather nicely with one of Greg Kot's:

Greg Kot:

image from "The invention of the phonograph was going to discourage people fro  m going out to see live music. The introduction of music radio was a surefire way of killing record sales. "Home taping is killing music" screamed the magazine ads when the cassette tape was introduced to the marketplace. Of course, each of those sky-is-falling alerts from the music industry over the last century was a false alarm. With each technological innovation, music became more accessible and more lucrative than ever."

Mark Lemley:

image from "The content industry, it seems, has a Chicken Little problem. It may, in fact, be the case that the sky is falling. But, if you claim that the sky is falling whenever a new technology threatens an existing business model, the rest of the world can be forgiven for not believing you when you claim that this time around it's going to be different than all of the other times. Now, let's be clear, each one of these technologies changed the business model of the industry. They caused certain revenue streams to decline. But they also opened up new ones."

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  1. Lemly gets it. I’m not sure Kot gets it.
    As explained in a paper by Stan Liebowitz, U.S. recorded music revenues were hit hard by the introduction of radio. It took per-capita sales about 25 years to recover. (Per-capita recorded music sales dropped by an amount greater than the drop in GDP during the Great Depression, and didn’t recover with GDP as the country pulled out of the recession.) So it would have been correct to say the sky was falling during that stretch of time. For a quarter of a century, the sky did indeed appear to be falling. Kot would wrongly have you believe the introduction of radio immediately brought higher revenues. But it took a long time.
    Of course revenues are going to come back — in some way, although nobody can figure out exactly how, and at some point in the future. As Lemley points out, existing business models will not return the record industry to prosperity. New technologies have hurt more than help so far, but that doesn’t mean they won’t eventually be harnessed properly.

  2. The technology that I don’t think gets enough coverage in music business articles is do-it-yourself music. Not do-it-yourself careers, but user generated music. I recently read that painting involved a small group of people until manufactured paint came along and opened it up to far more people.
    Look at what ProTools and Auto-Tune did for and to recoding. Now those tools have filtered down to in modified versions to iPhones and iPads.

  3. Glenn wrote: “…U.S. recorded music revenues were hit hard by the introduction of radio. It took per-capita sales about 25 years to recover….”
    And would we be better off if the manufacturers of radio sets and broadcasters had been sued into oblivion, and if the ordinary users of radio had been the targets of a sustained legal attack? (Ah, that’s a snarky rhetorical question.)

  4. Hence, the current situation is like the one in a Gold Rush. There, it was the shovelmakers that got rich, not the diggers. It seems that in the current environment, it’s the makers of music equipment and recording equipment that profit the most from the boom in DIY. And it cannot be a bad thing at all that people are making their own music again – instead of merely buying recordings.

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