Opinion: "We're still a hit driven culture"

Opinion piece posted to paidcontent.org

Definings Hits In Today’s Music World Means Merging Revenue Streams

Posted by Jimmy Guterman - Mon 11 Dec 2006 10:26 AM PST

Listen, kids, put aside your copy of The Long Tail and know this: The music business has always been a hit business, with the majority of buyers, most of them casual fans, interested in hearing just one song by a particular performer.

The genius of the record industry in the 1960s was sensing major performers’ artistic move to the LP and changing their business to reflect that. That one smart response got the industry through the 1970s and the reissue boom of the late 1980s and early 1990s. But that well has run dry. More than a decade ago, the major labels all but stopped promoting singles to retail (or, in many cases, even manufacturing singles), and that led to a world in which millions of fans revolted against $19 list CDs with one good song by downloading them for free as soon as the opportunity arose. Again, most fans weren’t downloading full albums—they were stealing and swapping individual songs.

Early fans of legit online music services like the iTunes store may have hoped that the buy-by-the-song environment would lead to a return to the single to its rightful place as a profitable business. That has happened, but not in the way people may have expected. Jeff Leeds leads the NYT’s latest look with a case study of how major labels are trying to squeeze more cash out of each single. You can hear the R&B singer Akon sing via a variety of online services—and, in the few weeks since his new album came out, he has sold 269,000 ringtones, a market that didn’t exist not so long ago. Leeds’s article notes that the very definition of a hit is changing, with more attention being paid to more revenue streams. The day of the first-week blockbuster are likely over—several months back, a Johnny Cash album debuted at Number One on Billboard despite having moved fewer than 90,000 units—but add the new streams to the old ones and suddenly there’s a real business there again.

Using an unnamed Warner Music artist as the example, Leeds walks through an internal cost analysis of “a successful hip-hop record released in the last 12 months”: “Sales of the CD accounted for roughly 74 percent of domestic revenue the company took in from the project, or roughly $17 million. But sales of an array of digital products added almost $6 million — about two-thirds of that came from ring tones of hit singles. The figure also included roughly $330,000 from mobile phone games related to the performer and $94,000 in sales of cellphone ‘wallpaper,’ or screen backgrounds.”

Some of these new businesses may turn out to be predatory such a record companies getting into talent management, an age-old practice that has left many performers broke. Still, it may provide a way out for an industry that needs it badly. As record-chain owner Joe Nardone puts it, “Everybody’s still hoping for the best, but the best ain’t what it used to be.”