The Internet age has not been kind to Industry stalwarts. Traditionally strong organizations from the Industrial revolution like financial institutions, automobile manufactures, telecommunication companies and media outlets like television and newspapers are struggling in the era of the Web. Computer-driven tools are also causing another industry to re-examine their business practices and revenue models.
Case in point, the music industry.
In 1999, the U.S. accounted for 14.9 Billion in record sales (CDs, albums, tapes, etc). Record sales (including digital downloads) fell to around 11 Billion in 2008. Forrester projects that number to be around 9 Billion by 2013. The music industry “hoped” that digital sales would increase their overall revenues earlier in the last decade. That is all but a pipe dream now. Unless a major innovation is announced soon, I speculate revenues will continue to decline.
Because the music industry can’t rely on record sales alone to create profits, bands must now tour and sell merchandise regularly to account for lack of revenue. Even the biggest (and some of the oldest) like Bruce Springsteen, Elton John, Eric Clapton, Billy Joel among others are touring the country providing the only marginal utility left for these musicians — opportunities to hear them play live. According to 70% of those who participated in a recent survey, ticket prices are too expensive. In spite of this sentiment, gross ticket sales are rising and so is attendance.
While record sales are a commodity, live music isn’t. Demand has, seemingly, never been greater.
With the recently approved merger between Ticketmaster and Live Nation (the biggest retailer and promoter now one and the same), I speculate musicians will choose promoters and agencies that will allow them to play in the best venues and have the most powerful reach to allow them to increase revenues. If the economy holds constant, I speculate revenues for the live music business to increase steadily.
The music business has a winner on its hands.
It’s also a good time for new original bands to make their mark. The reason music sales are so commoditized is because of outlets like Napster and YouTube which made listening and watching music to become almost free. On YouTube, consumers are watching musicians like Dave Carroll sing about how United Breaks Guitars or Jonathan Coulton wax musical about Code Monkeys. Bands playing original music, like the Elders, connect with fans by planning excursions or having drinks with fans before and after concerts. Also, bands are updating on Facebook and Twitter.
Its still an uphill battle for relatively unknown bands to make money playing music. One expense for bands: promotion. Bands pay promoters to get their show booked, advertised and sponsored. Another expense: ticket brokers. Brokers take a cut of every ticket sold. Ticketmaster is rumored to see around 40% of every ticket sold.
Live music is carrying the music industry. The demand for live music has never been greater. Conglomerates are consolidating and seeing record profits. And yet, why are so many (i.e. the fans) the ones paying the expensive ticket prices, so unhappy?
Because of the merger, Irving Azoff, the CEO of Ticketmaster, Michael Rupino, CEO of LiveNation and Barry Diller the Ticketmaster Chairman appeared before the Senate Judiciary committee last year to testify.
Rupino remarked:
“I would also like to get on the record that when people hear what Ticketmaster’s service charge is, Ticketmaster was set up as a system where they took the heat for everybody. Ticketmaster gets a minority percentage of that service charge. In that service charge are the credit-card fees, the rebates to the buildings, rebates sometimes to artists, sometimes rebates to promoters.”
Essentially, bands, venues and promoters are paying Ticketmaster to be the fall guy for the Music Industry’s woes. According to the testimony, the breakdowns experienced by fans are not due to the fault of just Ticketmaster and the promoters. The breakdowns are caused by the entire industry itself.
Keep in mind, because of the very nature of live music and the scarcity of the musician(s) performing, artists are able to set their own prices in the marketplace. If fans wish to see their favorite artists play live, fans will have to pay.