Article of the week: Music in the Digital Age - What is its value? (Anth Gaskill (Forbidden Fruit Records)

This article is taken from Issue 11 of the AIM Journal, first published in January 2012. This, and other issues are available here to download for free. 

Music stars are still revered, shape our fashions, inform opinions, and sell out concerts; yet the song is not the same, digital media has changed ints value. 

Many dance music producers, and the industry in general, are struggling to make ends meet. At the LostinMusik.net blog we undertook an in-depth research project of the dance music industry to try to answer what we thought were some key questions, namely;

•  Why does a download cost nearly as much as physical product?
•  Are labels and producers really making less money?
•  What other ways are there of making money from music
•  What is the value of music? 

To help answer these questions we interviewed a number of leading figures within the dance music industry –Beatport CEO Matthew Adell, Mark and Stuart Knight of Toolroom Records, The guys at Data Transmission regarding their Piracy 2010 Survey and Darius Syrossian of Viva Music/Breakout Audio. In addition we consulted the many artists we interviewed for our ‘Complete Music Producer’ book including Uner and Paul Woolford. All of whom, we would like to give thanks for taking the time to share their valuable insights.

This article summarises our findings; you can read the full articles online at www.lostinmusik.net/?p=1886 and www.lostinmusik.net/?p=1893; we would love to hear your views. We are going to be moving this debate forward with the ezine Data Transmission over the coming months. You can contact us as dancing@lostinmusik.net. 

Why does a digital download cost nearly as much as physical product?

Our findings indicate that the proportion of release sale revenue shared by the various parties is comparable with vinyl releases. This is with the exception of the artist/producer’s cut of profits which is typically a 50/50 split with the label. 

Typically, the internet has brought prices down through competition, yet with music, the power has largely become concentrated in several digital stores. This lack of competition, the high start-up costs of a digital store, pricing structures, along with the large store promotional costs, means that there has been little change in the percentage of sales revenue taken by DJ orientated stores. This means that unless music is purchased from sites such as Bandcamp or Amazon the customer is seeing little reduction in the price of DJ music. There is potentially an increase compared with CD singles.

Are labels and producers really making less money?

There are many indicators that music sales revenue is significantly down for most labels and artists. What is not clear is whether this is as a result of piracy, as touted in the press, or something else. 

It is clear from the ever swelling list of record labels that there are considerably more dance music releases than ever before. In 2011 there were on average between 7,000 and 15,000 new releases a week on Beatport alone. In the late 90s there were approximately 10 main record distributors and each would release 10 –15 new titles a week; that’s between 100 –150 releases! Therefore, buyers’ money is now split between a great deal more music. Established labels will continue to fair well, but competition from new labels could significantly impact profit margins.

Changes to the official sales charts, means that it is difficult to directly compare how much money was spent during the vinyl period to what is now spent on digital downloads. We know that the cost to the label for each release is comparable in the digital age –a three-track release on WAV will often set you back a similar price as a vinyl release. However, customers commonly buy only the tracks they like as opposed to the whole EP. As a result the relative income is generally three times lower for the equivalent physical product. A single release MP3 is as low as a fifth of the sale revenue. This is a key reason as to why single track releases are becoming more popular. It is also the reason that many labels’ release schedules are getting busier in an attempt to make up for the lower income per release. However, this compensating increase in the volume of releases reduces the shelf life of individual tracks further and is consequently likely to reduce the revenue each release generates.

The key interest of clubbers is a seamless blend of music to make them feel uplifted and remember the weekend good times. The endless availability of free podcasts from DJs and labels effectively means that the average clubber does not have to look far to find a cool collection of tracks to listen to; and for free. Brands such as Toolroom Records, Fabric and others all spoke about working to create a Mix-CD product that people want to own. Yet the sustainability of this notion appears extremely difficult in a sea of on-demand, free music. To compound the problem, most podcasts do not provide licence payments or tracklists to PRS or similar bodies. Therefore, the artists do not earn any royalties for the use of their tracks. Mixcloud is one of the few streaming sites that we are aware of that provide track listing to PRS and pay a fee. We did not find a noticeable correlation between the exposure of an artist’s tracks on leading DJ’s podcasts and direct sales. While it is difficult to assess what gigs are booked as a result, it would appear that an artist whose tracks are used in podcasts would need to be regularly featured or a high-profile guest to gain any tangible benefit.

Turning to piracy, while the number of illegal downloads cannot be disputed, it is difficult to assess how many would have been sales. As Pareto’s 80/20 principle holds true for many business areas, it is realistic to estimate that around two in ten would convert to sales at best. We looked at the games industry and found similar piracy battles. As with music, spurious figures of actual downloads were quoted. 

The survey conducted by Data Transmission of the dance music industry at Pete Tong’s IMS 2011 Conference revealed a number of interesting views. Not least that 60% of those surveyed give blogs the permission to share their music. 70% said that Fatdrop and similar services were too expensive. This raises serious questions of how the industry values its own product.

These and a number of other areas are analysed in detail in ‘Part 1’ of the article on the blog. Considering the issues researched, it would appear that two areas are possibly having a significant impact on sales revenue aside from piracy. Firstly the ability of customers to buy individual tracks and secondly the wiliness of those in the industry to give their product away via podcasts/DJ mixes.

What is the value of music?

We concluded that not all artists’ actions are the same and that many are devaluing their products by ignoring what is otherwise social etiquette. Alongside this, it seems we are heading towards a situation where music on its own is not enough. The digital world has created unparalleled options for immersion, and to many playing a song is not sufficiently exciting in itself to make the listener want to buy. 

How then can artists demonstrate value in the eyes of the consumer? The way we interact has become like a local community, but scattered geographically. Each community has its own customs and values which it supports and responds positively to. The artist of the future must now clearly understand their image and their community in order to understand where to position themselves. They must provide value to their ‘tribe’. This demand is an artists’ value with which people will aspire to be associated. In a crude sense, people look to artists for inspiration and leadership, hope from the mundaneness of ordinary life. Perhaps ultimately the artists’ value, and that of music, is as high as they chose to set it and act. As an industry, we must be careful not to set it too low or too high. 

Going forward

It would appear that many struggle to conceptualise the value of digital media. In the past, we had products that had to be manufactured and purchased to be heard and used. The consumer now has almost infinite options of free music with no tangible product. How artists, labels and businesses choose to value their music and engage with listeners is fundamental to how its use will be rewarded. 

I would like to take this debate further and engage with the wider dance music community to investigate and develop a toolkit of methods to raise dance music’s value and sales. I will be working with Data Transmission to expand and develop their piracy survey this year. Your input and ideas would be very much welcomed.

Anth Gaskill

Forbidden Fruit Records (Founder)

Lost in Musik Blog

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