BOB GARFIELD: Last month, the major record labels' trade group filed copyright infringement lawsuits against another 493 users of on line peer to peer file-trading networks, bringing the total to nearly 3,000. At the same time, Atlanta-based research firm Big Champagne reported that more people than ever, nearly 10 million, are using the peer to peers. For the five years that networks like Napster have come and gone and come again, their fans have been saying one of the prime attractions is the availability of music that isn't on the shelves at big box retail stores, and isn't being played on commercial radio. Rick Karr reports that the business model used by major labels has driven musicians and fans to the peer to peers -- and to other new technologies.
RICK KARR: Every generation seems to hear the decline of Western civilization in the next generation's pop music, but apocalyptic visions of the aging aside, the aesthetics of pop music have changed over the past couple decades, in large part due to changing business realities in the music industry. Harold Vogel is a New York financial analyst and author of Entertainment Industry Economics, a textbook that's just gone into its sixth edition. He says the changes have affected the record business and radio in the same way.
HAROLD VOGEL: There's a cycle of, let's say, protectionism and risk-aversion, and we're in the depth of that right now. There's certainly a lot of risk-aversion. If it isn't popular in twelve different markets, why should we play it? And nobody wants to play the unpopular or the new or the different.
RICK KARR: Vogel says the risk-averse phase of that business cycle is a long hangover of sorts from the industry's huge expansion in the 1960s and '70s. The Baby Boomers set off a boom in the record industry, rewarding labels that took risks on new talent by making those artists into bankable stars. [LED ZEPPELIN MUSIC PLAYS] Vogel says record labels got used to strong cash flow and big profits, so when the boom tapered off in the late '70s, the industry scrambled to sustain profitability. One solution came from sales of the new compact discs. A lot of music fans bought their record collections all over again. [LED ZEPPELIN] The other way to sustain profits was to cut costs, and so the record industry started to consolidate: conglomerates snapped up independent labels, and major labels merged. The conglomerates set earnings targets and borrowed a page from the movie business's playbook -- the "tentpole release." Vogel says that's what Hollywood calls a film that's supposed to be a blockbuster that props up the studio's finances.
HAROLD VOGEL: An expensive picture, high marketing, high production value, lots of big stars, and all your other pictures, your other 15 pictures or so, would fall under the tent, basically. This would carry the season and be the thing you talk about to your shareholders in the annual report that you write the next spring.
RICK KARR: The same pressures drive tentpole releases in the record business. At least once a quarter, says former Mercury and Warner Bros. chief Danny Goldberg, you have to have a big hit.
DANNY GOLDBERG: When you look at a schedule, and you know you have to make whatever the number is for your company -- 200 million or 300 million or 400 million for the year in terms of your top line of sales -- something you can ship a million of is ten million of those dollars, and almost the same amount of staff time goes into setting up a release where you ship a million as setting up a release where you ship a hundred thousand.
RICK KARR: By extension, a record that sells ten million copies is an even better financial proposition. Goldberg says that makes it harder for major labels to take risks and puts a premium on releases by bankable stars. Labels pay bigger and bigger cash advances to those stars and spend millions promoting their releases to retailers and radio broadcasters. But--:
DANNY GOLDBERG: The more resources that go into that, the less resources are available for the development of, of new talent.
RICK KARR: Even established stars suffer if their records sell only, say, a few hundred thousand copies. The business model at today's major labels, Goldberg says, can't accommodate and act like the Pretenders [PRETENDERS MUSIC UNDER] who released two platinum and one gold album at their peak in the 1980s. [PRETENDERS MUSIC UP FULL] But the business models at smaller independent labels are designed to support acts like that, and in fact the Pretenders are now signed to Goldberg's four and a half year old Artemis Records. Goldberg says independent labels have traditionally been where new artists go to build their careers.
DANNY GOLDBERG: We're just putting out our second album by somebody named Jesse Malin. I'm very excited about it. The first album did about 30,000 but got good press; created some good interest at some parts of the media, and he's a brilliant guy. [Jesse Malin SONG PLAYS]
DANNY GOLDBERG: I think a major label might have spent more on the last record in terms of things like tour support, but they might not have made the second record.
RICK KARR: Goldberg says that throughout the history of the music business, independent labels have gone through cycles of their own, releasing jazz, R&B, rock & roll and punk when the majors were avoiding risk. Once the new genres became popular, the majors swooped in and co-opted them. The down side of the independent label, Goldberg says, is that it has a much harder time marketing artists like Jesse Malin by getting them played on commercial radio, an industry that went through its own cycle of consolidation and risk aversion in the '90s. But Danny Goldberg is bullish on the ability of new technologies to make up for the lack of radio exposure. He likes satellite radio, and he's a big fan of the subscription internet service Rhapsody which allows users to listen to a library of hundreds of thousands of songs for a flat monthly fee. Even the peer to peer networks, the scourge of the major labels, are proving to be places where smaller artists can get some attention. Consider the Seattle-based trio The Jeunes. [THE JEUNES MUSIC PLAYS] They've only played 14 shows, none of them outside the Pacific Northwest. But they have a passionate new fan 4,695 miles away in Derby, England: Musician and D-J Jyoti Mishra.
JYOTI MISHRA: I found about [sic] their music, cause I downloaded it, I thought illegally. Turns out they'd posted it themselves, to try and get better known.
RICK KARR: Mishra says The Jeunes are one of thousands of bands taking part in an on-line Renaissance of pop music -- recording at home, and if they're lucky, gathering fans from among the millions who troll the internet looking for music.
JYOTI MISHRA: People aren't waiting round for permission from major labels to have a career, to having their own career themselves. It may be tiny; it may be very locally-based. It may be internet-based. But they're not waiting round or spending their whole lives chasing some dream of, of being signed and getting some big thing happening. [JYOTI MISHRA'S YOUR WOMAN PLAYS]
RICK KARR: But Mishra knows firsthand that the major labels still dominate one thing -- marketing. They have the clout and the money to grab media attention in a crowded marketplace. His song, Your Woman, recorded under the name Whitetown, got him picked off a small independent label and on to the major EMI Records. In 1997, it went to number one in eight countries and sold more than a million singles and albums worldwide. Without EMI, it would probably never have sold more than a few thousand copies. Seven years later, Jyoti Mishra says, technology is at least starting to give musicians and music fans a choice. They no longer have to buy into the major labels' business model. For On the Media, I'm Rick Karr in New York.