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On Jan. 1, 2009, the New York Times reported what industry watchers have come to expect: another year, another set of inauspicious numbers. Album sales in the United States were down 14 percent in 2008 and 45 percent since the industry peak in 2000. The same week the article was published, Rolling Stone contributor Steve Knopper was promoting a new book called Appetite for Self-Destruction: The Spectacular Crash of the Record Industry in the Digital Age. The exposé, which shines a light on the passing of what Knopper has called the “hookers and blow” era, concludes that, by early 2008, “the death of the old music business model was almost impossible to miss.”
The glory days are almost certainly over. But is the doomsaying premature?
1) The industry is declining; therefore it must be dead.
Though the past decade has offered no hint that the record business can, or will, ever revisit its boom-time high—achieved, in part, by the conversion from vinyl to CD—the industry is still responsible for some rather large figures. In 2008, a year in which digital album sales were up 32 percent, consumers bought more than 400 million albums, a tally that does not include digital singles or ringtones. That’s lower than in 2000, to be sure, but those CD sales still brought in about $6.5 billion.
2) The industry’s woes are divorced from larger economic forces.
Given that album sales have been in decline since 2000, the record industry is probably not a leading indicator for troubled times. But it seems naive to think that, in a decade in which this country suffered two recessions, the state of the economy has had no effect. According to data published by the Recording Industry Association of America (RIAA), there was only one year-to-year drop in record sales during the ’90s (from 1990 to 1991)—and that decline coincided with the only recession of the decade. Competition may be another factor. From 2000 to 2004, the videogame industry grew to the tune of $3 billion. And Hollywood has expanded by almost $2 billion since 2000. Box-office revenue set yet another record in 2007, a year in which record industry sales dropped by over $1 billion. A consumer’s entertainment budget can be stretched only so far. And yet Americans are still shelling out for music: In 2008, the overall recorded sound industry was worth $8.5 billion.
3) Digital music sales are rapidly overtaking CD sales.
It’s easy to understand where this impression comes from. White iPod earbuds are everywhere. Apple’s digital music store, iTunes, sold 2.4 billion songs in 2008. And, according to RIAA, digital downloads, as a percentage of overall industry sales, have grown every year since the middle of the decade. But a little context is important. According to a mid-August press release by market researchers NPD Group, CDs still make up 65 percent of all music sold—and that’s almost a decade after RIAA started tracking digital music sales. If you consider how rapidly CDs took over as the dominant format (it took about eight years), the rise of the digital download is much less impressive.
4) The Internet has rendered record labels irrelevant.
When Radiohead offered its 2007 album In Rainbows as a pay-what-you-like download, there was a lot of talk about new business models and changing paradigms. But, as former Washington City Paper arts editor Mark Athitakis pointed out in the Washington Post, Radiohead “had the cachet to charge nothing for its music and to rest assured that enough paying fans would keep the band solvent.” (Keep in mind: This is a record that, in 2008 alone, sold over 25,000 copies on vinyl.) For artists who depend on radio, or those who lack Radiohead’s market share, it can simply be more efficient to find a label that will, in effect, vouch for them. Which is why even an obscure—albeit highly specialized—label such as the Norwegian indie Rune Grammofon recently came up with a more restrictive demo policy. According to a recent post on its Web site, the label has been “receiving more [unsolicited] demo CDs than we can possibly listen to.”
5) If the industry isn’t dead yet, it must be in its death throes.
The record business is hardly the first to fall from prominence. Think of the railroad industry after the rise of the automobile, or the film industry after the advent of TV. Neither has disappeared. And given that startup costs are low and piracy is reportedly on the decline, there’s little reason to think that record labels will vanish either. In fact, some independents have prospered in inverse proportion to the health of the industry.
One such label is Hydra Head, a heavy rock indie that, in the past year, has released excellent records by the likes of Greymachine, Khanate, Keelhaul, Pyramids with Nadja, and Xasthur. Run by Mark Thompson, who prefers the title “Team Leader,” the label has responded to the changing economic climate by becoming more conservative in how it handles its budget. “I’ve tried to become a better businessman, to pay attention to what we spend,” Thompson said by phone from Hydra Head’s offices in Los Angeles (it was once based in a bedroom in Roxbury, Mass.).
Asked if the label would still ever go all-download, Thompson, who is also a partner in the vinyl-centric Los Angeles record store Vacation, was quick to respond. “Yes, absolutely,” he said. “But that’s not why I do what I do; that’s not why Hydra Head exists.” Demand, according to the longhaired entrepreneur, is beside the point. “Our perspective is you do what you do, you do it well, and the audience will come to you.”
This stance might not make much sense to the “hookers and blow” crowd. But for those looking for a way forward in troubled times, you could do a lot worse than to follow Thompson’s lead.