Possible Solutions to our Research Question

In terms of solutions to our research question How can record companies and signed artists better utilise the online music market to make money?, we have made the following suggestions:

The first suggestion is one that we mentioned earlier: that Internet Service Providers, or ISP’s, such as Optus Broadband pay record companies royalties when a customer downloads a particular artist’s music.

Second is the idea that record companies could fund projects such as Radiohead’s In Rainbows and NIN’s Ghosts I-IV, which have been shown to be successful methods of connecting artists with their fans.

Finally, record companies could potentially abolish physical CD’s and release music solely as digital downloads. This could be a way of saving on the costs of manufacturing and transporting CD’s, as digital files costs virtually nothing to copy and distribute.

Looking Towards The Future

Based on what we have discovered through our research, it is possible to make some general hypotheses about the future of the recording industry. These are that:

* Independent record labels, such as Vhp Records, are likely to replace majors.

* Innovative online marketing solution sites such as Promonet will become more prominent.

* Record companies are likely to take on a less significant role within the music industry, as artists begin to manage their own relationships with fans.

Recent new approaches to making money in online music

Despite the seemingly hopeless financial situation record companies are currently facing, there have been some recent attempts to use the online music market as a means of making profit.

One approach that has been taken is Promonet which is hosted by IODA, a leading distributor of digital music, based in the U.S. Promonet is a management site that allows independent record labels to distribute and market their own music online for profit. Part of this process is that different bloggers, retailers such as Amazon and iTunes and other promotional partners are allowed to give away for free certain tracks that an independent label has chosen, as long as they include a buy link, which the label can then track. Promonet also offers the option for labels to begin their own online music stores, set their own pricing for specific tracks, and manage their own profits. According to Piers Stacey, attorney at IODA, who talks about the principles of Promonet in a panel discussion on Artisthousemusic.org entitled Monetizing Music in the Digital Age (November 10th 2007), "The whole idea behind Promonet is to directly connect its labels and rightsowners (i.e. artists and songwriters) to their fans." By giving away free downloads, labels that use Promonet are able to market themselves to consumers, and encourage consumers to listen to the music of independent artists, and potentially buy it.

In another project, according to Stacey, "IODA has been working with Spectra Records since 2007 to create a system that allows independent music promoters to digitally download albums so labels don’t have to service physical CD’s and send them through the mail - this can be very expensive. Rather than sending out $2 CD’s to everyone you want to have your CD before it’s released, you can create something online that allows you to track who downloaded what, and when."

Working towards some conclusions

The results of our research and interviews indicate that making money in online music may mean creating a more direct relationship between artists and fans. If this can be established, fans may be more willing to shell out in order to sustain the careers of their favourite musicians.

Take Radiohead’s latest album In Rainbows, for example. Radiohead released the album independently of any record label, and told their fans that they could pay whatever they wanted for it. While a lot of people paid nothing, many did pay for the album, and paid generously. The result was that Radiohead made a significant profit, which ended up being virtually as much as they would have made for an album under their old labels Parlophone & EMI. While only a successful band like Radiohead could afford to undertake a project like that, it was a clever way of engaging directly with fans by putting the value of their music in the hands of the consumer. And the results show that this worked to Radiohead’s advantage, bringing them publicity, respect from fans, and a substantial profit.

Nine Inch Nails undertook a similar project with their album Ghosts I-IV (2008). In an article on Wired.com entitled Nine Inch Nails Gets Creative With Radiohead-Style Release, Eliot Van Buskirk states, "The band took Radiohead’s In Rainbows project further by leveraging BitTorrent and releasing songs under a Creative Commons license that allowed purchasers to remix the tracks. As with the Radiohead experiment, dedicated fans looking for something more substantial than a zip file full of music tracks could choose to spend more on a box-set version of the album, or buy inexpensive CDs."

While this process creates a positive connection between artists and fans, it also means cutting out record labels altogether. This may not necessarily be in the best interests of artists, who still need funding for tours and recording.

Impact of digital music on music industry professionals - Kenny from Vhp Records, Melbourne Australia

Next, we interviewed Kenny from Vhp Records Australia. Vhp Records is an independent "net" label based in Melbourne, Australia, that Kehinde (aka DJKZ) set up to release music he was writing and co-writing. It is a 100 percent internet-based label, which offers its fans music in streaming, download and also physical formats. The label also works with all the leading online retailers and websites to ensure its music is able to reach as many people as possible. 

Jasmine: To start off with, can you please give us a brief outline of the kind of work you do with Vhp Records.

Kenny: I don't have a particular job description. I do everything from recording, writing and producing. I also do all the A&R as well, and video production, marketing and promotion. It's pretty much all inclusive.

Jasmine: In what ways are you currently participating in online music?

Kenny: I am always on Youtube listening to music tips that come my way, as well as promoting our acts online through Facebook, Youtube and advertising. 

Jasmine: Has the emerging digital music industry affected you in your profession? If so, has it been more beneficial or detrimental? In what ways?

