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A Psychological Analysis of Record Industry Decline

The-reason-of-trouble-of-psychological-health Everyone has their own theory on why the record industry is in decline. In part, they all hold a grain of truth. Hundreds of things helped exacerbate the process – some obvious, others not. The diagnosis will always remain open to speculation. After ten years (or more) of the smartest minds in various fields prognosticating and predicting the death and subsequent rebirth of the record industry, it's quite difficult to offer an original take on what happened.

It's all been said, at least once, and the Internet is a living record of that. In the last few years, many interesting studies have emerged that – when taken as a whole – offer a somewhat novel insight into what could've possibly caused the plight of the record industry in the digital age. The bigger picture takes a bit of imagination to render, but when looked at, it raises thought-provoking questions.

Let us review:

1) Traditional Leaders. It's well documented that the record industry found itself run by traditional, MBA wielding executives around by the time it became a nearly $15-billion-a-year juggernaut in 1999. After a decade of position swopping and promotions, the record industry still consists of traditional leaders, i.e. the Doug Morris characters of the world. It doesn't take much speculation to argue that there simply aren't many creative leaders in the major ranks, perhaps, due to the fact that there's a psychological bias against choosing them. Recently, a new study concluded that "organizations may face a bias against selecting the most creative individuals as leaders in favor of selecting leaders who would preserve the status quo by sticking with feasible but relatively unoriginal solutions." The next question to ask, what happens when traditional leaders are put under pressure?

2) Opt For The Familiar. Now, pick your poison. At the peak of the record industry, executives were under pressure to sell millions of albums to please shareholders and keep the billions of dollars rolling in. Once the industry started a decade long nosedive, executives were under pressure to sell anything and keep the bottom from falling out of their business. High stakes, high pressure, either way you look at it. These traditional executives found themselves under serious pressure. According to a new study, when people are under pressure, they often try to surround themselves with things that are familiar. Due to this bias, many carbon copy artists may have gotten record deals, because they sounded like, looked like and played like someone already highly successful.

Paradoxically, researchers found that people still opt for the familiar choice (read: familar artist) when it's the worst choice and amplifies the pressure. It's not that outlandish to think traditional leaders – under immense pressure – signed familar artists, and even though such artists failed to produce the desired results, said executives still found comfort in signing more "sure things" looked like the old thing. This is, despite the fact that those pop artists also underperformed and only served to increase the pressure on them. What do traditional leaders, put under immense pressure, do when they must sell familiar artists to the masses?

Apply marketing. Use radio, MTV, and Wal-Mart to increase the popularity of the artists, and fast! So what are the negative effects of artists spiking in popularity?

3) Spike in Popularity. According to new research, trends that quickly increase in popularity die faster. Researchers Jonah Berger and Gaël Le Mens analyzed over 100 years of data on first name adoption trends in France and the US. In both countries, they found that the more gradually that a name became popular among parents, the slower that faded out of popularity. Thus, as a whole, more children received names that weren't blockbusters. On the contrary, the names that did spike in popularity, and seemed like they more prevalent, actually rose and fell at the same high velocity. This meant that despite rising interest, fewer children inherited the seemingly more popular names. Why? Parents said that they viewed names that experienced more rapid rises in usage as fads. For that reason, they avoided names that seemed to have less staying power. The authors noted that similar scenarios have been observed in the music industry.

Artists that rocketed up the charts in an instant often fell away just as quickly, realizing overall lower sales than those that experienced more organic growth.

Now, in the past, if fans perceived an artist to be a fad, they may not have bought their music. But today, they end up file-sharing or streaming it for free instead.

If you believe some fans are respectfully using file-sharing and streaming to try the fad artist before they decide to buy it, then it's worth considering if using YouTube and BitTorrent to preview music may also have negative implications.

Is it bad when music-purchasing decisions are no longer "irreversible" in nature?

4) Adaptation Is Hindered. As it turns out – yes. In studies conducted at Harvard, researchers gave some students a choice that was reversible and others a choice that was nonreversible. From a set of art prints, students were allowed to choose one. Students valued their ability to reverse their decisions, but had no idea that, by leaving the option open; they would diminish their satisfaction with the art they chose. When people make decisions, viewing them as nonreversible, they do a bit of psychological work that helps justify their decision. If we're able to change our minds at any time, thinking that there's a better choice to be made, we'll stress over the alternatives, rather than making do with what we have. On contrary, if we're stuck with something, we're more likely to search for and find a positive view of the decision we made. So when a fan buys an album from a store and the decision is irreversible, it forces them to like it – even if they really don't.

Prior to the digital age, the pressure exerted on the fan was much greater. They had to make their $15 count; therefore, they – like the executives – may have opted to buy familiar albums as a way to mitigate risk. This is, perhaps, why instead of avoiding extremely popular artists like the research above suggests, fans too may have decided to buy music that felt familiar even if it disappointed more often than it delighted. Today though, when fans file-share and preview music through YouTube, they do so, because they desire the ability to reverse the decision, to delete the album if they don't like it. As it turns out, the act of downloading the music (or streaming it) may be the very reason that they don't like it as much, because they aren't stuck with it. Thus, the synthetic happiness, i.e. adaptation, that prior generations experienced when they bought a familiar, yet mediocre album, is never produced. Thus, since they aren't committed to their music decisions, there's less pressure and synthetic happiness to be had.

