Who needs a major label?

It’s Easier Than Ever To Sell Albums—But Harder Than Ever To Stand Out
GLENN PEOPLES 11/14/09 Billboard

In the online age, do artists still need labels? The Long Tail seems to imply that they don’t, and many digital music executives agree. Just put the music online, they say, and fans will find it.

But how many?

Although popular albums no longer dominate the market like they once did, each digital album toward the end of the tail won’t benefit much. That’s because the Long Tail phenomenon takes away significant sales from the few albums at the top of the charts but redistributes those sales among many others—each of which doesn’t sell enough additional copies to amount to a significant gain.

The same forces that make digital distribution so easy make it harder for each individual album to achieve even modest sales. In a record store, an artist might dominate a niche easily, since the shop might only stock a few thousand other titles. At an online retailer, it’s easier to get lost in a crowd of hundreds of thousands.

Consider the numbers: Since 2004, the most popular digital albums have lost market share to less popular titles, according to Nielsen SoundScan. (Since sales of digital albums are rising, these losses are in market share, not units sold.) In 2005, the titles that ranked from No. 101 to No. 200 on Nielsen SoundScan’s list of the best-selling albums of the year collectively lost one percentage point of market share—equal to 1,700 units each. Now, that same force also hurts albums that aren’t in the top tier of hits: In 2006 the top 2,000 albums lost market share to less popular titles.

To the losers, the decline can be significant: Albums among the 100 best sellers of 2006 collectively lost three percentage points of market share, according to SoundScan, equal to about 10,000 copies each. At the other end of the tail, however, the gains are so modest they barely matter. In 2006, the No. 7,000-ranked title gained about 64 units worth of market share. At No. 10,000, the gain was 53 units.

Album sales are so hard to achieve for niche artists that giving away music may seem like a good idea, and the value of additional fans could outweigh the revenue lost. But it’s awareness—not just sales—that’s hardest to come by. There’s already so much free music available on the Internet that giving it away might not do much to win an artist new fans

The Long Tale revisited.

Don’t Bury The Blockbuster Yet. The Most Popular Digital Tracks Account For More Sales Every Year
GLENN PEOPLES/ 11/14/09 Billboard

The great hope for digital music was that it would make the recording industry more egalitarian—that up-and-coming bands with pluck and a knack for promotion would be able to get their work to the masses without the backing of record labels. According to “The Long Tail: Why the Future of Business Is Selling Less of More”—a 2006 book by Wired magazine editor in chief Chris Anderson—hits dominated the market mostly because shelf space in stores was limited. Digital retail and online media would exponentially increase the choices available to consumers, who would then use online tools to discover products that appealed to them more than the biggest hits.Anderson’s “Long Tail” idea comes from a sales graph that looks like the letter “L” with a curve instead of a corner. On the left are the hits, the 5,000 best-selling titles that would typically be carried by a national chain; on the right, further down the curve, are less popular titles that sell fewer copies. In the physical world, few stores have space for these niche titles, which don’t sell well. But in the digital world, where space hardly matters, Anderson suggested, these titles would collectively account for a far greater percentage of music sales—and of movies, books and other consumer products. The ways we think about popular taste, he writes, “are actually artifacts of poor supply-and-demand matching—a market response to inefficient distribution.”

For an industry that coined the term “hit parade,” this would amount to nothing short of a revolution.

So far, at least according to Nielsen SoundScan data on U.S. music sales from January 2004 through October 2009, that revolution hasn’t arrived—although the demand for albums has changed. Sales of albums, especially digital ones, became significantly less concentrated around hit releases since 2004. But sales of digital tracks—which this year account for 56% of digital sales by track volume—have grown more concentrated in hits during the same time period.

Essentially, hit songs are becoming more important while hit albums are becoming less so.

Although “The Long Tail” discusses the waning prominence of hits, Anderson would prefer to look past the top of the head of hit singles at a larger group of tracks to gauge broad shifts in demand. “In short, this isn’t enough data to draw any proper ‘Long Tail’ conclusions about,” he wrote in an e-mail, “since it doesn’t use Head and Tail the way the theory does.”

