Classical Music after the CD – Redux

I was somewhat surprised by the number of comments and the energy of the dialog that resulted from this post. As my objective was to stimulate an exchange, this response was gratifying.

I thought it would be useful to follow up both to clarify my original post where it was inadequately clear and to respond to some of the comments where a response might be useful.

I thank Alan Bise for his long and thoughtful comments. There are 2 issues that he raises that I would like to clarify.

First is the role of labels. As he describes, the nature of the job performed by record labels is changing dramatically. He observes that “Rather than go out of business, they (the record labels) will simply become service companies and charge artists an amount that covers expenses and provides a small profit.” The majors will find it very difficult to transform themselves to this business model. There is, however, a job to be done here. For artists who have the means it is great to be able to partner with a modern “label” that will market and distribute their music. I think that Alan and I both believe that any time an artist’s music touches the public it promotes that artist and improves their brand. There is an opportunity for boutique and very efficient next generation “labels” to fill this gap. For those who do not have the means, there are mechanisms like Facebook and InstantEncore to self-promote. There are also opportunities to participate in festivals and other events where live music can be recorded and distributed by the organizer. I think that selectively taking advantage of these options is an imperative for a modern artist.

Second is the role of live and studio recordings. I think we probably disagree on this issue but not to the extent that one might conclude by reading the post and response. I was a roadie for the Grateful Dead in the summer of 1967 when they started encouraging fans to bring recorders and tape their live concerts. The recordings that resulted from these efforts over many years became hugely important to the creation of the “deadheads” and to the whole Grateful Dead subculture. They were “traded” (before the internet) by exchanging tapes. They did capture something that could never be present in a studio recording. The Dead were way ahead of their time.

I do not have an esthetic problem with studio recordings. I have been listening to them for 58 years. I have purchased over 30,000 LPs and CDs. Many are superb. I love them. They can be sterile but not all are. I was not sufficiently careful in the way I addressed this issue in my original writings. However studio recordings of orchestras and operas are economic dinosaurs. The cost can never be recovered by the sale of the recorded music. Whether they disappear completely or simply become very rare depends on the willingness of donors to keep coming up with the money. My guess is that they disappear. As Alan points out, many “live” recordings are recorded over several performances and engineered later to create the highest quality final product possible. I would call these “hybrid” recordings. They are less expensive to produce than studio recordings and will become more cost effective as new technology and new contracts (artists and others involved) evolve. It is still unlikely that they will become an important economic contributor as the market for these recordings is small and the costs are still considerable. Small groups and individual artists can elect to record themselves under studio conditions and engineer the music to achieve the desired result. It is unlikely that any “label” will advance the money required to make these recordings (the 20th century model) so the cost will have to be borne by the artists or the donors. Whether enough copies of this recording can be sold to make the recording an important profit center for the artist, worth the effort and the risk capital, is the big question. In the past the Labels created the recordings at their own risk (they put up the money) and marketed and distributed them. This was a business that was worth being in. When the generation of the “risk capital” is moved from the label to the artist there is a reason. So the ultimate question is whether the creation, including the provision of the risk capital, of a studio recording is a viable economic business, “generating an adequate financial return in exchange for work and acceptance of risk” (definition of a business). I maintain that it is not - that it only “works” if it is subsidized, either by the artist or a donor, or if it is included as a promotional cost in creating and improving other forms of income. There is no harm with that. It may be an important part of an overall business campaign by an artist, presenter or ensemble. It is simply not a business in and of itself.

As an aside – I would refer the reader to the presentation by Nielsen SoundScan at the 2008 NARM conference for accurate data on music sales:

http://www.narm.com/2008Conv/StateoftheIndustry.pdf

On slide 33 they show album sales by genre. Classical albums represented 3% of CD sales and 2% of digital sales. I find that hard to reconcile with classical sales being 12% of iTunes sales?

I also appreciate Mr. Tate’s comments. While I am not an artist, I understand the artists desire to “refine and preserve my (the artist’s) creations”. While live performances are imperfect, I struggle to understand where the money will come from to create studio recordings in the future. It certainly won’t come from the labels. While some orchestras are “self-producing” recordings, few, if any, are making money doing so and they rely on fairly large donations to make it work. This model may continue but it is very fragile. The current economy will test it to the limit.

Sarah takes issue with my statement that “Everyone will have a home theater”. I refer you to the following research report:

http://www.csun.edu/science/health/docs/tv&health.html

Note that the percentage of US homes with a TV is 99%. The average number of TVs per home is 2.24. The number of hours watched by Americans in 2007 is 250 billion. Every Sony TV sold by the end of 2009 will have a native internet connection and be able to receive video directly from the internet without a cable, satellite or over-the-air connection. All others will follow. Any video program material available on the internet will be directly accessed by these TVs and millions of others with a very inexpensive accessory box. For Christmas I received a subscription to the Berlin Philharmonic live webcasts:

http://www.guardian.co.uk/music/2008/dec/19/berlin-philharmonic-internet

This is the first of many that will be offered. I will watch it on my TV.

I responded to Alex’s questions as a composer in the comments. I am personally very interested in promoting new composers as I believe that this is one of the keys to renewing the classical genre. Composition has rarely been a standalone business – though Puccini did really well – and probably is not for the classical genre today. However commissions, university positions and patrons are still around and should remain the economic support for new composers.

Joe Shelby gives us a review of the economics of CD distribution. I offer the following from Rolling Stone Magazine:

This breakdown of the cost of a typical major-label release by the independent market-research firm Almighty Institute of Music Retail shows where the money goes for a new album with a list price of $15.99.

