CSI Music Industry — Part 1: The Crime Scene

First in a series of investigations [more like a cold case, see update below] around the music industry record business death and the music industry crime scene worthy of a CSI drama.

Background: I went to Berklee College of Music as a conducting and arranging major. I switched my major to music business mid-way when I discovered how lawyers and accountants make the major decisions about the music I heard. I wanted to change that from a performer perspective.

I worked three years in the record business and became convinced something was wrong with the record business model (1989-92). When I thought about a career in the record industry and my ability to advance being tied to a degree in law, not business, I became a bit more skeptical.  I did not want that route.

I projected what I might be able to do after 20 years in record industry promotions and felt the skills of record industry promotions do not translate into other industries. I decided to develop a traditional business career and set out to accomplish a series of goals:

1. Learn the technical skills of marketing from other industries;
2. Get an MBA to further build foundational business skills of: accounting, finance, marketing, and management;
3. Seek professional experience in the widest range of industries and business challenges I could expose myself to; and
4. Return to the music business with a business perspective

Music Industry:  Something Foul This Way Comes

Now in my second decade outside the record industry, I look into the world of music and find a business in atrophy that stumbles around like a spoiled child who had his trust fund shut off and looking to pick a fight with anyone perceived a threat to their party.

Frankly, I am happy the record industry is in this current state. We are about to wrest control away from three decades of corporate record thugs. We are now unencumbered to discover more new artists, and discover more ways to connect and share artists and music than ever before.

Today there are more business models for an artist to reach an audience than ever before and the opportunity to make a living as a performer is emerging. The record business is dead, but the record business still tries to lurch forward with their 30-year old business model.

How many articles do we need to read about the record industry chance of survival? Here is the first in a series of reviews of the record business that will look at the industry through strategic frameworks that many businesses and executives rely on to frame market opportunity, identify competition, and manage business risk.

Rigor Mortis Set In Long Ago

Let’s look at this corpse and I hope we can all discover this business was dead in the mid-70s and has been on life support, it never had a healthy outlook, and we have put up with a façade for too long.

New posts will evaluate the record business using industry and business frameworks like: Michael Porter’s Five Forces Analysis, the ever-present SWOT (strengths, weaknesses, opportunities, threats) analysis, and Boston Consulting Group Matrix.

I’m game for other frameworks to enter the discussion and happy to see how others might analyze this crime and against the music fan, the music artist, and the art of music.

So part one, the crime scene: did the record business just happen to be at the wrong place, at the wrong time or did they have this death coming to them? Was this a murder, was this a suicide, was it negligence, or was it old age that led to this death?

Business Strategy According to the Music Industry

Let’s take an initial peek into the record business series of unfortunate assumptions:

• A business model that tried to turn a service into a product
• A product that is a commodity
• A product with a fixed price
• A business competitive advantage that relied on control
• A business that fears technology
• A business where technology destroys supply chain control
• A business where technology destroys marketing channels
• A business where technology destroys marketing vehicles
• A business where marketing does not start with the word “market”, but starts with ‘PAY’ and ends in ‘OLA’
• Marketing campaigns rely on a retainer with organized crime;
• External firms control of distribution channels;
• Market access controlled by external firms;
• Industry executives are predominantly litigators, auditors, and lobbyists (otherwise known as lawyers, accountants, and the Mafia);
• No technology investment;
• No research and development investment
• A core business strategy is to sue new technology manufacturers;
• A core business strategy is to sue technology platforms;
• A core business strategy is to sue your target market;
• A core business strategy is to own back catalog;
• The majority of your revenues come from old inventory;
• A core business strategy is to repackage and resell old product;
• A core business strategy is price inflation; and
• A core business strategy is price fixing

Music Industry Crime

I hope you now have a sense for the dark underworld in which we will need to travel to solve this crime. In the next blog post we will look at some initial “toxicology” reports from the scene of the crime and a background check of financial measures that in most business is the accurate way you to assess health.

Throughout these blogs I will also offer some online and offline resources to help further our investigation.

This blog post I recommend the following three books:

 

Update 2011:  Logic Has Left the Building

The more I delve into research, innovation, social media, organization development, and what makes industries and companies grow and change to meet or chart the next level of excellence, the more I realized the music industry is not interested.

So, on to other insight.