Disintermediation function Re-intermediation
2.4.5 Responses to Digital Distribution
2.4.5.1 Musicians’ Responses to Digital Distribution
The IFPI’s 2014 RIN report stated that performance rights offer producers and artists an opportunity to supplement declining income from sales (IFPI, 2014). In the past decade, the music industry has witnessed two extraordinary events that support the dissemination theory.
In 2006, international rock band Radiohead announced that that they had completed all of their contractual obligations to their record label, EMI. The band added that most of their profit came from merchandise and concert ticket sales; thus, they would release their following album in 2007 independent of any record label (Young and Collins, 2010:345). This was the first time that any band had bypassed a record label in the creative process, and represented the beginning of the end for record labels (Bielas, 2013:4). Radiohead’s release of their next album In Rainbows was a success but even more importantly, it was a huge loss for record labels and their position in the music industry (Bielas, 2013:6). By releasing the album on their own, Radiohead integrated the supply chain activities which were once entirely assumed by record
labels. Radiohead’s experiment proved that artists can succeed with independent distribution and compensation methods (Bernardo and Martins, 2013:9).
In the same year as Radiohead announced their independent production, Nine Inch Nails announced on their band’s website that they were withdrawing their contract with record label, Interscope (NME, 2007:1). “As of right now Nine Inch Nails is totally a free agent, free of recording contract with any label. I have been under recording contracts for 18 years and have watched the business radically mutate from one thing to something inherently very different and it gives me great pleasure to be able to finally have a direct relationship with the audience as I see fit and appropriate” (Renzor cited by NME, 2007:1). The figure below reflects the reintermediation of the artist and the consumer or audience in the music industry. The actions of the two bands reflect disintermediation and independence with bands releasing their albums in an independent capacity and addressing their fan base directly with all the perks of retaining full creative and business control, intellectual rights and the royalties obtained from distribution.
Bernardo and Martins (2013:10) however report that these cases are not representative of all bands as the two bands mentioned already had an extremely large fan base and their announcement can be regarded as a bold move or promotional act. At the same time, the trend of individual musicians developing their own fan base and publishing records without major record contracts using digital distribution tools took off and has been observed in studies of groups of artists (Bernanrdo and Martins, 2013; Hracs, 2012; Young and Collins, 2010).
Figure 2.7: Both the Artist and the Consumer become Distributors
Source: Alves, K. (2004) Digital distribution music services and the demise of the traditional music industry: three case studies on Mp3.com, Napster and Kazaa. [online], available:
http://ro.uow.edu.au/cgi/viewcontent.cgi?article=1008&context=thesesinfo [21 July 2014]: Pp.
129.
Pietila (2009:247) attributes much of the on-going debate on the ‘crisis’ of the music industry that reflects the interests of the major recording labels and revolves around the question of how to secure rewards for music producers from the digital distribution and consumption of music.
O’Neill (2009); and Hracs (2012) observe that with digitalisation, artists who previously belonged to record labels move away from such contracts to become independent music
Artist Consumer
entrepreneurs. Previously, the record labels paid a percentage of royalties from record sales to artists. As music entrepreneurs, artists are now entitled to all profits from album sales (Bernardo and Martin, 2013; Pietila, 2009). In addition, the digitalisation process brought artists and consumers into a direct business to consumer relationship. Building personalised relationships with fans and promotion through social media favours the self-promoting entrepreneur over the introspective artist, thereby potentially weakening music as a stand-alone art product and re- contextualising it as online media, consumed as part of the wider Internet, film or gaming culture (O’Neill, 2009:44).
Concerts and tours have always been the most important facet of artists’ careers. Now that album sales have dropped, there is greater focus on concerts (Suede, 2014:2). Record labels that are still operational in South Africa are acknowledging this factor and implementing the “360 deal” where a record label will sign an artist and instead of making a percentage of album sales;
they now make a percentage everywhere the artist earns, extending from live performances to sponsorships (Bacache, Bourreau and Moreau, 2014; Dahl, 2009; Suede, 2014). The music industry will move away from online piracy towards producing experimental merchandise together with live performances. Thus it is not surprising that during 2011 artists and bands, whom fans thought had retired, resurfaced with new albums and international tours. In effect, the decrease in album sales due to file sharing has resulted in increased demand for live performances (Dahl, 2009; Informa UK, 2010; Mortimer, Nosko and Sorensen, 2012; O’Neill, 2009).
2.4.5.2 Retailers’ Response to Digital Distribution
At the time when CD sales were falling, the growth of vinyl is a beacon of hope in the music industry. Record Store Day was introduced as an annual celebration of independent record stores and has become extremely popular (Armstrong, 2015; Peoples and Crupnick, 2014). In the first half of 2014, 4 million vinyl records were sold compared with 2.9 million during the first half of 2013, an increase of almost 40% (Bernasek, 2014:1). During the same period, album sales in the U.S decreased by 15% to 121 million units due to the decrease in sales of CDs and digital albums.
Although vinyl has grown rapidly, it comprises only 3% of total album sales and is dwarfed by digital downloads; online streaming increased by 40% in early 2014 to 70 billion songs.
According to Bernasek (2014:2), one of the reasons that vinyl has made a comeback is that
“When you buy virtual music you’ve got nothing to hold on to. So for the first time with records, kids are holding something physical in their hands and collecting something they can show off and be proud of.” Alternatively, vinyl enables nostalgic members of the older
generation to relive their youth (Armstrong, 2015:1). Although vinyl is a mainstream product, Peoples and Crupnick (2014:4) note that people that buy it are more likely than the average music consumer to listen to Internet radio, follow musicians on social media and stream music online. Diduck (2015:4) noted that in 2014, vinyl sales amounted to less than 2% of physical format sales.