Vanishing Act - Music Biz is Running Scared

Technology's pushing aside the album, and the music biz is running scared – 'It's a very unnerving situation'

As a technologically savvy teenager, Danielle Harrison is a key reason the record industry is in big trouble.

“Albums are less important to me than to my parents' generation,” said Danielle, 13, an eighth grader who lives in Encinitas. “Most of my friends have iPods and Mp3 players, so it's easier to just download the songs you want than to buy the albums, like my parents did. They didn't have iPods and iTunes when they were young.”

As album sales continue to plummet, it is clear Danielle is not alone.

“It's absolutely true – the behavior of consumers in the digital world is to buy tracks and not albums. It's one of the things that keeps me up at night,” said David Dorn, 40, the senior vice president of new media strategy and business development for Rhino Records, which oversees the back album catalogs of nearly 1,000 artists for the Warner Music Group.

“It's a very unnerving situation, because you're talking about albums – the traditional business model – being broken down, with people saying: 'I just want one song.' And there are plenty of albums where that's fine. But what about classic albums by Aretha Franklin, or the Ramones, or Ray Charles, that are wonderful in their entirety? It makes sense to buy singles that were intended as singles, but there are a lot of great albums that should be heard as albums.”

The question is, will they?

For more than 50 years, the album provided a near-perfect medium for musicians to present their work in a carefully crafted and sequenced form.

Now, in an age of instant gratification dominated by iPods, iTunes, music-playing cell phones, CD-burning and a variety of legal and illegal forms of downloading and sharing digitally delivered music, the value of albums to Danielle and many young consumers is diminishing. Not coincidentally, the current advertising slogan for iTunes and iPods is: 1,000 songs in your pocket.

“I think iTunes has changed everything in the past couple of years,” said Mike Kennerty, 25, the guitarist in punk-pop favorites the All American Rejects.

Kennerty proudly noted that “Move Along,” the title track from his band's 2005 sophomore album, was recently the third most popular song on iTunes (which sells songs for 99 cents apiece, a price several major record labels want increased to make up for lost album revenues). He also acknowledged that snippets of all of the Rejects' songs are available in ringtone form. But he sounded conflicted about the impact such technology may be having on music, including his.

“It's cool to go on iTunes (for singles), but it's also a shame to think about it,” Kennerty said. “Because there are many other songs that a band puts just as much heart and soul into, and they'll be ignored. People just don't have patience any more, and that has brought this on more than anything. It kind of sucks that kids won't get a chance to appreciate an album as a complete work.”

Precarious position

But the album's precarious position – like that of the CD itself – can't be blamed on downloading and iPods alone. Other factors include the constant overpricing of CDs and other questionable business practices, and the fact that major record labels (which once patiently nurtured the careers of promising young artists) now seek instant returns from one-hit wonders, whose average shelf life is almost as fleeting as that of an “American Idol” reject.

“The record industry did not embrace the technology. They tried to stop it, instead of seeing it as a great new way to get music out to people and exposing people to music they might not get on radio and MTV,” said Rolling Stone publisher Jann Wenner, 60, whose biweekly magazine has covered popular music and culture since 1967.

“There are other problems – pricing is too high, product too thin. Why do you want to pay $19.95 for a CD that only has three songs worth listening to? The industry's problems are fundamental, but I do think it will rebound.”

Owen Sloane is less certain.

A veteran Los Angeles entertainment attorney, his past music clients include Elton John, Jane's Addiction and Stevie Nicks. He believes album sales will continue to decline.

“The economics of the business are such that the major record labels are not developing artists who would make albums where every song was great and you would want to play and replay it,” said Sloane, 64, who now represents matchbox twenty, Steve Winwood and the new band Pink Spiders.

“The major labels are just going for the hit records, not albums, and taking the easy way out. Acts like U2 and the Rolling Stones were developed over a long time and their first albums weren't necessarily successful. Today, there is no long-term objective. Major labels just want to have quarterly sales success and artist development is getting short shrift.

“The labels have a vested interest in the old system, because they own pressing plants and their whole economic model was based on selling CDs at high prices. So the majors will have to devise an economic business model where they can make money selling downloaded singles.”

This may been prove difficult, however, especially given how much more profitable albums are compared to singles.

In a recent Billboard interview, veteran U2/Peter Gabriel producer Steve Lillywhite (now a senior vice president at Columbia Records) was asked if the music industry is turning into a “song-by-song market.” He replied: “Maybe we are, but that is a penny business and we're in the dollar business.”

Shifting landscape

“I know I need to make albums, and that's all I'm concerned about,” Young said. “The songs are the album, and if you only want to listen to one song, fine. But I try to have an album tell a story, and to put my songs out – more than ever – in the order I wrote them. . . . I wouldn't want to listen to an iPod – it sounds terrible.”

Lewis, however, is a happy iPod owner. She believes new technology can benefit her and other indie artists, who don't have the legendary status and major label support an artist like Young enjoys.

