Business models in the Music industry

Accountant turned music manager Brian Message: ‘You’re chief executive of a business with multiple revenue streams’

Something strange has happened to pop music since I began reviewing it in the late 1990s. In the past, how you listened to music played second fiddle to what it sounded like. Only finger-sniffing audiophiles cared whether you listened to Nirvana’s Nevermind in 1991 on vinyl, cassette or CD. To everyone else the point was the album itself.

No longer. Nowadays the format of music, the way it’s sold or listened to, overshadows everything else. MP3 players, internet streaming services, MySpace, mobile phones: music is everywhere. Good news for listeners but perplexing for record companies, who are seeing revenues from recorded music dry up as the old ways of doing business crumble.

Three years ago, Radiohead released their album ‘In Rainbows’ online – telling fans that they should pay whatever they thought the music was worth

It’s symptomatic that the most significant album of the modern age, the 2000s equivalent of Nirvana’s Nevermind, should be Radiohead’s In Rainbows, whose importance lies not so much in the excellence of its songs as in the ground-breaking way it was sold – or not sold. Because there were no hard copies and no cover price: instead In Rainbows was released online as a pay-what-you-want download. In 2007, the year of its release, global revenues in recorded music were $19.4bn. Speaking to Time magazine before the album came out, Radiohead’s frontman Thom Yorke explained that: “Yes, it probably would give us some perverse pleasure to say ‘Fuck you’ to this decaying business model”. By which he meant the music industry, which looked on aghast as one of the world’s biggest rock bands opted out of the record label system. Worse, Radiohead were offering fans the chance to pay whatever they chose to download new music.

Three years on, Radiohead are back in the studio. In the meantime the music industry’s problems have worsened. In 2009, global recorded music revenues dropped to $17bn. The end of May this year was the worst week for album sales in the US since records began, in 1994. In July Thom Yorke warned apocalyptically of its being “simply a matter of time – months rather than years – before the music business establishment completely folds”. His advice to young bands: “Don’t tie yourself to the sinking ship, because believe me, it’s sinking.”