What They'll Never Tell You About the Music Business

by Peter M Thall

  But, like the CD phenomenon, the budget juggernaut came with a curse. As it turns out, the budget-record scenario has also lowered the perceived value of classical records and has inadvertently damaged, perhaps forever, the willingness of consumers to pay a sufficiently high price to allow record companies and artists to produce truly memorable, even legendary, recordings. A standard cost for an orchestral recording of a world-class orchestra, such as the Philadelphia Orchestra or the Chicago Symphony, ranges from $150,000 to close to a quarter of a million dollars. Sad to say, symphonies of this caliber rarely record anything anymore.

  This consequence of setting prices so low that the public perceives that the records are not worth very much may turn out to be the ultimate legacy of the budget label. In the popular music field, try to buy a Rolling Stones or a Pink Floyd record for less than full retail. Sure, there are sales, but the going price for these records, some of which are more than forty years old is still for sale at a suggested retail price of $18.98—three times more than they cost when they were originally released! But select a Eugene Ormandy, Philadelphia Orchestra recording, and you’ll pay a whole lot less.

  THE INTERNET: IS IT THE ANSWER?

  Supply and Demand

  It did not help record companies (or artists) when a late 1990s change in the tax law made it impossible to deduct the cost of retaining huge inventory stocks. The record companies can no longer keep the large back orders of inventory they used to maintain, and, accordingly, they do not. The customer who wants to back-order a work heard on the radio can forget about receiving it any time soon. But, as with so many clouds, there is a silver lining to this one as well: in this case, the internet.

  There are fewer applications of the Internet more important than the ability to make available huge choices of music 24/7. The technology needed to provide for real-time downloading has already been invented, and baby steps toward distributing new and old music have already been taken—most notably by UMG, which has established Deutsche Grammaphon and Decca concerts: live, downloadable musical events. Many of the new classical music artists that are utilizing the Internet are paralleling what pop artists are doing—making available their music via downloads and hard copy delivery. MP3 files are just as applicable to classical music as to popular music, and the energy level and innovations of the classical music Internet enthusiasts are no less sophisticated than those one can see in the popular field. Further, one of the things that makes classical music exploitation on the Internet more feasible than exploitation of popular music is that, in many instances, the music performed is out of copyright. The time and cost of clearing rights is totally absent, making the process a whole lot more efficient. Of course the quality of the sound of MP3s is another story entirely. (See chapter 4, this page)

  Reaching the Surfers

  Theoretically, the Internet is a place where independent artists and labels can have the same direct access to consumers as the big companies. Nevertheless, the lesser- known names all face an uphill battle to prove their bona fides. Known trademarks are still more valuable than unknown trademarks; an authorized Van Cliburn recording of the Tchaikovsky First Piano Concerto will usually have more resonance than one by an unknown performer.

  Classical Music Websites

  The almost absurd number of competent instrumentalists and singers who play and sing classical music in the world today makes it incumbent on all of them to find new and effective ways to reach an audience. The Internet affords this opportunity for the classical artist almost more than it does for the popular artist. Why? Because there are hardly any other outlets for the classical artist. Numerous music sites have sprung up featuring young artists, and it is only a matter of time before these artists figure out how to use Internet opportunities to create a kind of branding that will begin to exploit their names and talents.

  There are also a large number of classical sheet music sites on the Web. Downloading this music is usually accomplished via PDF files—in other words, files that are like photographs. The downloading and printing of PDF files is fairly cumbersome and time-consuming, and not at all interactive, but the music is visible and readable nevertheless. Other sites, whose main target is the popular music buyer, have far more sophisticated options and some are interactive in that they will play back via your computer’s sound card all or portions of a work and will change keys, repeat measures, etc. A client of mine, Musicnotes.​com, is the industry leader.

  The generic sites that are currently affording classical artists visibility are mostly sites whose financial models have not done well over the years, and it would be a shame for these sites to disappear just when they have begun to become “branded” (translate: “trusted”). You know what you get and you get what you ask for. We have to cross our fingers and hope that these few compatible sites remain available to surfers.

  Promotion Via the Internet

  One new option available to record companies in the digital world is Internet radio. By utilizing Internet radio sites to do what they have done since time immemorial, record companies can now extend their reach globally in an effort to promote artists. Cable television stations feature 24-hour classical music programs originating at Sirius XM and Music Choice, so they do not have to establish their own programming—or, worse, not program classical music at all. Coincidentally, this new opportunity can be used to introduce a broader population to new music, new artists, and new composers much more efficiently than ever before. Instant access (for a price) to these new works will make these artists and composers ever more valued in the marketplace, benefiting both the record company and the artists and generating an enhanced demand for the artists’ performances. And soon, via webcasts, these live performances—which many feel present the ultimate musical experience—will be available via the Internet.