As a result, less purchases are made. The more fans fail to buy the familiar music, the more pressure is placed on the next executive to find the next big star, who is just like the old star that failed. Then major labels are forced to create more music that has "the potential" to go viral and become and instant blockbuster, which feeds into a vicious cycle that kills what it creates. Once this happens, everyone in the chain from the executives to the fans grow very upset.

What happens when a traditional executive opts for a familiar artist, tries to spike them in popularity, and finds that fans previewed the music and never bought it?

5) Not My Fault. In the book Mistakes Were Made (but not by me), two social psychologists reveal how psychological biases help perpetrators of hurtful acts justify and rationalize their behavior. Put simply, the positive feedback loop of action and self-deception leads executives to accuse fans of being greedy for not buying their "great" music, and fans call the executives greedy for trying to sell them yet another "not so great" Nickelback clone. Each side believes that the other side is morally corrupt and refuses to give way. Thus, the decade long sales decline, is – according to fans and executives – "not my fault, it's theirs."

The industry abandoned fans. Fans abandoned the industry. No one wins. This process simply repeats over and over. Meanwhile, the industry kills itself to live.

Final Thoughts

Now, admittedly, this collage of academic research is a stretch. But like any theory about the fall of the record industry, there's a grain of truth. Through the lens of psychology though, there's a number of things to be learned about why things are the way they are. This is just one, and I'm sure there are others. File-sharing has obviously evolved into a social norm; therefore, the period that this theory seeks to add insight into has (perhaps) since passed. Text on the page is always misleading because it seeks to add linearity to a real-life narrative that isn't. Regardless, I hope this short thought experiment has been fun and did in fact make you think differently about the plight of the record industry in the digital age. All fields can reveal novel insights into ours. Stay curious. Create the chaos.

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  1. Thanks Jake, I tried to be careful, as just because the dots seems to connect on the page doesn't mean they actually connect in real-life. But, it was too neat of a post to pass up once I saw the insights align.

  2. The record industry was a juggernaut that saw good and bad times. I’m currently reading the book Appetite For Self-Destruction and it clearly shows that the execs at the music industries were paid extremely well while signing acts to deals that really sucked when you compared the two. Almost every exec was interviewed at their homes that were luxurious and grand while a lot of their acts wound up just as broke as they were before they sold hundreds of thousands of cds. These companies were SO tight fisted about their revenue that that they employed dirty tactics to leech as much money from consumers as possible from payola scams creating fake placement and hype on the billboard charts to MAP arrangements where they fixed prices of their product at different stores. It was only a matter of time until their empire crumbled. A lot of it was fake. All the hype and promotion was just bullshit to get our money and get our money they did because they had the market locked in their favor.
    Free album download at


  3. Good article Kyle.
    It seems clear to me that the slow death of the majors over the past decade or so is about managing decline of the most profitable music format ever created for the distribution pipeline they control: the compact disc. The death of the CD is not the death of the music industry – but it will likely change many of the players and the rules. Copyright is at risk in its current form and needs to be updated more quickly than would seem legislatively possible.

  4. I agree. Had I only been able to find some research that applies for directly to CDs, this picture would've been more complete. It's one of those things where I could've spend a month perfecting and expanding on this analysis, but I did it instead in a few short hours and lots of coffee. For now, it's just fun food for thought. I had no idea if I was crazy or onto something.

  5. the greed and spending of the artists and execs in the 80’s and 90’s boom is the spike in popularity. the decline in sales over the last 10 years and lack of will to move forward and embrace the current digital revolution is the downfall. there will be an answer, it just might take another 10 years to get to there.

  6. I was on more than one conference call in the late 90’s in which the label heads stated “this internet thing is going away”
    They blew it when they did not get together and own the technology (Napster), before the horse left the barn, now there is no way they will ever get it back no matter how many consumers they sue…

  7. Sorry, it’s not a “nuff”; and it’s not correct. Empirically, according to the research done at Harvard/ Chapel Hill: “(illegal) Downloads have an effect on sales which is statistically indistinguishable from zero, despite rather precise estimates. Moreover, these estimates are of moderate economic significance and are inconsistent with claims that file sharing is the primary reason for the recent decline in music sales.”

  8. Steve Blank talks about three types of companies: mom-n-pops, scalable entrepreneurial, and a typical corporation. The third one, the corporation structure, describes the music industry circa 1999 and now. The corp is set up to execute efficiently in an existing market with a well-established product against a specific plan. But, this organizational structure doesn’t deal well in situations of change. So, when the music “product” changed radically, the industry was unable to nimbly shift due to its very structure. This inability to shift probably manifested the psychological reactions mentioned above. Thanks Kyle, you’ve definitely added a layer of analysis to the picture.

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