Since the publication of “The Long Tail,” some studies have confirmed the book’s thesis, while others have cast doubt on it. In a 2008 paper, Harvard Business School associate professor Anita Elberse found that hit titles still dominated sales even though some consumers were venturing further down the tail. This year, two researchers at the Wharton School of the University of Pennsylvania, Tom F. Tan and Serguei Netessine, examined Netflix user data from 2000 to 2005 and found that new titles are appearing faster than customers can discover them. Perhaps more surprisingly, a study by PRS for Music chief economist Will Page and BigChampagne CEO Eric Garland found that the demand for songs on file-sharing services—which offer users almost unlimited choice—closely mirrors that of purchased tracks. Only 5% of songs accounted for 80% of downloads, resulting in what the authors called a “hit-heavy, skinny-tail distribution.”

One thing that hasn’t changed since the publication of “The Long Tail” is how hard it is for artists to sell a meaningful amount of music—whether or not they’re signed to a label. From 2004 to 2008, the number of new albums released per year has more than doubled. And although digital retail is taking market share from the most popular titles, the sheer number of unpopular albums available means that each of those titles doesn’t benefit much from their collective increase in market share. The millions of units that are shifting from a few titles at the head of the tail are migrating to a few hundred thousand at the end of it—each of which doesn’t sell much more.

THE POWER OF HIT SONGS

So far digital retail is less about albums than individual songs, which account for 57% of all purchased tracks so far in 2009. And in the last five years, track sales have become increasingly more concentrated, so that hits matter more each year. This trend was first noticed by Elberse, who pointed out that it was happening even as the number of tracks available continues to increase.

The change is significant. From 2004 through October 2009, the most popular tracks have steadily and consistently grabbed market share—and tens of millions in unit sales—from less popular songs. The growth is slight at the top of the chart and more noticeable further down. The top 10 increased to 3.1% from 2.1%. The top 40 increased to 8.3% from 5.9%. And so on. The top 200 tracks—that’s just 0.002% of the nearly 9 million currently listed at Amazon—have a market share of 18.7%. In 2004, their share was 14.5%.

At a time when more music is available than ever before, why do so many consumers buy the same few songs? It may be because popular taste tends to reinforce itself, especially in an online world. Or it may be because buyers of single tracks tend to be casual fans who are more inclined to buy songs they hear on the radio and TV.

“One aspect of word-of-mouth online is that it can be an effective discovery technique, driving demand to titles that don’t have traditional marketing,” Anderson said. “But the other side of it is that it can lead to herd behavior, with ‘winner take all’ effects. It’s possible for both to work at the same time, with some word-of-mouth boosting niche acts, while other word-of-mouth creates bigger hits at the very top of the curve.”

Weekly sales figures show just how important hits have become. Since iTunes launched variable pricing in early April, the top 200 tracks have retained their market share even as the number of tracks purchased each week has fallen by about 6%. (Some of this decline may be due to a midyear weakness in digital track sales.) From April to July, the top 200 averaged a 24% share of each week’s total track sales. In the same period in 2008, the top 200 averaged just 22.2% of each week’s track sales, even though most of the top 200 songs were less expensive.

Although higher prices have depressed sales of hits—in terms of units, not revenue—consumers haven’t been spending their money on other songs. “The Long Tail” suggests that consumers will use increasingly sophisticated digital tools to discover, sample and buy music that appeals to them more than the biggest hits. But in the case of digital tracks, that hasn’t happened. Consumers who are turned off by a $1.29 price point for the track they came to buy don’t seem to seek out less popular alternatives. In other words, many music fans aren’t shunning hits because they don’t like them but because the price rose by 30 cents. And if they don’t find the hits they want, they forgo a music purchase altogether.

THE LONG TAIL OF ALBUMS

Overall, album sales don’t look that different from five years ago, at least in terms of the demand curve. The most significant change has been the overall decline in album sales: 32% from 2004 to 2008. As everyone in the industry knows, it’s tough all over.

