Tony Brooke: The Obsolescence of the Music Industry Middleman

by Tony Brooke

This was written in 2007, based on my earlier article "On the Future of the Music Industry" (written in 1999). It is featured on's 12/2007 Think Tank "What will the music industry look like a decade from now?"

The music industry is severely fragmenting, due to obvious technological advances. There are more choices available to music fans than ever before. In fact, over the coming years there may be too much for the average fan to choose from. An incredibly diverse wave of recorded music has been forming for years, coming directly from the artist.

In the past, the listening public was conditioned by the music industry to believe that corporations were best qualified to pick what gets heard. But in our increasingly interconnected world of six billion people, it's fundamentally absurd to say that only certain music deserves to be heard by all, or that that everyone may only listen to a limited pool of music.

But the floodgates are opening, and music fans will soon be overwhelmed with new choices. The old-school gatekeepers and middlemen, too slow to realize this, are missing the wave.

The new plurality of music requires the listener to actively LISTEN for what they like instead of just HEARING what they are told to like. This is a skill that the new generation knows well. This also means that there is an increasing need for independent guides through the expanded choices, without dictating choice.

The first radio station Disc Jockeys were the original music editors: "Check this tune out, I like it." That got wiped out by big business, while college and public radio kept the tradition alive underground. Now the Internet brings it back, better than ever and much more accessible. Plus, now there's interactivity: "So, tell me what tunes you like... OK, if you like that, check this one out..."

The new music Community must understand this shift. The old music Industry is no longer useful.

So, what drives this change? The main cost factors for a release are: Recording, manufacturing, distribution and advertising costs. Each of these stages of getting music from the artist's soul to the public's ear have recently changed drastically:

Recording costs:

Due to technological advances, lower cost, high-quality equipment has made the phrase "major-label quality" an anachronism. Pro and semi-pro recording equipment costs less, so more people can make music. With this "cost of entry" lowered, increased competition has lowered hourly studio rates at every level.

The Result: Good for artists and music fans, bad for recording studios.

Manufacturing costs:

Pressing a CD, LP or a cassette used to be expensive. But now, with the advent of digital delivery methods, there is minimal manufacturing cost.

"Marginal cost" is an important term that refers to the additional cost of production for each additional unit produced. The first unit is the most expensive to make, because it's cost includes the whole recording process. In traditional physical manufacturing, it takes large economies of scale to reduce manufacturing costs per unit. But with digital distribution, it's basically just a matter of duplicating a file to make the next unit (plus a small cost for bandwidth). Thus the cost of the first two units is about the same as one unit, or half per unit. This pattern repeats, and for each new unit, the marginal cost of each extra unit approaches zero.

The Result: Good for music fans, bad for pressing plants.

Next, distribution and advertising costs:

Record companies used to have this side of the business locked up. With control of the only way to get music to the buying public, the big labels were the gatekeepers. In bed with FM radio, labels doled out the music that they owned to a musically hungry public.

They spent most of the project's budget on advertising and promotion, including, for the larger acts, absurdly expensive music videos. Only if the company first broke even, then made a profit above that, would the recording artist get anything. The artist was in debt to the company for these costs, and essentially paid the label to let the label make money off of the artist's music. It was indentured servitude.

Now, artists can distribute their own self-recorded music on the net. They don't have to pay the many middlemen, so they can charge less and keep more while selling a lower quantity. The break-even point is so low that they can afford to cater to a smaller audience. And, when you don't have to pimp yourself out, you can really sing your own song.

The big labels that don't adapt will be left with the lowest-common-denominator pop fluff, which will fall on deaf ears and eventually erode consumer confidence in the integrity of their product. They must adapt or die.

The Result: Good for artists and music fans, curtains for the record labels.

So that paints the trend. A great trend for artists and music fans, but it's bad news for everyone else in the current business of music.

The tug-of-war between lower production costs and lower sale prices will continue to erode the old model. The mayhem of the past 5-10 years is due to these factors hitting us with unsynchronized rates of change. It would have been fine if the lower cost of creating music and the lower selling price had ebbed in tandem. But whenever one outpaces the other, there is turbulence. But the old guard missed each wave, pointing fingers and hiring lawyers instead of adapting.

When the selling price should have dropped, the few newly consolidated record companies didn't lower their retail prices and conspired to fix prices at their peak levels. Their short-sighted profit gouging sacrificed their future income by killing the integrity of their own product, driving the adoption of digital distribution, and strip-mining cash from art.

But now, with the middlemen being removed, there is a much more efficient pipeline from a musician's idea to the listener's ear. In fact, the pipeline will actually become too efficient. How can the average fan sort through such an overabundance?

With so many choices, there will be an increasing need for editorial guidance. Not in the sense of the old-guard gatekeepers and taste dictators, but instead from independent recommendations. Whether from the cloud-mind of social networking, from automatic recommendation engines, or from professional music mavens, somehow people will need help finding stuff they will like.

This will create business opportunities, and will be the future of music. The old indentured strip-mine model will hopefully be replaced by a richer, more diverse, sustainable ecosystem of music.

Think of this: There have been millions of pieces of music that precede recording technology, and even more since then that were not recorded. And most people have only heard a tiny fraction of all recorded music; just a tip of the iceberg.

With the lower cost of production, much more music that would have been lost will now be preserved. With the instant access of digital delivery, that music will also be available to a vastly wider audience. As these trends ebb and flow, there will be turbulence because their rates of change won't be synchronized. But as smaller and smaller niches form, a more direct, intimate connection will emerge between artists and audiences.

Eventually, I see music returning to its role in society as a natural expression that comes from the soul, rather than a product, or a commodity, or a means to a career. I would love to see absolutely anyone who feels the urge be able to pick up an instrument and make a noise, with no motivation of becoming a big star or striking it rich.

Picture the artist who truly thinks, "Who cares if nobody else ever hears this? I'm feeling it and that's what matters." Today, we're already starting to see this trend, and we have the privilege of sometimes hearing this honest expression. But only if we remove the remaining middlemen and economic barriers, will this be the norm. Today's changes are just the beginning...

Here are some related resources and ideas:

To quote Joni Mitchell:

"A major difference between the performing arts, to me, and being a painter (is)... A painter does a painting and... that's it. He's had the joy of creating it, and he hangs it on some wall... somebody buys it... somebody buys it again, or maybe nobody buys it and it sits up in a loft somewhere 'till he dies... but nobody ever said to Van Gough, 'PAINT A STARRY NIGHT AGAIN, MAN!' He painted it- That was it."  (From the live album "Miles of Aisles")