  The Internet permits a multiplicity of performances on demand. It will not be long before every concert hall is wired for instant download or streaming. There are already dozens of performances currently available on a number of websites. These are not “cooked” performances, presented through the filter of an editorial process; that’s why they are called “virtual.” The Vienna Philharmonic customarily presents a concert on Saturday nights, yet its concert hall can seat only 2,400 people. How wonderful if those concerts could be experienced virtually live in one’s home—with video. The popular music industry has www.​allmusic.​com, which makes available live performances, by mostly unsigned bands, in one of the wide variety of music clubs throughout the United States and around the world. Why not a similar approach to classical venues?

  Many of the prayers and promises of the last dozen years to reignite interest in classical music have been answered, since various web services have been introduced to take advantage of the easy transmission of MP3 files. Apple introduced the iPod, which is now obsolete given the range of the iPhone and the iPad. But iTunes keeps growing, and the massive catalogues that used to be represented only on physical discs are now available for streaming and even by download. The world’s music has been treated to the largest audience it ever had. In 2011, Spotify began operations in the United States. The large record companies, down to three upon Universal’s absorption of EMI’s wondrous cache of great recordings (particularly vocal recordings), have cooperated enormously with digital music services now that they have actually seen in dollars the results of the expansion of monetization in the digital space. While audiophiles may object to the sound quality which is something less than they enjoyed with LPs and CDs, the incredible choices made available by these music services more than balances their artistic concerns. Furthermore, as the New York Times pointed out, the metadata (search information such as artist, conductor, soloist) is much more complex, and poorly served by the industry, than that of pop recordings. One can only assume that now that the foundation and the receptivity of the content owners and users have begun to be established, and both sound quality technology and metadata are coming of age, revenue collection
s will improve as well.

  THE ROLE OF RECORD COMPANIES

  Whatever one’s ideas about promoting artists, it is undeniable that unless the artists are brought to the attention of consumers, there is little likelihood of success. With (most) television opportunities a thing of the past, and motion picture biographies of instrumentalists and singers unlikely, the best way to do this for classical artists is through recording. Besides, even if the artist is able to generate a semblance of a live performing career without records, the impermanence of a live concert itself dictates that only through recording can these works and these new artists be made to last. The record becomes a means of promotion rather than a product for sale.

  Having a record deal has another crucial function—one that is understood by classical managers. Being with a major label is simply irreplaceable as a calling card. Classical managers will take an artist associated with a major label more seriously. Purchasers of talent will take the artist more seriously. Being signed to a major label really can contribute a lot to one’s status and prestige and economic viability. If a major record label says, “This artist is important,” then he or she is important. It becomes a self-fulfilling prophecy.

  How should classical artists entice record companies to record them?

  Although there is nothing wrong with the concept, it is really not necessary to record CDs entitled Mozart for Cats or Songs Your Russian Grandfather Sang While Hoeing the Steppes. The marketplace is more flexible than that.

  The disparity between the appeal of the known and the appeal of the unknown, which is endemic in all fields of entertainment, will require artists to find creative ways to generate interest in their work. A few years ago, the conductor Gilbert Levine, named a Knight Commander of the Papal Order of St. Gregory for his work in using music to further interfaith relations (the last musician so honored was Wolfgang himself), recently presented Haydn’s The Creation with the Philharmonia Orchestra of London in several of the great cathedrals of the world, including Baltimore’s Basilica and the Vatican’s St. Peter’s (for the eightieth birthday of Pope John Paul II). This inspired presentation of a work with a somewhat tired past gave the work a new vitality, which did not go unnoticed by the media. Many of the concerts were televised (by, among others, PBS in the United States). Again, the Internet would seem to be a perfect venue for these magnificent concerts, whether presented live or via recordings.

  Suppose a pianist discovers a previously unknown work by a great composer. Or suppose a pianist identifies a work that has been underperformed because its cadenza is poorly conceived and the pianist writes a new cadenza, lifting the work to the level that it aspired to but fell just short of. Or pianists—or composers—who have been largely forgotten or abandoned by the mainstream, but deserve to be revisited or visited for the first time through a technology that can do them justice, find work.

  Once a recording exists, its value is limited only by the imagination of the artist, the artist’s representatives, and the artist’s record company.

  The High Price of Low Pricing

  When retailers made the transition from the LP to the CD in the early 1980s, they were concerned with the response of customers to a new price structure. Compact discs were expensive to produce, and were not, in fact, manufactured by all of the record labels when the format was introduced because they did not have the facilities to do so. The extra cost to the retailers was considerable, and CDs were not in great supply. During the first roll-out, competition and demand were very high, so retailers decided to use the CD as a loss leader to get rid of LPs, expecting that they would eventually be able to raise prices to a more appropriate margin of profit. They have never recovered from that decision. Even when the cost of making CDs dropped considerably, the record companies continued to charge the same price to dealers and the retailers felt they could not reverse their earlier actions and raise prices, leaving them with the same small profit margin.

