Business Structure of Music Industry

Lillian Lu

Business Structure of the Music Industry, Section 2

Professor Larry Miller        

Assignment #1

Fortune’s Fool

        With time comes innovation, and with innovation comes change. This can be said about many industries, in particular the music industry. Over the last century, this field has seen non-stop change, from records supplanting sheet music to the rise of the major labels to the sweeping sales of CDs. The industry continues to undergo drastic changes with the advent of widespread digital distribution of music. This can pose several problems however, which Fred Goodman addresses in the epilogue of Fortune’s Fool: Edgar Bronfman, Jr., Warner Music, and an Industry in Crisis. He argues that Internet users and content consumers who refuse to pay for music are creating more of an unfair economy for artists than the record industry of the past did. Goodman urges Internet users to stop downloading music for free, an activity he considers comparable to theft. While Goodman makes a valid point that in forgoing payment, the artists who create the music we consume are hurt; it is unfair to say that that creates a more unfair economy for artists than the old record industry model.  

        In Fortune’s Fool, Fred Goodman creates a portrait of Edgar Bronfman Jr., the chief executive of Warner Music Group. He begins by providing a summary of how the Bronfman family came to prominence- they built their fortune during the Prohibition of the 1920’s in Canada and the United States, and Mr. Sam, Edgar Jr.’s grandfather, made a fortune in the liquor industry through his company, Seagram’s. Initially, Edgar Jr. was not interested in taking over the company after his father, instead immersing himself in the entertainment industry as a producer and composer. While CEO of Seagram’s, Bronfman, Jr. partook in a series of transactions with French mass media company Vivendi that ended up costing his family fortune $3 billion- an event that turned Bronfman into a laughingstock in the media and on Wall St. In order to try to rehabilitate his image, he purchased Warner Music in 2004. This was a risky move considering the fact that the music industry was shifting from a physical to digital model, and online piracy and file sharing were starting to shape the industry. However, Bronfman is portrayed as a pragmatic business leader willing and eager to deal with the challenges that technology would bring. He approached Lyor Cohen, a well-known figure in music production, to help run Warner Music with him, despite criticism. However, despite this time of rapid change and instability, brought upon by the Internet’s popularity and with it, peer-to-peer download platforms like Napster, Bronfman was able to enjoy a moderate level of success with the company. While Warner had to fight hackers and new technology, they were the first major label to invest in other markets such as ringtones, videos, and T-shirts intended for users.

        It is no secret that physical album sales and music sales in general have dropped rapidly. Today’s technology makes it immensely easy to share files amongst our peers without having to pay a penny. In the epilogue, Goodman argues that Internet users who refuse to pay for music are creating a more unfair economy for artists than the old record industry model is. In this case, the “old” industry record model refers to lucrative contracts that would provide labels with a large chunk of an artist’s profits, as well as 360 deals that would effectively do the same. While it is generally agreed that not paying for an artist’s work is detrimental to the artist, it is not necessarily fair to claim that the old record industry model was more beneficial. In this day and age, it is crucial to acknowledge the reality that many people will not directly pay for music. Even more imperative is that record labels learn how to adapt to this new change. There are other ways for people to listen to music for free while still generating some sort of profit for the artists. Online streaming sites such as Spotify and Pandora have becoming increasingly popular within the past few years. These services, Spotify in particular, have been controversial because many claim that it generates a negligible amount of revenue for the artists despite having thousands of streams. A recent manifestation of this controversy was Taylor Swift pulling her entire catalog from Spotify, after which she claimed that she didn’t want to perpetuate the “perception that music has no value and should be free.” However, while Spotify’s model could be improved upon in order to create more value for artists, this option is better than an album being illegally pirated for free. Additionally, Spotify users could choose to purchase a premium subscription, which would generate additional revenue. There are also websites like Bandcamp, which allow artists to forgo the record label altogether and release their music on their own at their own price, which is what Radiohead did with their seventh studio album, In Rainbows. Often, through this service, artists release their music for free but then offer special packages at a higher price, which is what Trent Reznor did to great success. Granted, Radiohead and Trent Reznor were already established musicians, which was very likely a major factor in their success, but their success could be an indication for the future of “non-traditional” methods of releasing music. While not paying for music is usually harmful for artists, it is very possible that the major contracts of the old record industry model could be even more detrimental to the artists, who are giving up a large chunk of their profits to these large corporations.