As “The Long Tail” predicts, the most popular albums fared the worst, losing market share to less popular titles. From 2004 to 2008, sales of the 5,000 albums that make up the head of the demand curve dropped 40.5% while sales of the million-plus albums that make up the tail declined 27.4% And not only did sales of popular albums decline more than those of others, the most popular ones declined the most. Unit sales of the top 1,000 albums of 2008 dropped 41.7% from their 2004 levels. The second thousand most popular albums dropped 36%, the third thousand fell 33.2%, the fourth 31.2% and the fifth 30.9%. Five years ago, the top 5,000 albums represented 74.4% of total sales; in 2008 they accounted for 70.2%. Some of this comes from the sheer number of albums that now make up the end of the tail.

The marketplace for digital albums is also taking shape according to the theories in “The Long Tail.” At a time when the big-box retailers that now account for so much of the CD market have cut the shelf space they devote to music, the number of tracks available from online services keeps rising. And digital retailers make it easier for consumers to sample music and use various other filters and discovery tools that “The Long Tail” predicted would distract them from the hits.

Just as “The Long Tail” indicated, demand for digital albums is moving further down the tail than that for albums overall. In 2008, the top 5,000 albums accounted for 64.7% of digital album sales, as opposed to 70.2% of album sales overall. And the market share of the top 5,000 digital albums is shrinking as niche products take away sales from more popular titles. But the rate of change is slowing—the head lost three percentage points in 2007 and 2008 after shedding more than six points in 2006, which means that the demand curve could settle in something close to its current shape.

Within the head of the demand curve, which represents a wide range of popularity, albums have been affected very differently. In 2006 and 2007, the most popular 100 albums lost the most market share in absolute terms. The three percentage points of market share they lost represented about 1 million units. In 2008, albums from No. 101 to No. 200 lost the most share in absolute terms. But in relative terms, the albums in the middle of the head fared the worst in terms of losing share. From 2004 to 2008, albums from No. 301 to No. 400 lost the greatest percent of their market share—34%. From 2005 to 2008, Nos. 401-500 suffered the most—22%. From 2006 to 2008, albums as far down as No. 4,000 lost a greater percent of their market share (7%) then the top 100 ranks (5%).

As “The Long Tail” predicted, sales will disperse across a wider range of titles as consumer choice increases. Within the tail of digital albums, the truly obscure albums seem to be pulling sales away from those that are merely unpopular. In 2008, even as the head of the tail shrunk more slowly than in previous years, albums as unpopular as those around No. 8,000 gave up market share to titles that were even less popular.

LIFE IN THE TAIL

Life in the long tail can be difficult for any individual artist. One such album—former Afghan Whigs frontman Greg Dulli’s “Live at the Triple Door”—sold 1,400 digital copies in 2008 and ranked at No. 6,736. As “The Long Tail” would have predicted, an album with that sales rank benefitted from the effects of widespread digital distribution. But during the past three years the gain for an album at No. 6,736 was nil: around 75 additional copies.

Dulli is the type of artist who might be expected to benefit from the economics of the long tail. Signed to a major label in the early ’90s, the Afghan Whigs released some moderately successful albums, and Dulli has enjoyed similar success as a solo artist. But now Dulli and artists like him now face more competition, simply because so many more albums come out each year—”Live at the Triple Door” was one of 50,000 digital-only albums released in 2008. Even if Dulli keeps cracking the top 10,000 albums, his market share is likely to be smaller than what it is today. And market share is important because it influences other revenue streams, such as touring and merchandise sales.

In terms of overall album sales—not just those of digital albums—the greatest changes may be taking place in what might be called the middle class: albums ranked from No. 200 to No. 2,000 in terms of sales. Many of these are catalog titles that benefited from year-round price-and-positioning programs at retailers like Virgin Megastore and fye. Sales of these albums dropped as much as 34% from 2006 through 2008, compared with the 27% decline in overall sales.

Most likely because so many music stores closed, catalog chestnuts like the Phil Collins collection “Hits” have stayed close to their overall sales rank while selling far fewer units. In 2006, “Hits” sold 116,000 copies, enough to rank at No. 699 among the best-selling albums of the year. By 2008, “Hits” sold 82,000—a 29% drop—but ranked at No. 703.

