Sunday, February 3, 2008

Internet brings change to fans, artists, and industry

Take a good look at the model for the music industry today - a major label discovers a new talent, produces a record for that talent, then sells the album at a major retailer.

In five years, that business model might be a dinosaur.

There are some remarkable changes going on in the music industry, almost all of them driven by the growing power of the Internet.

Nielsen SoundScan's 2007 numbers showed a 16.3 percent drop in country album sales. That just about mirrors an all-genre fall of 15 percent.

Country music isn't 16 percent less popular than it was a year ago. The lost hard-album sales are resulting from a rise in digital sales and sometimes, unfortunately, in digital piracy. In 2007, there was a 45 percent jump in digital track sales and a 53 percent rise in digital album sales for all genres, according to SoundScan. Country fans are slower to embrace the technology - no country artist or group was in the top 10 for single tracks or digital album sales - but the trend is definitely heading toward using a computer to buy music.

This alone wouldn't spell doom for big labels because digital sales eliminate the need for distribution, thereby cutting a major cost for labels. However, the more worrisome trend for the big boys of the industry is the increasing use of the Internet as a marketing tool.

Taylor Swift's surge in popularity has been fueled by her savvy use of, where she can interact with fans and let them listen to some of her music. Just about any new artist's music can be found on a MySpace page.

Internet sites such as and were featured in a recent Reuters story. SellaBand lets "believers" buy "part" of a band for a minimum of $10. Once fan contributions total $50,000, SellaBand chooses a recording studio and producer for the artist. The cutting of the album and distribution is paid for through funds raised on the site. To date, 13 bands have raised enough funds to cut albums. There are 21 country acts in the United States for which fans can raise money on the site. The process is similar on ArtistShare, giving fans the chance to invest in an act they believe in.

Does this mean that Sony BMG is going to be cast aside in the next year or two? No, but the company could be headed for big problems if artists can refine a process where they can record a product, promote it, and distribute it without the financial support of a major corporation. From an artist's perspective, the major problem with a label is that the company finances their career and keeps many newcomers in debt for years.

Tracy Lawrence rattled the industry last year when he started his own label and had one of the biggest singles of the year, "Find Out Who Your Friends Are." He got his own distribution deal and kept a greater percentage of the profits than he would have at a major label.

The time is coming when new artists could be completely financed by their fans, who will share in the profits of an album that will be financed, promoted, and sold online. It's a brave new world for the music industry.

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