When the Music Industry Became a Service

When he was in his early 20s, Ethan Kaplan was hired by Warner Bros. Records as their head of technology, a job he might not have been well prepared for but one he was assumed to excel at given his age.

“I was the 20-something-year-old kid who was supposed to have every answer about all things digital,” he recounts in a column for TechCrunch. “I remember distinctly the first record I worked on. Not because the record was special to me personally (it wasn’t), but because that was when I began to understand how a ‘record’ was viewed by the record labels and the industry.”

Albums weren’t so much compositions of music, song after song carefully written and lovingly produced by artists who were respected and encouraged. Instead, it was all about how well something sold and whether those numbers lived up to, or fell away from, the story told by publicists, as dictated by how the album sold in its first week of release. “Even the record store owners had no idea who was buying,” he says. “It was a simple transaction reported to SoundScan.”

The landscape has shifted dramatically since his career began in 2005, to put it mildly. There are bundling options, for getting albums into listeners’ ears through deals with distribution methods (see U2’s experiment with iTunes last fall) or products (Jay-Z’s album delivered directly to Samsung phones), not to mention being able to stream an entire album weeks before its release date through programs like Spotify.

For a while, PR firms still relied on the “story” of an album to gauge its success: “If the record charted to No. 1 with millions of sales, the news was used to bolster second-week sales, as well as support the second single on radio and MTV and help launch the tour,” he says. “The story, the sale and the spins—this marketing dance worked over and over again.”

That changed when iTunes came on the scene, but “the record labels didn’t bother to change the process very much. They just got a level of analysis and quantification that they never had before (for Apple, primarily), as well as higher margins.”

Now, consumers are comfortable with music as a service, listening to what they want, when they want, where and how they want, without having to buy much of anything. He discusses the changeover from Napster to Rhapsody, the eventual fall in album sales happening slowly while everyone was looking. But now, digital music sales, which had helped the recording industry keep itself viable, are decreasing.

“The music industry is still organized to support the traditional retail and digital sales cycle,” Kaplan writes. “As subscription services become the dominant source of revenue for recorded music, the entire business will have to shift gears to survive.

“It’s no longer about pre-sales and Week 1, it’s about nurturing an audience month-over-month to drive loyalty and increase returns on a streaming device platform,” he continues. “All of the promotion dollars and methods to support Week 1 have to be retooled for a longer cycle, up to 6 months in many cases.”

It’s a fascinating read. Check out the full article here.

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