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Industry information that you can actually use
November 2001
What
Happens Next? The Business of Music after September 11th 2001
It has taken me some time to divorce myself from my initial reaction
to recent events in order to think clearly about what has occurred and
how it will effect us. There were many moments when I was tempted to
write a massive on the ass-whooping we should be inflicting. But it
is my job to have something level headed to say in the area of music
business, and it is my philosophy that in times like this sticking to
our gig is more
importanthan ever, if the ties that bind our country and our economy
are to withstand this tragedy.
The first thing I must comment on is the warmth I felt as I watched
the telethon. I saw more passion than any Grammy Awards show in years.
It is interesting to note what happens when artists are performing for
something they believe in, instead of just a slot between commercials.
(no
offense to Mr. Green intended). This is a valuable lesson, and one I
hope that labels will take note of. Perhaps we will see more of that
sentiment in the months to come. I for one believe that we will.
HISTORY
The ripple effect of large global shifts of money is never good for
the
entertainment business. Many executives love to say that
entertainment, as an industry, is "recession proof." But history
has proved otherwise.
The reason for larger production in the 1930s was the fact that the
economy had become so depressed that labor was almost free. This brought
on the golden age of Hollywood. It made for cheap product that was very
accessible to the masses.
The economic climate of the 1930s-50s has no modern paradigm. We have
never had a global economy, where profits are dependent on international
sales, where there is a sub-culture of non brick and mortar avenues
for sales willing to sell items at a loss just to keep their stock active,
where
labor costs are at an all time premium, where there is no Gold standard
to
back up our money, and finally where the enemy is not centrally located
(leaving us with no economic enfilade). All who think they have a definite
answer to what will happen are probably fooling themselves. Even high-level
analysts are scratching their heads.
But there are a few things on which we can speculate that will
probably makegood stable datums for us to use in predicting the future
or our industry over the next six months to a year.
PROBABILITY
I would love to be able to say that the tragedy two weeks ago will
bring with it a rise in socially conscious decision making at the A&R
level and a benevolent attitude on behalf of labels towards artists.
But this
would be an oversimplification.
In the past year AOL was the undisputed leader in profits among the
Big Five for their record division, earning about 12 cents on the dollar.
Sony
was in last place losing about 4 cents on every dollar spent.
There can be little doubt that with numbers like these the majors will
be
looking for ways to make big cuts in order to prove to their parent
companies that they can be profitable in this unstable climate. The
first strike will likely be a fewer number of signings and fewer releases
followed by cuts in personnel.
Fewer signings at majors means more product released by the
indies-usually. But I think many Indies will be suffering due to an
inability to compete. In times of strife people turn to mass media.
Only artists with access to this stage will be receiving attention.
To combat this I imagine that many smaller labels (who cannot afford
this venue) will be looking to trade off their better artists to majors
hungry for cheap, already packaged
talent. If you're on an indie, it's time to look deeply into your contract
in the
GRANT OF RIGHTS section to see what happens in the event of your small
label being swallowed by a major.
As far as the type of acts majors will look for: I predict signings
of bands/artists that create uplifting, positive material. (Brittany
and
others may have to restructure their acts a bit if they want to maintain
market share.) Bare midriffs will be out, replaced by turtle-necks or
some
such maudlin, conservative attire.
It has been a cynical time over the past three years. It has been a
time when we were gloating in anti-American conceit. That time is over.
The hard edged thrash tunes that you may have noticed on your local
version of K-Rock will likely soften radically for a few months and
yield to
more "thoughtful" music. Many program directors are old enough
to remember the early 70s unity among the youth and are not in the mood
to listen to the independent promoter's rhetoric or their "suggestions"
about what to play. Not at least 'till the beginning of next year. This
means the
delaying of many new releases that were counting on slipping into the
new "hard rock" format 'till after the New Year. If you understand
the economics of most deals on majors you know that this means disbandment
to many of these groups (Managers and lawyers out there, you may have
grounds for severance under these circumstances).
If you are a writer of serious tunes now is the time to dust off some
of those compositions that were a bit too "political" for
your pop
clients. They have renewed value. You may also want to change the old
rusted strings on your acoustic guitar.
In the Rap/Hip Hop genre I believe that we will be seeing a radical
drop in anti-social themes. Many videos will be pulled from rotation
on
MTV/VH-1 etc. I suspect that many memos about reshooting/recutting videos
that are still in production will be dealt with this week. Production
companies will be asked to consider low bids to take up the slack on
this. Videos and jams with lyrics about white oppression are probably
going to lose much of their audience now that it seems that we, collectively
as a country, have a greater oppressor.
For companies like Arista, J Records and other labels in flux, this
"war" is
not good news. Even though LA Reid has slashed his staff about as trim
as
it can get, let us not forget that his label is turning into La Face
II.
This will be fine as long as his artists are willing to create more
positive motifs in their masters. Something that, up till now, they
have not
been known for. This goes for Puffy and the like. Their talents will
be
necessary to help America heal. I believe that this will be what is
looked for by the upper management of the Big Five (who, let us not
forget,
are all owned--except for AOL--by foreign entities).
Finally, overhead. Starting with personnel. A&R departments will
be
trimmed. Promotion departments increased. Companies will look to
slash manufacturing costs. This means that Internet deals will take
a
sharper front seat interest. Companies with strong Internet pipelines
(like
AOL/WEA) will likely continue to have more options for revenue streams
in the next few years than their competitors.
To make up the difference look out for many, many, many benefit
concerts. Look carefully at the stipulations as to how much is going
to the
cause. Promoters have nasty way of cashing in on our sentiments. You
may recall the cavalcade of benefits for AIDS and other causes in the
eighties. Much research has shown that less than 15% actually went towards
real 501c3 (non profit) companies.
FINAL WORD
I do not want to wrestle in politics here, but one contribution I can
make to the strategic anthems that have been so prolific on CNN (an
AOL owned company) will be to say just this to those that are fired
up to strike
a blow for Democracy: what has kept us in a relatively peaceful mode
since
World War II is the concept of "mutually assured destruction."
Nuke us and
we're gonna nuke you back. But, this falls on deaf ears when dealing
with an enemy that does not value human life as much as we do. The cost
for our revenge may, therefore, be high indeed. Think this over. Remember
what happens to those who live in glass houses.
See you soon.
Stay well and be safe,
Moses
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