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Google and the Record Business

May 20th 2011 in Music

In a long running thread about “monetizing the new music industry” on LinkedIn the other day, David Robbins Jr. from Extra Musical commented:

I remember when there were live concerts on the radio and I could copy my friends tape until I got my own copy, concert ticket and tshirt. Now it seems the band wants to make millions on everything and end up with nothing. Try letting file sharing go on, manage bands, don’t dictate, and see what happens. No one likes bootlegs, they just don’t want an album with one good song. They want liner notes.

When I read this, it occurred to me that, yes, this was the old paradigm of doing business that the “new” music business was supposedly reacting against. It also bore an amazing resemblance to the way one of the most successful companies of the last two decades does business: Google.

As long gone as the record industry it served.

Through the rock and roll era, the bulk of the record industry’s business was monetized by a few products. For every Michael Jackson, Fleetwood Mac, or Madonna shifting 10,000,000 copies of their work, you had 19 Chuck Brown and the Soul Searchers, Norm Nardini and the Tigers, and Adele Bertei’s getting signed, allowed to work for a couple of albums, but selling “disappointingly.” These artists, however, were able to build up enough of a following to earn a living playing music, even without the major label support.

This didn’t represent an industry just doing things they liked, though there was more of the thinking if I like it, someone else probably will. These artists all had to potential to do very well, but for whatever reason, they didn’t. As long as they had artists making them money, they could take a chance with artists who might or might not. They got it right about 5% of the time. Similarly, Google often throws ideas out there because they’re interesting, because there is the potential for profit there. Then they see if they catch on. The main difference there is that, when something doesn’t catch on, they try to figure out why.

Is Google the future of the music business, or is the music business a cautionary tale for Google?

When Google copies another company’s ideas for the sake of copying (c.f. all of their attempts at social networking), they’re never as successful as when they innovate. This is one of the reasons so many people are interested to see just what it is they’re planning for the music space, and how/whether it’s going to be any different from anything else out there, aside from the fact that it’s done by Google. This is one thing the record business never really got. Certainly, a lot of great bands got released when, for example, Nirvana topped the charts and suddenly everyone had to have a grunge band (or two). A few of them even did well, and many continue to be able to tour and support themselves making music. But a lot of pretty awful music got sucked up in that vortex as well.

They let ideas spread largely by word of mouth. Have you ever seen a paid ad by Google, at least about a new Google product? The early days of an artist’s release might have seen a trade ad, but most didn’t have that kind of a marketing budget. In fact, one of the key reasons (IMHO) for the collapse of the industry is the record companies got lazy – They had depended on radio to be their means of disseminating information, and as playlists got more and more restrictive, fewer and fewer artists got the work out. If a record ships and nobody hears it, does it make a sound? These days, less than 0.2 percent of music accounts for over 50 percent of sales.

So what can the record companies learn from Google? I’m actually not to sure. The fact that Google is getting into the music business at all reminds me of the old riddle – How do you make a small fortune in the music business?
You start with a large fortune. What I’m wondering if Google will learn from the record business’s mistakes.

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