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Chicken Little would have plenty to scream about if she were watching the recent trajectory of the music business. CD sales have dropped off precipitously as the ease of downloading or copying music for free has skyrocketed. Meanwhile, monolithic major labels are running around, trying to squeeze every last penny out of a dying business model.
And yet something in this supposed doomsday scenario doesn't quite wash. The International Federation of the Phonographic Industry claims worldwide sales of recorded music still topped $18 billion in 2008. The Recording Industry Association of America puts sales of recorded music at more than $10 billion in the U.S. alone for 2008, and says sales of digital downloads increased 30 percent from 2007 to 2008. Those figures don't even include concert ticket revenue (estimated at around $10 billion for last year), sales of band merchandise, income from TV and film licensing, and ringtones. The music industry, in other words, isn't so much in decline as in transition.
"This is still a $50 to $60 billion a year industry," says James Lamberti, vice president for marketing at Topspin, one of several new companies trying to capitalize on the marketplace's new direction. "The change taking place is that artists now have control over what they can do."
This shift has its roots in the Internet and in the rapidly developing tools for artists to bypass middlemen and get music directly to fans. Since this new paradigm is digitally based, it's fitting that several leading lights in the artist-centric revolution are based in the Bay Area.
Topspin, headquartered in San Francisco and Los Angeles with offices in Nashville and New York, traffics in software that enables "direct to fan" marketing. Cofounded by former Yahoo Music general manager Ian Rogers, Topspin's technology manages e-mail lists, digital distribution, and special features such as unique goodies for superfans willing to pay more. Lamberti passionately hypes his product, comparing it with music recording software ProTools in one breath and business productivity apps Salesforce and QuickBooks the next. He claims the Beastie Boys, Eminem, and jazz icon Dave Holland are users of what he calls the "alpha version" (a full launch is planned for January). Even wading through the namedropping, though, it's clear that the young company is tapping into a genuine opportunity for artists to manage relationships with consumers. "I think you're seeing a fundamental shift in the economics of the industry that's making direct to fan [marketing] a really attractive growth channel for artists," he says.
Flexibility in the musician-customer relationship is also the goal of Bandcamp, another music technology start-up that essentially lets artists offer music for download in a variety of formats, setting their own pricing levels (or giving away their product), with an appealingly minimalist design and intuitive structure. The company, which launched in September 2008, couldn't be more "start-up" if it tried. Its creators have no office, instead spending their days using free Internet in the UCSF library and managing their site by typing to each other through IRC chat boxes on their laptops. "When we hire a couple more people, we're gonna have to get an office," cofounder Ethan Diamond muses.
Diamond is no stranger to the Bay Area start-up world, having founded the Web-based e-mail service Oddpost in 2000 with Bandcamp cofounder Shawn Grunberger. Oddpost was sold to Yahoo in 2004. The pair's latest tech start-up has personal origins. When a favorite band of Diamond's (he won't name names, since he's trying to lure it to Bandcamp) decided to self-release an album a few years ago, he was ecstatic. But his delight turned to frustration when his repeated attempts to buy it ran into technical difficulties. The singer eventually e-mailed him a .zip file. "It was so frustrating, because the album was great, and I'm sure most people never heard it because it was so hard to get a hold of," Diamond says. "So it just seemed like an obvious thing for someone to improve on."
Bandcamp retains the feel of a company created to make it easy to support your favorite artists. "All the things we've added to the site are things we've wanted to see ourselves as fans," Diamond says. The site has a variety of high-quality audio formats like FLAC and AIFF in addition to MP3s. It also has sections for lyrics and additional information, and lets artists give their music away if they choose.
The free option isn't without controversy. Most of the new download and distribution sites offer full streaming, meaning the music is there for anyone with an Internet connection. And the availability of free music is, after all, what has driven the major labels into such a pickle — if you listen to their explanation, anyway.
But in the new landscape, giving music away or streaming it without charge may not be the income-killer it used to be. Topspin's Lamberti believes bands can monetize their relationship with listeners in many different ways. "It's part of a shift in the way the industry works," he says, "where now, if your music is good and you take some of it and give it away, that becomes your best promotional vehicle."
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