In the digital world, which relies less on merchandising programs, “Hits” is all but absent: It hasn’t cracked the list of the top 10,000 digital albums since 2006. Bargain catalog makes an appealing impulse buy at physical stores, and since many retailers can’t carry all of Collins’ albums, they focused on a hits collection. In the digital world, consumers have many more options for Collins’ catalog. In addition to “Hits,” shoppers can choose from his studio albums like “No Jacket Required” (No. 3,273) and “But Seriously” (No. 9,652) or buy their favorite tracks individually.

ARE THERE RICHES IN NICHES?

So how can music companies adapt to this new world? “The Long Tail” urges businesses to “think niche.” Since the future is “selling less of more,” it makes sense to make available every product possible. And since niche titles are rarely discounted, Anderson argues, online retailers like Amazon are wise to use recommendation engines to subtly nudge their consumers toward relatively unpopular items.

At the time “The Long Tail” came out, this was smart advice—and it still is for online retailers like Amazon and Netflix, which sell physical goods. For years big-box retailers like Wal-Mart have used popular CDs as loss leaders to drive sales of more expensive, high-margin products. So far, however, pure digital retailers work differently, and iTunes, which typically has the highest prices of any online music store, still has the highest market share. (iTunes also sells more expensive versions of some albums.) And as long as the most popular titles command the highest prices, as they now do on iTunes, retailers would be wise to steer consumers toward them in order to maximize revenue and, presumably, margins.

There is also evidence that a retailer could alienate consumers by steering them toward niche items that don’t appeal as much as hits. Anderson wrote in the book that, as listeners stop buying CDs and explore the tail, they are “typically more satisfied with what they find.” But Elberse studied user ratings at the Australian DVD rental service Quickflix and found that the more popular titles also received the most favorable ratings. Users who rented obscure titles tended to rate them less favorable than they did hits.

“No matter how I slice and dice the customer base, customers give lower ratings to obscure titles,” she wrote in her article for the Harvard Business Review. “There are signs that if you keep pushing people into the tail because the economics for you are really good, that might actually hurt you in the long run.” “That may be true for the specific example of the Australian DVD data,” Anderson wrote on his blog, “but it is not clear from the paper why she feels able to extrapolate that to all Internet commerce.” In their analysis of Netflix user ratings, Wharton’s Tan and Netessine also found that consumers tend to be more satisfied by hits than niches.

While it’s easy to see how retailers could adapt to the world of “The Long Tail,” what about content creators and the companies that fund and market their work? Any label or artist that stopped trying for a hit in order to focus on a niche is almost certainly doing the wrong thing, at least in economic terms. Although niche titles collectively account for a greater percentage of sales, no individual one accrued any meaningful income—and few have received the attention their creators would need to perform or sell merchandise at a time when those revenue streams are becoming more important.

Major labels and independents that are run as serious businesses should continue to focus on how to reach a mass audience—especially on how they can do so using new digital tools and the advertising and sponsorships that are becoming increasingly important in the music businesses.

Indeed, labels have continued to focus on finding hits for a reason: It’s almost impossible for them to make real money any other way. (Even if a company or act decides to give away music in order to play live or sell other goods, they still need to reach a significant audience to make that pay off.) Elberse, for one, doesn’t think content companies should focus on hits any less than they do now. “I don’t think they need to go about their job any differently now than they did 10 years ago,” she told Billboard. “They will still bet on a few projects more than other projects in their portfolio and hope they will become the winners that pay for the majority of things that don’t make a profit.” ••••

Editor’s note: This story was edited by Louis Hau and Robert Levine; Levine several years ago worked with Chris Anderson, the author of “The Long Tail,” at Wired magazine.

 

Donald Passman: Q&A

November 14, 2009 ED CHRISTMAN/Billboard

When attorney Donald Passman was teaching a course on the music business at the University of Southern California in the late ’80s, he realized that his class notes for that year would make a pretty good outline for a book. Writing a book was something Passman had always wanted to do. And he felt that there was a need for one about how to make it in the music business. Now, nearly two decades later, Free Press is about to publish the seventh edition of “All You Need to Know About the Music Business” Nov. 17. Its various editions have sold more than 150,000 copies in hardcover, according to his Web site. In a career that has lasted more than 30 years, Passman has been involved in some of the biggest artist contract negotiations in the industry, including Janet Jackson’s switch from A&M to Virgin in 1994 and the 1996 mega-deal that re-signed R.E.M. to Warner Bros. Records. He has also been involved in new-media deals and has represented publishers, record companies, managers, producers and other music industry players. These experiences have helped inform his book, which he revises every three years. Passman has practiced law with Gang, Tyre, Ramer & Brown for the past 35 years. In his spare time, he writes fiction and has published two mysteries for Warner Books: “The Visionary” and “Mirage.” In an interview with Billboard, Passman talks about some of the recent changes in the music business that will drive demand for new editions of his book.

