Smashing the Record
photograph by Larry Kuzniewski
Lazarus, Osiris, Mark Twain, possums, Glenn Close, zombies: You can add the music industry to the list of things you thought were dead but aren’t.
The rise of services like Napster, which debuted in 1999, caught the record industry with its sequined leather pants down, and sales of CDs plummeted. In the early 2000s, there was no sign of life, and many lamented the end of recorded music. Metallica threw a tantrum. Rather than look at the problem as a research and development challenge, record labels went on an aggressive defense, suing file sharers and vigorously defending a doomed business model.
But a decade later, the sun has sure enough come over the horizon, and legal, dependable digital music services are posting enviable growth. Last year was a watershed in a decade-long seismic shift in the music industry. For the first time, sales of digital units have reached par with CDs. It is a new day for the music industry. But it’s a new day without a penthouse and a helicopter.
This changing landscape has been hard on labels and artists alike as they search for stability and growth. Fortunately, Memphis offers serious advantages to making music here, and several start-up businesses are emerging from the wreckage.
"Our mission is economic development,” says Cameron Mann, director of the Memphis Music Foundation’s Music Resource Center. “Our job is to grow jobs in the music industry here in Memphis.”
The foundation is supported by public and private funds and is part of the Memphis Economic Development Plan. The resource center helps local musicians by fostering cooperation among budding talent and the local service providers they need to record and market their music.
“Every band is an opportunity to start a new business,” Mann says. “Bands have bank accounts. They incorporate.”
While it is incumbent on every artist to work every angle in pursuit of success, it’s a fact of life that many creative personalities do not excel in the business-oriented side of the industry.
The service providers who can help an emerging artist (distributors, publicists, managers, and radio promoters) worked under the old paradigm of shipping physical units. When the record labels pulled back on expenses, the service providers withered on the vine. The industry lost institutional knowledge about things like copyright, performance rights, contracts, and promotion.
The Music Resource Center (MRC) is designed to offer some of those missing services free-of-charge and to help Memphis artists and service providers meet and do business.
“The three areas that are lacking are national agencies that can book a band out of town; publicists that are national — that can reach out to national press and blogs; and real, professional management,” Mann says.
These services are just part of what amounts to a huge R&D burden on music. Major labels spend $1 million developing a new act and can spend $4.5 million promoting a superstar act, according to the International Federation of the Phonographic Industry (IFPI). These costs include advances to artists, recording, marketing, and tour support, not to mention the royalties and costs of distribution.
An IFPI report on investing in the music sector makes this point:
“Very few sectors have a comparable proportion of sales to R&D investment to the music industry. In the U.S., the average corporate R&D proportion to sales turnover is 4.4 percent. The pharmaceutical and biotechnology industry, widely acknowledged as a leader in research, invests 15 percent of its gross revenues in R&D.”
The IFPI says the music industry spent 15 percent on development in 2006 and 12 percent in 2009. You can imagine what the rest of the recession was like: There goes your helicopter. The budgets are all gone and the onus lies on artists like never before.
The Memphis Music Foundation formed the Music Resource Center to help defray these costs of entering the market. The center provides artists with access to design, copyright registration, performance rights organization affiliation (to collect royalties), publicity, distribution, and more. But it does not stop there. The center has spawned some new businesses that have scaled up along with the center’s musical clients.