“Times are changing and we're all reacting or adjusting,” she said. “For an independent artist, I think it's positive. Personally, I try to listen to music in many ways. I have an iPod and put it on (random) shuffle. But in the car, I limit myself to one album and I commit myself to it for a week and don't listen to any other music. But I do feel inundated with music now. Whereas, when I was growing up, there were only a handful of records I listened to.”

The quantitative growth of music has been enormous, not only in conventional recorded forms, but in video games and computer programs, in TV shows and commercials, on DVDs, and in an array of mobile devices. Albums, however imperiled they may be, have also exploded – at least in terms of the total number of releases.

In 2003, 38,269 albums were released by major and independent record labels and digitally in various forms. That number jumped to 60,331 last year.

But this dizzying increase did not come close to fueling a commensurate jump in sales. The total number of albums sold in the United States in 2005 was 618.9 million – the lowest annual tally since 1994 – according to data from Nielsen SoundScan and the Recording Industry Association of America.

Consumer demand for individual songs has led the record industry to try some new approaches. Last year, the Warner Music Group created Cordless Recordings.

Rather than release albums, this new “e-label” will issue what it calls online “clusters” of three or more songs every few months, but not in CD or any other physical form. Instead, Cordless releases will be available exclusively to downloading services, users of wireless devices and legal peer-to-peer networks.

The median cost of developing and marketing a Cordless “cluster” artist is $50,000. That's significantly less than the $500,000 typically spent to underwrite an album by a new act on a major label.

“It's hard to sign an artist based on just a riff,” said Bob Merlis, 57. He was the longtime vice president of publicity for Warner Bros. Records until 2001, when he launched his own record label, Memphis International, and independent publicity company.

“You'll sign an artist because they have something to say,” Merlis said. “Even today, I don't think a major label would sign an artist because they have only one good song. But it's fragmenting, and major labels can make money from ringtones or sampling or mash-ups (the combining of songs, or parts of songs, by different artists). It's deconstructing your catalog, which is the opposite of what it used to be. You used to build a body of work by an artist. Now, you sell little pieces of it, not even whole songs in some cases, but ringtones.”

Ringtone sales doubled from $300 million in 2004 to $600 million last year. “My Humps” by the Black Eyed Peas recently became the first ringtone to pass the 2 million sales mark.

“It's like whistling a song – people are just quoting a melody from a record they like,” said electronic music pioneer Thomas Dolby, whose Silicon Valley company Beatnik Inc. was instrumental in creating the ringtone technology now used in more than 500 million cell phones. “But people don't consider it the Black Eyed Peas, unless the ringtone is from the record.”

Dolby, best known for his 1983 synth-pop hit, “She Blinded Me With Science,” launches his latest solo tour Wednesday at House of Blues in Anaheim. He said he is bemused that “many of the same kids who pay several dollars for a ringtone won't pay 99 cents to download the entire song” that ringtone comes from.

The reason, he believes, is that paying for a ringtone “doesn't come from kids' music budget, but from their fashion budget. They pay an extra $10 to get the right logo on their sneakers, when they could get a cheap knockoff, because when you're a kid at the mall, what you're wearing is important. Similarly, when your phone goes off, you can't look like a dork. It's just like whistling the Black Eyed Peas' song – it's not the real thing.”

Making a living

“The majors still have an advantage when it comes to selling large amounts of records, for which you need radio and major retailers like Wal-Mart,” Sloane said.

“But you can make a nice living, selling on a much smaller level, if your costs are down. Digital technology has helped bring down recording expenses, and the Internet has reduced the costs for marketing, especially for artists who operate outside the major label sphere.”

One beneficiary of this shift is Brandon Kessler, 32. A former San Diegan with a liberal arts degree from Columbia University, he is the founder of the New York-based indie label Messenger Records.

“Online distribution has been fantastic for Messenger,” said Kessler, who in the past decade has released albums by such cult artists as Dan Bern, Johnny Society and the recently deceased Chris Whitley.

“While the industry as a whole currently sells about 6 percent of its music through digital downloads, we do about 15 percent and growing. With physical CDs, the stores have to guess how many they will sell when they place an order. With online distribution, we eliminate the guessing and, one day, the manufacturing costs, too. We go straight to the hardcore fans who want more music than one album every one or two years.”

Dolby, who still has emotional scars from his days as a major label artist, is pleased by the possibilities now presented to tech-savvy musicians.

“As a musician, I'm delighted with the way things are going,” he said. “I actually think its a great time for music, because all of these conventions are breaking down. I'm conscious that every song I write now will be around forever (on the Internet) and doesn't have to be part of a co-ordinated marketing campaign – or an album. The Internet is the best of both worlds. I can record and release a song, and – a month later – if I don't like a verse, I can change it.

“I think what you'll start to see is a move away from the record collection toward a 'virtual jukebox.' So no matter where I am, if I'm in the mood for Van Morrison I can dial him up, whether I'm in a Hertz rental car in Atlanta or a San Diego hotel room. Maybe you'll pay for the access to music, like gas or electricity, depending on how much you use.

“It's all about what you want to hear. Whatever it is, you should have access to it, immediately, and this definitely doesn't play to the strengths of the album. But I don't think the habits of music-buyers will die out overnight.”