What changes in the music business did you have to address in the new edition of your book? The biggest changes are in the digital area and the 360 deals. Now the labels want a piece of nonrecord income. It started with the pretense you would get more for it, like you will get a better deal with a share of the profit and a higher royalty. But all of that has gone away. The other big change is in digital. We have much more settled how digital rights get treated. Now we are handling things that didn’t exist three years ago, like the user-generated content that you find on YouTube and MySpace.

Have 360 deals become the norm at all major labels? And how much pushback are they getting from managers and lawyers? There is pushback. But unless you have negotiating power, it’s just a reality you are going to have to deal with. Again, everything is more difficult nowadays. What do you think of the digerati belief that artists no longer need labels? It depends on who you are. If you are a niche artist, you may not need a label. If you are a mainstream artist and you want to break through, no one has done it without a label. That will obviously change in the future but for now you need help, and likely money, to break through all the noise. But the next question becomes, “What’s a label?” Look at Irving Azoff, who is building a management infrastructure that is arguably as powerful as some labels. How is the industry’s evolution, particularly the decline in CD sales, affecting smaller artists? It’s harder to get CDs into stores, even for the majors. It’s harder now than back in the day when the majors had more muscle.

With digital tracking now possible for all kinds of performances, will performance data measurement shift to a census method, or will sampling continue to determine royalty payouts? Certainly on terrestrial radio you will continue to see for some time the use of statistical sampling. In digital, the census method is obviously preferable because it’s a really accurate accounting. The book is very specific about CD wholesale costs and even mentions digital downloads. But why doesn’t it explain the business model behind subscriptions or interactive streaming? Because the terms I know about are through confidential deals and I wasn’t comfortable giving away those details. Besides, all the deals are different and that space hasn’t settled into an industry norm yet.

Are U.S. music publishers right to remain firm on mechanical royalty rates, or should they be more flexible during this transition away from the CD? In the rest of the world outside the U.S. and Canada, the mechanical rate is a percentage of wholesale. U.S. publishers have always refused to adopt something like that, but I am going to guess they may have to because the profit margins on CDs will generally shrink. But I don’t think it will be an easy sell to publishers.

Looking at digital music in terms of a life cycle, where is the music industry right now? In terms of digital downloads, we are at the adolescent stage to the young 20s. In terms of digital delivery, we are still at the toddler to preteen stage. Sure, you can download music to your cell phone and computer. But eventually there will be some digital device capable, I think, of serving as a very robust cross-platform so you can get music anywhere you want it. That is sort of the ultimate model.

How much longer will the CD survive? I think it becomes what vinyl is, [limited to] a few specialty stores. Vinyl is the ultimate irony in that turntables now come with USB ports. The CD is being propped up and is on life support. On the other hand, the CD is still the majority of the business—at some labels it is 70% of volume. Today, the problem isn’t the labels. It’s the retailers—the floor space is becoming scarce.

Will the industry eventually have a diverse account base with a host of digital service providers selling music? Or will it remain a narrow channel with only mega-sites like iTunes and Amazon dominating the market? It’s going to be much more diverse. There will be a lot of niche players, just like now you have so many cable channels but on those channels you have many people making shows. There are more people in the television industry today making more money than ever before, but it’s very diffuse, with people making programs for the cooking channel, the golf channel and the fishing channel.