$0.17 Musicians' unions
$0.80 Packaging/manufacturing
$0.82 Publishing royalties$0.80 Retail profit
$0.90 Distribution
$1.60 Artists' royalties
$1.70 Label profit
$2.40 Marketing/promotion
$2.91 Label overhead
$3.89 Retail overhead

As you can see the packaging and manufacturing account for only $.80 of the $16. Digital distribution is less expensive but even that doesn’t improve the equations dramatically. You have to impact the last 5 items to make a real difference.

WJ Keizer extols the European model of government sponsorship of the arts. I am personally in favor of government sponsorship of the arts. I believe that it is as fundamental to human existence as roads and the military. Unfortunately neither the US nor the European governments listen to me. In fact, sponsorship by European governments has been declining at a rapid rate. This is a matter of great concern and much needs to be done to continue the economic viability of the arts in Europe. I hope to write about this further in the future.

Anonymous took issue with my statement that "None of the pre-2000 material had digital rights cleared when it was recorded and the cost of clearing these rights now dwarfs any income that could result." In fact my statement was correct. The big labels tried to assert that the existing contracts covered digital distribution and that no additional rights clearances were necessary. This issue was taken to court and the big labels lost. During the early years of the digital revolution, when everyone was naïve, a lot of money was spent clearing rights for digital distribution of long tail classical music. DGG was one of the most aggressive. At some point the accountants got involved and stopped the effort. There is a body of pre-2000 recordings that are cleared because of this early effort but there is no ongoing effort to add to that body of recordings. Anything not cleared now is likely to never be cleared until the copyright expires. Everything from 1958 became public domain a few days ago.

Richard B is, thankfully and like me, happy to pay for recordings of classical music whether CDs or downloads. I think it is probably true that the classical music audience is more likely to “behave well” and to pay for music even when they can get it for free. Unfortunately we are caught in a tidal wave of contrary behavior. Digital Music Review just issued their report on 2008. CD sales declined another 20% and digital downloads were FLAT for the first time ever. Total revenue for recording sales dropped 16%. While I do not forecast the end of recording sales, the issue of building a business to serve the declining number of buyers is very daunting. Probably the leading expert in the world on this matter is Lawrence Lessig of Stanford (now Harvard) Law school. I would strongly recommend reading his new book “Remix” or listening to his excellent interview on NPR:

http://www.npr.org/templates/story/story.php?storyId=98591002

He proposes a new model for the distribution of media. While I am not sure I agree with him, his analysis is very valuable.

A.W. Carus makes a couple of very interesting points. I agree with him that the old recordings will not disappear. They are in the digital cloud and they are valued by many, including me. The problem is that they will not represent a business. They will essentially be available for free. If we want a vital and lively art form we have to continue to reinterpret and reinvent our music and art. With the cost of capturing and distributing live performances falling rapidly, I predict that the audience will be more interested in seeing or hearing something fresh and innovative than something 50 years old. I don’t think it is an all-or-nothing proposition but I hope, for the futures sake, that our appreciation of contemporary performances and music continues to grow. He also observed that classical music needn’t be for profit to be viable. In fact classical music has basically never been for profit. Creating and selling recordings has been for profit. In this blog I am attempting to address the business or economic issues of classical music.

One theme which reoccurred throughout the comments was the issue of my conflict-of-interest as a CEO of InstantEncore.com. I have been involved in a number of successful businesses in my life and I have promoted them all. Most of these businesses have been successful because they met a need in their market and did it better that the competition. InstantEncore is an attempt to build a small, commercially viable business to support and facilitate the evolution of classical music into and through the 21st century. I believe that classical music artists and presenters need the help and that InstantEncore offers much to them that is valuable.

I believe the whole music ecology changes in the future. People may "save" performances that are in some way memorable, either because of the quality of the performance, an emotional connection with the artist or music or an emotional connection with the event. However most performances on the net will be "disposable" (not meant in the pejorative) much like a live concert. They will be enjoyed, perhaps shared and then discarded. This is inevitable as the range of choices becomes so very wide. In the old model you had the perfectly transitory (the performance) and the perfectly permanent (the CD). There was nothing in between. With the rise of the internet, simulcasts of live events, time shifted performances, space shifted performances, streaming available for limited time or forever, downloads available for limited time - or forever - you have a continuum of "durability" of music. The "owners" of the music can determine where to place the music on this continuum from absent to fleeting to permanent. If they don't want it there they won't put it there. As for the audience - rather than having a shelf of CDs and an occasional ticket to a local live event - they will be presented with a vast panoply of options. They can attend live events in their local; they can participate in the excitement of live events far away through the cost effective space shifting capability of the internet; they can participate at more convenient times through the time shifting capability of the internet; they can follow their favorite artist, group, work, symphony or opera even when that performance is far away or at a time they cannot manage; they can invite their friends to experience performances that they particularly enjoyed, even if that performance is past; they can preserve, if enabled by the performer, those performances that created a particular emotional response and that they want to re-experience later. This is a much richer experience than a shelf of CDs and an occasional ticket. What is needed to make this work is a system where the performer can decide where to place each work on the continuum of availability; where the performer can reach the prospective audience easily; where the audience can navigate through the vast ocean of choices easily and find what they most want and where the audience can easily promote the things they love to others. That is InstantEncore.

No one objected to the recording industry when it was thriving and it provided an important component of the music ecology. It is important that classical music is supported by a few commercially viable businesses which symbiotically exist with it. We are attempting to create one. If I were interested in making the maximum money from my time I certainly wouldn’t be spending it in classical music. I make no apologies for my promoting the concepts behind InstantEncore.com. I promote them because I believe in them. It is my fervent hope that, in addition to making the business successful, InstantEncore will make a real contribution to the art.