CD sales dead? Not For Indies!
CD sales dead? Not For Indies!
CD sales dead? Not For Indies!

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    The Future of Music Coalition launched their “Rock the Net” campaign today. Musicians around the country are signing up to do concerts to raise awareness of network neutrality and mobilize their fan base to lobby their members of Congress on the issue. You can read more about FMC and the new campaign here on my other blog, “Tales of the Sausage Factory“.

    But one related fact came out during the press conference that deserves special attention here. Derek Sivers, the founder of CD Baby (which sells CDs of independent musicians online), mentioned that sales of physical CDs for independents have increased by 30% in the last year. Legal music downloads, for which indie artists get compensation, have likewise increased exponentially. Unsurprisingly, indie artists do not want to see the Internet go the way of radio and record stores by allowing broadband providers to do “premium tiering”. The major labels will gladly pay extra to put the indies at a disadvantage with slow download speeds. They can afford to pay extra for faster downloads, while indies can't.

    But more importantly, the rise in sales of indie CDs takes place at the very moment that every major news outlet has announced the death of music albums and the resulting decline in music industry profits (despite the rise in online sales). Say what? Why haven't we heard about this amazing growth sector of the music industry and the endless speculation over what it means?

    Sivers offered the following explanation of why you haven't heard about the fantastic rise of the independent CD sales despite the growing popularity of digital downloads:

    “Major labels are like a $100 stock that has dropped to $90, and that's oh so newsworthy. But independent labels are like a $1 stock that has risen to $5. But it's still not considered newsworthy so no one knows about it.”

    I have a few less charitable explanations, starting with “most industry reporters are lazy herd beasts that work almost exclusively from industry press releases” to “you really think the media conglomerates are going to report on the rise of independent music and how a neutral internet makes real competition in music and video possible?” I also need to qualify this information by observing this is merely one off-the-cuff report at a press conference by one indie retailor.

    That said, I hope other folks will start trying to verify if this is true. Because if true, it provides one more powerful argument that the current decline in revenue for the major labels has nothing to do with “piracy” and everything to do with competition working. As I have argued, (along with the good folks at Ars Technica), the decline of the CD market proves what many of us have said for years. The 1990s saw a number of factors that allowed the major labels to push out independents and dominate the market with their own outrageously priced and poorly produced products: consolidation in the music industry, the whole “studio system” of pumping a few big stars to the exclusion of others, the consolidation in music outlets from mom-and-pop record stores to chains like Tower Records and retail giants like Wal-Mart that exclude indies and push the recordings promoted by major labels, and the consolidation of radio — which further killed indie exposure and allowed the labels to artificially pump their selected “hits” through payolla. All this created a cozy cartel that enjoyed monopoly profits.

    As a result, the major labels, the mainstream retailers, and the radio broadcasters grew increasingly out of touch with what listeners actually wanted. But as long as the music cartel controlled what the vast majority of people got to hear, it didn't matter. Sure, there was independent music out there. But nobody ever heard it. As a result, the music cartel remained the de facto only game in town.

    Now, for the first time in living memory, the music cartel has lost control of distribution. Independent musicians can use a neutral internet to reach listeners directly. Online radio, satellite radio, and podcasting move power out of the consolidated terrestrial radio bottlenecks and expose people to different choices. Digital downloads and online purchases of physical CDs break the stranglehold of the box-store retailers. Even better, the stranglehold on video distribution may follow.

    And lo! Competition actually works for once in the way predicted by the neo-cons and techno-libertarians (hey, it happens). Consumers of music “vote with their dollars” and opt to buy lots more music they like and stop buying music they don't like as much. The major labels see their artificially puffed up monopoly profits decline, and must chose between actually working for a living by giving customers what they actually want or getting swept aside. But sadly, despite the fact that folks in Washington policy-land pay endless lip service to the idea of competition, they really don't understand it that well or recognize it when it happens. As I often say, the Emperors of China in the Forbidden City had more regular contact with what was going in in the real world than most policy folks in Washington have with what goes on outside the beltway.

    So when the lobbyists from the RIAA and the MPAA come in with their sob stories about how their profits have declined and this proves — PROVES — it's all the fault of those evil peer-to-peer technologies and those nasty colleges and universities that give irresponsible young folks free broadband, Members of Congress don't tell them to shut up and start producing some music people will actually pay to listen to like the independents do. Instead, they re-introduce competition-killing measures like the PERFORM Act, or jack up the copyright rates for internet radio so high that no one but the major incumbents can afford them. As the music industry (and its video bretheren) understand all too well, if you can keep people from easily finding indy music, you can keep them from buying indy music.

    So I hope that some actual reporters (those outside the lazy herd) and others will do some digging and see if they can substantiate Sivers' statements about the phenomenal rise in sales of physical Indy CDs. It would provide another solid proof that music fans respect the law and will pay for the music they want to hear, given a fair chance and a fair price.

    In short, music fans aren't thieves; but the jury is still out on the major labels.