In terms of where indies and majors stand vis-a-vis the evolution of the industry, are their businesses becoming more closely aligned or is the gulf widening? The advantages that the majors had in the past are going away. Back then, you could only get into premium retail space with major-label clout. Now the retail stores don’t exist and big boxes carried limited titles. So while majors are still important there are so few spaces, [the gulf between the two camps] isn’t the issue it used to be. For example, the majors used to control radio. Now radio is such a narrow channel, with a smaller playlist and playing less music, so [radio] is less of an issue. That has forced labels and artists to find new ways to get their music to the public.

Don’t believe the hype: music is doing better than ever

by Nick Crocker

“There is nothing wrong with the music business, there is a problem with the CD business.” – Chuck D

If you reduced the last decade’s discussion about the music industry to a single word, it would be decline.

And yet, observing music consumption over the same period, the opposite is true. More people are listening to music in more ways than ever before.

On planes, in trains, in movies, on ads, at the gym, on the computer, at the desk, on the way to work, in the car, waking up, falling asleep, getting married, breaking up, doing housework, in the shower, in restaurants, cafes and bars and every second in between, music is present.

In last year’s MTV Music Matters survey of people aged 15-34, the percentage of people who claimed they liked music rose from 67% in 2007 to 85% in 2008.

Along the same lines, Bauer Media, the company behind Q and Mojo, released findings from a five-year study of music consumers.

The study found that 44% of respondents consumed more music in 2008 than in 2007 and in terms of favourite interests, music ranked higher than any other pastime including films, shopping, sport and fashion.

Perhaps it’s time to put the discussion about music into a new context.

The musical doom and gloomers have one major source of ammunition: falling CD sales. They’ve been in decline since in 2000, the same year N’Sync sold 2.41 million copies of ‘No Strings Attached’ in the US alone.

But in a world of kaleidoscopic music consumption, are CD sales still the most accurate gauge of the music industry’s health?

When you look beyond CD sales, you find that the total number of all units of music sold (that is, CD, digital, LPs and ringtones) grew by 10.5 percent in the US in 2008.

The biggest area of growth was digital downloads but there was growth in other areas.  Vinyl sales increased by a staggering 89%.

Elsewhere over the last few years, tens of millions of iPods have been bought and (at least partially) filled, Guitar Hero has sold a billions copies and a billion plastic guitars and streaming through sites like MySpace, Last.FM, YouTube and Pandora has become a daily destination for a new generation of music lovers.

Silvio Pietroluongo, director of charts for US-based Billboard magazine, sums up the situation neatly: “Music consumption has never been at a higher clip, it’s just a matter of trying to turn it into revenue.”

On the revenue front, the revenue issue is an ongoing one.  Major labels in particular are rushing to reorganise their business models to mirror the consumption habits of a society that can effectively access whatever music they like, whenever they like, for free.

But major labels aren’t suffering through a lack of smarts or will or talent.  Music industry people know what needs to be done and how things need to change, but you can’t implement that kind of shift within a multi-billion dollar industry still overly reliant on CD sales and subject to the demands of retailers, publishers, rights-holders, copyright lawyers, media-buyers, managers and most critically – artists.

So long as the focus is on that chapter of the music story, the bigger picture is going to be ignored.

If the music industry’s health was measured by total music consumption then it’s never been in better shape.

When the business models evolve and the music industry’s challenges are overcome, there are entire nations of music consumers hungrier than ever for the next song to change their lives.

It’d be nice if we could spent a little more time talking about that, and a little less counting plastic CDs.

Ann Arbor’s record store blues: Surviving in a download-dominated music world

By Joshua Bayer/Michigandaily.com
Daily Music Editor  On  November 2nd, 2009

Walking into Encore Records is like stumbling into a corn maze, a disheveled college bedroom and a natural history museum all at once — just 20 times more overwhelming than any of those places. The walls are practically crawling with musical artifacts from the past century, teeming with an otherworldly sort of life that’s completely missing when you’re browsing for obscure records on allmusic.com.

But as daunting as walking into a “mom-and-pop” record store can be, there’s also something incredibly warm and fuzzy about browsing records in a culture den surrounded by fellow music lovers. There’s something magical about pulling a vinyl record from a shelf based purely on the merit of its cover art, handing it to the store clerk and having him play it for you.

This might all sound hunky-dory, but if the financial wallop peer-to-peer music sharing delivers to these stores continues, this experience could be gone faster than you can say “Lady GaGa.”

