Labels Pull Albums off iTunes, RIAA Goes After Internet Radio -- When Will They Ever Learn?A few weeks back, as I was having dinner with a media-industry colleague at a trendy restaurant in a trendy New York neighborhood, I realized that the music coming over the sound system was transporting me to another time -- specifically, 1986. As song after song by various "it" bands of the moment, such as Black Kids and the Virgins, played, it was as if we were listening to a time-warped or parallel-universe version of the "Pretty in Pink" soundtrack. Because really, the "it" sound of the moment would work seamlessly in just about any John Hughes movie circa the mid-'80s.
In fact, I suggested to my dinner companion that there might be a niche market in this: Somebody should create a soundtrack titled "Pretty in Pink 2: The Original Motion Picture Soundtrack to the Movie That Never Got Made." (Same deal with "The Breakfast Club" and "Sixteen Candles.") Of course, in the iTunes Age, the conventional wisdom is that nobody buys albums anymore -- but they do buy compilations. (Witness the continuing global success of the "Now That's What I Call Music!" franchise; the latest U.S. "Now" compilation, the 28th in the series, was released in June and went platinum last month.)
As it happens, my colleague ended up buying "Partie Traumatic," Black Kids' debut CD, on iTunes. He doesn't really read music criticism, so he didn't know -- and wouldn't have cared -- that Rolling Stone and The Guardian loved the record or that Pitchfork hated it. He just really liked the Black Kids song we heard over dinner ("I'm Not Gonna Teach Your Boyfriend How to Dance With You"), got hooked and became a customer.
All of that got me thinking about the economics of music discovery, whether by hearing new music in a restaurant, in a movie theater or on the internet. Speaking of which, the deeply troubled music industry, rather astonishingly, has been spending its summer making it harder for music fans to encounter new music online. Last month, for instance, Muxtape, which I raved about in this column when it launched earlier this year, went dark. Created by former college-radio DJ Justin Ouellette, the hipster favorite made it simple for music fans to create virtual mix tapes -- short lists of songs your friends (and other Muxtape users) could listen to but not download, because Muxtape used streaming technology. (Muxtape, in fact, offered links to Amazon's MP3 store to make it easy for users to buy songs they had just heard.) But now, a simple, sad message appears on the Muxtape home page: "Muxtape will be unavailable for a brief period while we sort out a problem with the RIAA" -- the Recording Industry Association of America. A brief period? We'll see.
Likewise, the hugely popular internet radio station Pandora is "approaching a pull-the-plug kind of decision," as founder Tim Westergren told The Washington Post, because the federal government, prompted by the music industry, doubled the "performance-royalty" rate that internet radio stations must pay (to record companies) to stream music -- twice as much as satellite radio. Traditional terrestrial radio stations, mind you, don't have to pay performance royalties: They pay only publishing royalties to songwriters. The new internet-radio royalty rates kicked in as of July, and they threaten to kill not just Pandora but the rest of the fledgling internet-radio market.
Meanwhile, we're seeing artists and labels pulling music from iTunes in hopes of juicing album sales. Warner, for instance, just pulled Estelle's entire album "Shine" from iTunes because it didn't want fans to be able to buy just its ubiquitous hit single, "American Boy" (featuring Kanye West). It's kind of sweetly principled that Estelle -- and/or the suits at Warner -- think that "Shine" is a complete work of art that must be purchased in its entirety and then presumably listened to from start to finish. Principled but idiotic -- and the proof is that "Shine" and "American Boy" are both now in freefall on the Billboard charts. (Your neighborhood drug dealer wouldn't do so well either if he forced all his customers to buy in bulk.)
All in all, it's been a depressing summer for the delusional record industry. We're seeing a total disconnect between labels' unrealistic, old-school revenue expectations and what the market can bear. On the streaming-music front in particular, the sad reality is that advertising revenue isn't, and may never be, there to fully support the music industry's wishful-thinking profit margins.
As Advertising Age Editor Jonah Bloom said to me last week, labels "can't help looking at what they used to earn from a big band's latest release and wondering why they can't score that. ... The trick is to get your costs in line with your anticipated sales based on current revenue rather than former revenue."
But the music industry, stuck obsessing about exactly that -- former revenue -- would prefer that you only listen to music when and where they want you to. And that's no way to figure out the path to future revenue.