Kenny: Digital music has been quite good for me, as I was never really able to consistently release physical product, but with digital we can make music available at zero cost. Marketing is cheaper, but earnings from selling CD's and downloads have fallen dramatically. Fortunately, other opportunities such as ad-sponsored music have emerged. 

Jasmine: How do you think record labels are currently handling the issue of digital music?

Kenny: Most labels have handled it badly and do not have a grasp on digital music. As a result, they have alienated their fans and are trying to pick up the pieces. The whole industry is reeling from the fact that selling CD's is on a permanent decline. Online services providing ad-sponsored solutions do not pay enough, and it is indeed tough now. 

Jasmine: Do you have any suggestions on how record labels could take better advantage of digital music, and use it as an effective means of making money?

Kenny: Digital music wants to be free, so the best thing to do is to leverage it in a manner that creates value, brings in some income, and enables labels to profit from live music, endorsements and licensing. To do this, labels need to evolve. Fortunately from my perspective, I am very much part of the creative team and am an artist, writer and producer, so I am able to evolve and take advantage of new opportunities. It's a long, hard slog, and one has to be in it for the long run before one sees any results. 

We appreciate your time, Kenny!

Impact of digital music on music industry professionals - Jim Warren Sound Engineer for Radiohead

A little bit about Jim Warren: Jim recorded you never wash up after yourself (my iron lung ep, 1994), mixed permanent daylight (my iron lung ep, 1994) mixer and producer of 'high & dry' (the bends, 1995), mixer on 'the bends' (1995). Engineered all the demos for the album "The Bends". He continues to work extensively with Radiohead in the studio and provide their live shows with the sound that band and fans alike have come to expect.

Jim Warren also does Peter Gabriel's live sound and has produced and engineered albums by Jocasta and Pineforest Crunch. Jim has produced the second Unbelievable Truth album and has also been working with new act Darling, Gintare and Wock. Most recently Jim has just produced a single for Damien Saez.

Laura: How do you think the emerging digital music industry has affected artists? Do you think its been largely beneficial or detrimental?

Jim: For most artists, beneficial. It's now a lot easier to get your music heard by a larger audience without the help of a record company or an agent.

L: How do you think record labels are currently handling the issue of digital music (and the fact that it has dropped their revenue dramatically in the last few years)?

J: I think they're finally beginning to catch up, but they are dinosaurs who had been doing business in the same way for 70+ years, and were surprisingly conservative in their approach and marketing strategies, considering the "cool" product they were trying to sell. There were a few small label exceptions.

L: Any case studies/examples in your experience that have included the digital music realm? (i.e. RH's 'In Rainbows', whats your take on it, from the artists', record labels, and as an individual/'insider' who has the experience of the processes and sees the developments in the industry first hand)

J: I know that Radiohead made more from the "pay what you want" download than they would have done if they'd released the album oniTunes when they were signed to Parlophone, Record companies always put a clause in contracts to reduce the artist's share of income from "new media". This is supposedly to cover the extra costs to the record company, and they tried to justify it to me once by explaining how expensive it was to change all the shelves in music shops when they switched from LP to CD! These clauses have no time limit though, so in 25 years, your still paying for their new shelves. This was the situation Radiohead were in. iTunes taking a big cut of a reduced price, and the record company taking most of what was left, so they refused to release their music on iTunes unless the rec co. got less greedy.

Also check out my mate Tim Arnold. He was in a band I worked with years ago, but now promotes himself pretty successfully on his own website, and even does regular "gigs" from his 2 room flat in Soho to an audience around the world, rather than playing to no-one for nothing in a shitty little club somewhere.

L: Any ideas on the future? How far will the digital and online scene alter music?

J: Massively. There will be a much wider range of music available, because people can release their own "niche" music, and soon be selling it to small markets al over the world. The big record co setup could never have done that, they had to make a bigger profit.
Also, digital recording equipment gives artists the means of producing their own music to master quality, which in itself will lead to loads of (sometimes badly recorded) music, but some interesting new groundbreaking ideas.

L: Any suggestions/possible ideas on how record labels could utilize the digital/online realm?

J: Sky's the limit really. All of a sudden there is the potential for getting feedback from the people listening to the music, which could be just in the form of comments, or could be like minds sending in their own stuff, or check out the Nine Inch Nails idea of putting multi track versions of the songs online so that fans could do their own remixes.

Thanks for your time Jim!

Results of interviews with musicians

From these interviews, we have discovered that while artists have been affected negatively by loss of revenue for record companies, the digital music market has been mostly beneficial to them, as is evident in the pros and cons listed below.

Negative impact:

* Loss in financial support from record companies.
* Sound quality has been sacrificed for accessibility with digital downloads.
* Sentimental value of physical CD’s has become somewhat obsolete.

Positive impact:

* Widening of fan base.
* More recognition from overseas musical acts (e.g. SFK got to support Evanescence and David Bowie).
* People have immediate access to their music.
* The barrier between artists and fans is being broken down.
* Music should be for everyone, and now it is.