The business of music

Tuesday night I did what I do at least once a week and headed to a local bar to check out a band.

We caught a set from the talented group Onward, Soldiers (check them out). While enjoying the show, I wondered, what keeps them on the road playing small bars and side stages at festivals to tiny crowds for meager money and a few record sales? My friend and I agreed they’re just one night opening for the right band away from being discovered. We then got into a conversation about the music business and how tough it is to make it big and stay true to your art.

And it seems like it’s only going to get tougher. The Wall Street Journal reported Wednesday that European regulators are planning to approve the much-disputed EMI/Universal merger later in the week. From the story:

 After months of fraught negotiations, European Union regulators are set to approve on Friday Universal Music Group’s $1.9 billion acquisition of the recorded music division of British music company EMI Group Ltd., but will require Universal to sell off many of EMI’s most treasured record labels and the accompanying global rights, people familiar with the situation said Wednesday.

 The approval will bring Vivendi SA’s Universal one step closer to sealing a deal that will reinforce its position as the world’s largest music business, but at a cost that threatens to undermine the economic rationale for the deal.

As part of its concessions, Universal must agree to sell 60% of EMI’s businesses in Europe, measured by revenue, those people and others familiar with the situation said.

 This deal has spanned the globe in its coverage and reach. The Australians, Japanese and Canadians have already approved the merger, so the Europeans joining checks off another hoop to jump through to completion. What was most interesting about the Google search for coverage was the divergence in opinions on whether the consolidation was good or bad for music.

As Patrick Zelnik wrote in July in the Financial Times:

 These digital giants need to redouble their efforts to create affordable offerings that fairly remunerate artists, record companies and other rights holders, while respecting artistic integrity. Music entrepreneurs, small or big, need to recoup their investments and make profits, or cultural diversity will become cultural uniformity. Music, film and television are to internet players what the piano stool is to the piano: inseparable. And the music industry must act to bring back a generation that stopped paying for content because legal ways to do so were seen as expensive or boring.

This can be done if the Universal/EMI deal serves as a model, giving entrepreneurial platforms access to label repertoires on a non-discriminatory, transparent basis – in return for a commitment to direct traffic towards legal and affordable services. None of this should deprive Universal of power in the digital marketplace. A combined Universal/EMI can play a huge role.

Moreover, we can use Universal’s acquisition as a model to create online competition that reflects music retailing when it was healthy – when specialists, independents and mass merchants had easy, non-discriminatory access to all repertoire. Emulating this online could give a huge boost to digital sales, streaming options and choice.

But will combining two old school music moguls really fix the industry? National Public Radio’s Emily White wrote a blog post in June about her 11,000 song – yet less than 20 CD – music collection. From her post:

I wish I could say I miss album packaging and liner notes and rue the decline in album sales the digital world has caused. But the truth is, I’ve never supported physical music as a consumer. As monumental a role as musicians and albums have played in my life, I’ve never invested money in them aside from concert tickets and T-shirts.

As a vinyl lover/collector, I can only cringe and flip my copy of Led Zeppelin III to the B side to hear “Tangerine,” taking a moment to turn the fun cut-out wheel on the album cover. But despite my personal disdain for her view, White has a point and one that most of the coverage I’ve read has missed.

The music industry is still struggling to figure out how to make money off digital, whose sales have now surpassed physical CDs (and vinyl). No one is writing about the innovation that Universal will bring to the EMI catalog (or vice versa). This is industry consolidation, and one that isn’t likely to create any financial gains after the divestitures, according to the WSJ.

Despite the price tag and the combination of the household names it brings, is this deal going to fundamentally change the way we buy, listen to and experience music? The answer is sadly, no. Until they figure out how to promote up-and-coming, local talent (like Onward, Soliders) in a way that benefits both the label and the artist, this is just another business deal – not the innovation they’re touting to investors.