  The only way retailers could figure out how to make up the difference was by literally selling the store. As competition became fierce in the classical music industry, as the retailers had to discount even more drastically, and as budget records began to fill up space in record stores, the record stores actually began to construct a complex system of selling advertising within their stores themselves. This system became extremely sophisticated. Every inch of a store was available for sale. Some methods are obvious, such as window dressing and listening stations; some are surprising, such as stickering headphones at listening stations and pasting advertisements on light boxes. The record company had to pay for all of this. With most stores no longer extant, and with the decline in profitability of the brick-and-mortar record business, this creative scheme has become all but extinct. Bad as it was to “sell the store,” at least there were stores to sell. Not so anymore, unless you consider Walmart a valid substitute. The Internet at least offers some consolation to those who want to “thumb through” a variety of choices, and YouTube clips are also useful for potential purchasers of classical music records, but that site too often serves as the listening experience itself and streaming opportunities continue to threaten the very existence of physical unit sales.

  Budget labels for classical music did not have the money to buy in-store advertising. They had to rely on rock-bottom prices, made possible because their production costs are low and there are no royalties due to the artists. Just as today’s kids fiddling around with MP3 files and other Internet transmissions over their computer “sound systems” seem to be satisfied with degraded sound quality, classical music buyers have shown that they are quite happy buying a Beethoven symphony performed by the Bulgarian Opera Orchestra for $4.98 rather than one performed by the Berlin Philharmonic Orchestra conducted by Herbert Von Karajan for $10.98, or the latest version by the London Symphony Orchestra conducted by [insert “name” conductor] for $18.98. One sad side effect of this practice is that the consumer, while presumably enjoying the recording, will not have had the magical opportunity to experience the ultimate greatness that made the artists, or the conductors and their orchestras, almost as legendary as the masterpieces, with their unique visions, that they recorded. Without this experience, it is not at all certain that the consumers who purchase budget-price records will ever be totally captured by the possibilities of classical music.

  Promotion Methods for Classical Records

  Record promotion in the classical business can be considerably more potent than in the popular music business if handled carefully. And it must be handled carefully, as there is so little money to spend on promotion. How much can a classical record company expend on promotion when it expects its new release to sell 10,000 units? A rule of thumb is around $3 a record, or, in this example, $30,000. How the allotment is spent is interesting. Artists, and their inexperienced managers, will have a million ideas about how to draw the consumer to its product: quarter-page ads in the New York Times, for example, radio spots, some of those highly visible “in-store” displays. But $30,000 doesn’t go all that far. Only experienced artists’ managers, or record company product managers, are likely to know how to get the most bang from the buck. And believe me, they need that knowledge. Remember, if the records don’t sell, the artist can move on to another label, try to make a go of it via Internet distribution, or make a living performing. The record company will be left to collect “returns.”

  While the proliferation of independent record companies in the classical field mirrors, in part, the development of independent popular record companies, the smaller labels cannot compete with the big companies. The small label, even more than the big label, must rely on smart promotion. A small label that does not have the Titanic soundtrack millions to dip into may have only one shot to “break” an artist. So savvy record companies and wise managers commit their limited resources to press and publicity. You will more quickly buy a record recommended by a reviewer or a radio station than by the record company telling you why you should own it. Howeve
r, if its one-shot promo campaign does not succeed, that may be the end of promotion for that particular record and perhaps also for that particular artist. A major label does not face these constraints. (Some of the major classical record labels have begun to establish focus groups in order to determine whether a record has a chance of catching on. Stokowski would not be amused.)

  While the promotion effort is being mounted by the record label, the distributors are simultaneously supposed to be picking up the baton and continuing the push toward the retail account. This used to be called selling. But nowadays, it is more common for the distribution companies to respond to the accounts rather than vice versa in order to sell them on a particular project. They take orders and collect money. There is no “sell”—hard or soft—in the classical record business.

  No wonder the artists are depressed.

  Interestingly, retailers, whose stake is in the artist’s ultimate celebrity, notoriety, and record-selling prowess, have never, to my knowledge, actually made their own commitment to develop artists and careers. While this is not particularly surprising, it seems shortsighted, since promotion at the retail level would seem a perfect way to create demand for a product.

  Balancing Supply, Demand, and Optimism

  One thing the record company must avoid: responding too quickly to a surge in interest. As noted in an earlier chapter, records are shipped on a 100% return guarantee; this means that if records do not sell at retail, or if middle-level distributors (such as rack jobbers) do not receive orders from retailers to match what they have purchased from the ultraenthusiastic sales staff of the record label, those records that the rack jobbers and the retailers were unable to sell can, and will, be returned to the record label for credit. On the other hand, the record company will have only a brief window within which to respond to a surge of interest. This is a very delicate balancing act when dealing with classical records, which, on average sell 1,500 copies, but which in extraordinary circumstances can sell 1 million copies.