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Hey Mr DJ, play that ... err... Could our changing music habits affect our ability to access it?

“WHENEVER I talk to a band who are about to sign with a major label, I always end up thinking of them in a particular context. I imagine a trench, about four feet wide and five feet deep, maybe 60 yards long, filled with runny, decaying shit. I imagine these people, some of them good friends, some of them barely acquaintances, at one end of this trench. I also imagine a faceless industry lackey at the other end holding a fountain pen and a contract waiting to be signed. Nobody can see what’s printed on the contract. It’s too far away, and besides, the shit stench is making everybody’s eyes water. The lackey shouts to everybody that the first one to swim the trench gets to sign the contract.”

That’s Steve Albini’s view in The Problem with Music, and perhaps with some justification. Since 2000, an earthquake has been systematically destroying the music industry, with attendant multiple Armageddon scenarios and obituaries already written or played out over the ability to sustain CD revenues to the mass market. The decline of physical music sales can be attributed to many factors, but the rise of illegal downloading, competition from computer games, the continual splintering of music into ever-smaller niches and the decline of high street music retailers are four of the most prominent.

One other is less reported: the saturation of product. While music making and distribution has come down in price, it has created a lower barrier to entry, making it far harder to find success in the marketplace. There are still profits to be made by selling CDs, but the market is nowhere near as lucrative as it once was.

It is important to clearly define the difference between major labels, independent labels and DIY labels, particularly when discussing how record labels are adapting to this new climate. Major labels are multinational companies with shareholders to please, there to make a profit, and their adaptation to the new environment is guided – but not necessarily gilded – by the reality of business needs and goals. Independents are smaller operations, which also seek to make a profit, but are usually considered to have a closer connection to the music as well as to the business. DIY Labels should not be viewed as businesses. They are often labours of love that can and do sell records and turn a profit, but without a close consideration of the bottom line.

Illegal piracy is a huge challenge, and is swiftly becoming a political controversy. Yet while the Pirate Bay movement see this as a political, anti-establishment issue, many consumers simply want something for free that they would normally otherwise have to pay for. Competing against a consumer base now formed on the habit of free product is a challenge any industry would struggle to answer, and is made worse by the ability of content creators to go straight to the customer, bypassing the label, via the new digital marketplace.

The majors labels have driven the government’s newly announced plans to tackle copyright theft, believing that their releases are undermined by album leaks prior to official release, and that unauthorised downloading hammers prospective revenues. The idea that every download as other than a lost sale is inconceivable to these rights-holders. The notion that the pay market might be opened up by the availability of free content is lost on them.

It is not lost on those further down the food chain. In a scan for reviews of unsigned Welsh bands it quickly becomes apparent that their music is available for free online, and without permission. For DIY labels this is a good thing; exposure is a lifeblood of any band seeking to find a bigger audience. Increasingly, it gives the lie to the suggestion that it is merely Beyonce’s album that is downloaded illegally.

Perhaps the doom mongers within the music industry would be encouraged if digital music sales were filling the gap, but all reports show that it has a long way to go before they do. And there is a view that digital content as not widely considered as a product we purchase and possess, although that may alter as the digital economy becomes more and more prevalent.

So where now for record labels? It seems that many smaller labels are still flourishing, albeit with modest goals. In theory, the internet provides a largely free production and distribution service, through home recording software, a MySpace account and an iTunes and Big Cartel store. In theory, anyone sat at home with a laptop has all the tools of a record label.

But this is only theory. Lowering the barriers of entry can take them too low, and with few filters – labels, promoters, managers and music media – the consumer is denied a steer. The fact that these filters are also more splintered and less influential than they once were has meant that the digital rat race for struggling bands and artists is now easier to enter, but harder to win.

Scott Perry, of the New Music Tip Sheet, argues that the change will come in revenue splits: “The core roles of record labels will never change – facilitating the marketing and distribution of an artist’s work is essential. However, the rights and revenues split will be vastly different, and that will affect the role the label plays in distribution and marketing.”

Perry’s forecast highlights how labels will seek to gain control of a greater part of a recording artist’s portfolio of products, rather than just his CD sales. This will include live shows, which remains a growing market, and merchandise. Both have traditionally provided revenue streams for the artists. Warner Brothers has now brought in a ‘360 Deal’, which essentially means that any new band signing up to its terms and conditions will have to cede some of the profits garnered from live shows and merchandise to the label. Labels argue that they alone invest in producing the music (which, ultimately, is a fundamental part of the artist’s appeal), only for their revenue streams to be increasingly lost to piracy, or simply not available through merchandise and gigs. It is worth remembering that Madonna signing to Live Nation for her live shows is now the deal that is reported, not any record label she has signed to.

The counter argument comes firstly from artists themselves. For every millionaire pop star, there are many other acts on major and independent labels that are not living the high life. The major labels in particular have no historical record of offering artists a fair deal, which is why it is worth returning to the essay that provided the opening quote to this article. It is worth reading in full to understand the context, but the financial break down for a band that sold 250,000 copies of their album yielded less than $5,000 dollars that year.

No-one quite knows where labels need to go next, primarily because the idea of a label is being radically overhauled. It is a guess, but you would imagine that major labels are more likely to become music houses, selling a far wider range of products than CDs. Digital music – including services like Spotify but, more crucially, legal P2P services through internet providers – will grow steadily and surely. Small labels will perhaps become more diverse in formats, but should retain their ability to sell niche products – including cds and vinyl – to niche audiences.

It used to be the case that you needed just a guitar and three chords to form a band. The crucial factor was imagination. The record companies of tomorrow will require a similar talent when they come to consider their blueprint.