State of the Music Industry: How the Industry has Suffered in the Past
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By Dominic Wren
The Coronavirus pandemic has made times incredibly uncertain for many people. The music industry is definitely not immune to this but like most sectors of the economy, the music business has had its set backs in the past. 2020 is simply a new set back. In our lifetime, we could think of 4 major crisis’s that have affected the music industry though some were more severe then others. What is most interesting is how the industry rebounded and what came out of those disasters. The overview of these world events will be simplified for the sake of not making this article six pages long.
The Oil Crisis of the 1970s was so impactful on the music industry due to vinyl being the main method of music consumption of at the time. During the time of the crisis, records were being made out of a plastic sourced from crude oil. The Oil Crisis led to rise in scarcity of oil, therefore making vinyl record increasingly more expensive. To counter this, the recording industry tried recycling the vinyl to make the record in an effort to keep the prices as low as possible. Because of this, records lost much of their audio quality. The loss of quality led to major reductions in LP sales that led to losses of hundreds of millions of dollars for the recording industry.
The next set back on the recording industry was caused by the death of disco music during the 1982 recession. With major label facing 22% interest rate with crippling debt and the end of one of the most popular genres of the time created an overwhelming surplus of disco records in record stores. According to Disco–Disco, some of the industry’s most prominent labels were either bought or ceased to exist. In 1982, the industry was in a whole but Sony and Philips jointly launched the Compact Disc and ultimately revolutionized recording forever. This new method of music delivery was much more attractive to consumers due to larger data storage and more consistent audio quality. This introduction outright saved the recording business, as fans would set out to replace entire vinyl music libraries for the new compact discs.
Starting the 21st century, the 9/11 attacks on New York City only inflated new but major problem within the recording arts. 9/11 itself didn’t have a direct effect on the recording industry outside of the political and economic fallout in western countries following the event and the banning of certain songs from being played on the radio after the attacks as they were deemed “inappropriate” right after the fall of the World Trade Center. September 11th is more used as a time frame of when Napster was really gaining traction. Napster was a digital file sharing software where consumers could rip digital music files and share/download them for free. The rise of Napster during one of the United States’ darkest times brought the recording industry and physical sales on a downward spiral. This battle between Napster and the recording industry eventually led to the birth of streaming as an alternate to buying physical media and ripping songs off the internet. Today, streaming makes up about 90% of how people listen to music according to the IFPI Global Report.
The 2008 financial crisis didn’t have any greater effect on the music industry than any other industry but one major impact of the recession is the major labels facing bankruptcy. According to the Music Business Journal, some companies saw a 50-60% drop of their share price in a week including EMI’s shares, which was a label previously part of the “Big Four,” lost more than half of its value that year. Today, Sony Music owns EMI. Nonetheless, outside of crippling debt and the impossibility of securing more loans from creditors, there were not many long-term game-changing effects from this crisis.
The 2020 pandemic will go down in history as one of the greatest financial downfall for the music industry. 2020 is a year unlike anyone has seen before: a pandemic, people in lockdown, a grinding halt on live music, an unpopular government in the US, threats from China, and an unpopular government in Britain that is exiting the EU. According to the World Economic Forum, the COVID-19 pandemic has been the primary cause of loss of almost 50% of the entire global music industry, which is equivalent to the loss of Iceland’s entire GDP and in Canada alone, Music Canada says that 80% of artists have reported needing financial assistance. Adding to this, six months into the initial shut down of live music has reportedly cost the industry over $10 billion in sponsorship deal according to the Information Engineering Group. These figures are absolutely devastating. But what next? In an interview with Alan Cross, a highly reputed music journalist, he explains that this will do a couple of things: first, it will weed out all the weak players and it will force new strategies and new technologies going forward. He adds that some companies will use this as an excuse to reinvent themselves too. Unfortunately, this causes a massive amount of disruption, though it may be for the best on the long term. “There will be casualties,” Cross claims, “but there will also be new power houses that will come out of this.” In my opinion, I agree with Cross. Though we might not see the tumble of one of the “Big 3” as they still gain (increasing) revenue from streaming and more but we might witness the fall some major players of the live music business. Companies like Live Nation, AEG, and other big players are having to manage immense financial losses, having to refund millions of clients for cancelled shows, and reputation-tarnishing law suits. Though I believe the recording industry will come out of this relatively ok, the live music scene will likely look very different from what is was before the pandemic. The reality is that no one really knows what will come out the other side of this crisis but it could lead to something that is even greater.
The point of looking at the past major events that crippled the music industry is to recognize that after every major downfall that was mentioned revolutionized the music industry in one way or another. The Oil Crisis in the 70s and the 1982 recession was the groundwork for the birth of Compact Discs. 9/11 and the battle with Napster later introduced to world to streaming. 2020 has been a year like non-other and has hit many industries with a baseball bat but we can already feel the start of something bigger and greater coming our way.