The Fitting Downfall of the Major U.S. Music Labels

By Alex Weber, DERF Music Columnist/Blogger

Well, folks, I'm sad to say it, but I'm pretty sure another major American institution might get the axe soon. And I doubt they'll be able to talk their way into a government bailout, ‘cause they screwed up pretty bad. I'm talking about the ever-floundering major record labels--the big-money end of the music business. A combination of complicated factors has worked to contribute to their downfall, but there are a couple of pretty clear moments of truth where the majors simply blew it big-time. First, they followed the trend of consolidation at all costs, allowing themselves to be gobbled up by larger corporations that had little to no stake or interest in the dissemination of good music. Second, and more importantly, they completely failed to figure out an intelligent way to deal with the harsh realities of the so-called digital revolution.

During the CD boom that took place throughout the 1990s, the music industry became a lucrative investment center with an attractive profit margin, and major labels sold themselves off one by one, going from distinct entities with public faces (remember Ahmet Ertegun? David Geffen?) to huge, international, conglomerated "holding companies." Suddenly, near the end of the decade, free file-sharing service Napster hit the scene. People quickly figured out that so long as they had a decent internet connection, they could download CD-quality mp3 tracks for nothing. Music industry lawyers issued the requisite round of cease-and-desists to the file-sharing entity, Napster went to court and was shut down, and LimeWire, Kazaa, Audiogalaxy, iMesh, and countless others popped up in its place. It was too late; the technology had been created and disseminated and the trend had been set. Music fans far preferred the idea of getting for free music of the same sound quality rather than buying what was contained on a piece of aluminum and housed in a shoddy, breakable plastic case for an absurdly marked-up $16.99 (or more) at mall stores--legality be damned. And who wouldn't? Not only was it logical, but it was also a great way to stick it to the man!

Naturally, plenty of people didn't download. And plenty of people still bought CDs. Just not enough--not as many as before. It didn't help that by this time (the early 2000s) the following trends were also taking place: many of those aforementioned mall music stores were beginning to shut their doors, shops like Wal-Mart were succeeding in CD sales by charging their customers less and demanding a lower price from the supply-side, corporate consolidation in other media sectors such as radio was causing a considerable decline in quality programming, and MTV was fast turning into Show TV. So how do you remedy this perfect storm of challenges if you're a multimillion-dollar music mogul? Well, rather than bite the bullet and hire programmers and researchers to figure out a way to develop an efficient, more reliable way to get your label's catalog online and digitally distributed for a small fee to customers, you get litigious on everyone's sorry asses. And how best to do that? Call in the greedy, mean-hearted attack dogs at the RIAA (Recording Industry of America, the trade group representing the major labels) and start suing individual file-sharing music fans, of course! I'm sure you all remember the lawsuits. RIAA attorneys would track down a random "violator of copyright law" via his or her IP address, present him or her with a ludicrous number in supposed monetary damages for said copyright violations, and then proceed to mercifully demand a $3000 "settlement" (read: "embezzlement"). This was, predictably enough, a PR disaster. And people still downloaded! Fail, major record labels, FAIL!

Having shown itself to be a myopic, boneheaded bully wholly unable and unwilling to change with the times, the music industry then got to watch a revolution bury it. Independent of any input from major record labels, a computer company called Apple developed the massively popular iPod and iTunes (the labels/artists get 65 to 70 cents out of every 99 it costs per download), MySpace Music made simple, D.I.Y. band promotion and marketing possible, YouTube gave anyone with a guitar a potentially international venue (not to mention the scot-free ability of anyone to post any musician's performance online), and many well-established indie labels began to make considerable inroads in the mainstream music game. And that brings us up to date. Of course, in America we're all suckers for star power, and we love a fresh-faced musical act. I'm tempted to say that major labels will always provide us with those entertainers and all their glossy accoutrements, but at this point those people could be managed and marketed by any number of other industries, including their own self-established ones. It's been a long and painful downhill trip for the music biz here in the good old U.S. of A., and it's anyone's guess as to when they're finally gonna hit the floor for good.