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 Oh,
to be a music industry executive these days. Sales of compact discs
are sliding, down 10 percent this year, as CD burning and
file-sharing proliferate. Legislators who have criticized the
industry, saying it has a perception problem, are considering
regulations to end some long-held practices, like paying independent
promoters to persuade radio stations to play hits. And some people
are concerned that disgruntled artists may stage a public protest at
next year's Grammy awards, as they did last February, in a bid for
greater autonomy.
Still, in the
midst of one of the most tumultuous times in the music business since
the payola scandals of the 1950's and 1960's, the industry is showing
signs of adapting. In recent months music companies have tried to
make more music available online. Artists are being wooed by labels
to help in the fight to combat piracy. And the unusually tight-lipped
industry, which has a reputation for suing rather than settling
disputes amicably — consider the protracted legal fight over
Napster — is being forced to speak out on its own behalf.
"People who
think the record companies don't get it haven't paid attention,"
said Hilary Rosen, chief executive of the Recording Industry
Association of America, the industry's lobbying arm in Washington.
"One of the defining things to happen over the last year is
people started to think that change wasn't bad."
But if record
executives are singing a kinder, gentler tune, it is because, in
effect, they have no choice. Almost every big music company has
reported profit declines in recent quarters. Most recently the
Universal Music Group, which is the world's largest record company
and is owned by the Paris-based Vivendi Universal, said last month
that its operating income dropped 89 percent in the third quarter
largely because of higher costs to promote and develop musicians.
Universal
executives, for their part, pointing to expected high CD sales, say
income will improve in the fourth quarter. But many analysts fear
that the problems Universal and others are facing continue to be
systemic and cannot be reversed quickly. Consider the following:
Universal's dominance in rap and hip-hop (it is home to rappers like
Ja Rule, DMX and Eminem) is threatened as other music genres adopt
the style.
Take the case of
the rock band Linkin Park, the Warner Brothers Records act popular
for blending rock music with rap lyrics. It sold 12 million copies of
its Hybrid Theory last year, making it 2001's best seller. And pop
princes and princesses, like Christina Aguilera and Justin
Timberlake, have co-opted the sound as their own this year.
"This is a
band who is selling records to kids who, years ago, would have bought
gangsta rap albums," said Craig Marks, the editor of Blender magazine.
Despite that, Doug
Morris, chief executive of the Universal Music Group, is optimistic,
predicting that the industry's subscription-based online offerings,
which recently began to allow CD burning, will provide a lucrative
source of secondary revenue — enough to rival the sale of
compact discs. "Every day it is more and more," he said in
a recent interview. "It is going to shock everyone."
That, of course,
does not mean recording companies are going to become lax in their
effort to battle piracy in 2003. In an effort to thwart file-sharing,
some companies are already employing technology that allows compact
discs to be played only on CD players, not on computers.
Copy-protected
CD's are more common abroad, in part because record executives fear a
strong reaction from paying consumers in the United States who want
to play their CD's on their computers, where they can create custom
playlists. By the end of next year, though, copy-protected discs
could be more common in the United States, analysts say.
Still, Ms. Rosen
said, "There is no silver bullet for piracy enforcement."
Another area
likely to change is the accounting of royalties for artists, a
particularly thorny issue for record labels and musicians alike. In
the last few years many artists — like the Dixie Chicks, the
country crooner LeAnn Rimes, the former Eagles member Don Henley and
Courtney Love — have balked at what they call shoddy industry
accounting practices.
Hearings were held
by California legislators early this year, where record executives
were told they had a perception problem that needed to be reckoned
with. Hearings are expected to be held by legislators in New York, too.
Some companies
have already begun to adapt. In November, the Bertelsmann Music Group
said it would pursue a more explicit royalty accounting plan, which
would not give artists more money, but would help them better
understand what they received. That same month Universal executives
circulated an internal memo saying the company would simplify its
accounting procedures, giving auditors more and better access to
their documents.
Managers and
artists' lawyers were encouraged by the news, but some were skeptical
that the industry as a whole would move quickly to institute broader changes.
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