Record Labels Are Making a Comeback
Remember when common wisdom was that technology had doomed record labels? With all the off-the-shelf tools available to musicians, who needed a record label anymore? Well, not so fast. Guess who’s back? This is from Re/Code:
Being a record label executive isn’t as cool (or fun) as it used to be. Ever since worldwide sales peaked at $38 billion in 1999, the industry for recorded music has contracted to less than half of that ($15 billion in 2014).
It’s not just sales — even profitability has found new lows. According to Ernst & Young (and as published in Billboard magazine), music has the lowest margin (and margin growth) within the broader media and entertainment sector. Today’s profit margin of ~10 percent is a far cry from the reported 20 percent as little as 15 years ago.
Various factors contribute to this collapse. Piracy and the unbundling of albums into individual tracks are just two of them. In general, the industry suffered from inertia to embrace digital when it first came to the scene in the late ’90s; too much money was at stake to experiment with this new format.
Identifying, dissecting and discussing each point of failure is irrelevant; it can’t be undone (but if you wish, I elaborated on some of this in a related article previously published on TechCrunch). As difficult as it is to find anything uplifting about the recorded music industry these days, I have recently turned bullish. And that’s what this article is about — how the music stars are beginning to align.