It’s disturbing to consider how much the market for these homespun businesses has collapsed over the years.

“Ten to 15 years ago, there were actually about 12 record stores in (Ann Arbor). There was a way oversupply,” says John Kerr, the owner of Wazoo Records.

“And, slowly but surely, they’ve all crumbled and there’s just four now, really,” he says. “And probably all four of those stores, including us, are struggling … I don’t really think there’s too many people doing real well in this business.”

But thanks to the sweat and blood of these record store owners — and a miraculous stroke of cultural karma — these shops are still around, although the payout is slim.

“You’re not gonna get rich at this,” says Matt Bradish of Ann Arbor’s Underground Sounds. “I am not rich. I work a tremendous workload. Most people wouldn’t even contemplate the time commitment.”

To Peter Dale of Encore, Bradish of Underground Sounds, Kerr of Wazoo and Marc and Jeff Taras of PJ’s, owning a record store isn’t a business — it’s a crusade. And if the record industry continues to slump, these precious cultural hubs of community-serving self sacrifice could become an endangered species.

The Internet: Friend and Foe

In many ways, the Internet has been responsible for the economic pickle in which record stores have recently found themselves. According to Dale, the value of CDs has dropped at least 50 percent in the last three years due to the massive availability of albums online.

“(Prices are) gonna continue to go down,” he says. “That’s just the way it is.”

And Kerr adds that Wazoo has certainly been outsourced by sites like Amazon.com that conveniently “sell legitimate CDs on the Internet and have unparalleled selections.”

Still, record store owners have found ways to harness the Internet’s vastness in their favor. Dale mentions how the Internet has made it much easier to advertise to international markets.

“There’s just not enough demand locally to sell a 50- or 100- or 200-dollar record,” he says. “You have to find the audience, and the audience is national if not international.”

Back in the Stone Age, record store owners had to slog through the cumbersome process of posting countless ads in specialty collectors magazines and newspaper auctions. Now, they can simply put pricey rarities up for grabs on their websites and wait for someone anywhere on planet Earth to bite.

Dale also thinks the Internet has “made the prices of records truer.”

“Before, there were some things that were ‘collectible’ when they really weren’t. They were just regionally hard to find,” he says.

“Now, everything can be found — so the true value of stuff is apparent. You can just check online to see what things are selling for on eBay.”

In fact, both Dale and Kerr have even started selling merchandise on Amazon and eBay, despite the looming corporate cloud these marketplace conglomerates have cast on the “little guys.”

As Kerr says, “You’ve gotta figure out a way to make the Internet work for you to some degree. There’s no stopping it.”

iGeneration: The Kids Aren’t Alright

According to Ann Arbor record store owners, the most salient effect of the Internet on business has been the dramatic split in consumer demographics.

“It’s gotten rid of the casual listener,” says Bradish about record store-goers. “People who aren’t that serious about collecting music or really listening to music generally just download. They’re looking for a particular song.”

Evidently, these apathetic skimmers of the music scene have forsaken record stores for the convenience of downloading songs for 99 cents from the iTunes store or “torrenting” music on their MacBooks.

Kerr doesn’t think people like music any less now than they did 15 years ago — he simply thinks “ideas have changed about what we should be paying for it.” And, apparently, about how we should be getting it too.

Given the prime real estate these stores occupy on campus, the expected collegiate frequenters have been surprisingly infrequent.

Dale observes that his target demographic at Encore has completely shifted away from the college-age bracket.

“Most of my customers are from out of town,” he says. “I don’t advertise on campus because the average person on campus doesn’t buy stuff. They just take it off the Internet.”

Drew Leahy, president of MyBandStock (a website that allows fans to purchase “stock” in a band in exchange for exclusive access to band footage and updates), exemplifies this cultural swing. He reluctantly described how he was recently in a record store and couldn’t connect with it, despite his desire to do so.

“I like to search for music on a search engine and listen to a couple things and then decide what I like,” he says. “This (record store) doesn’t feel like it’s something that’s really hitting home to me, because of the convenience and the quickness and the accuracy you can get online.”

“I don’t really have that nostalgia of going to a record store and being really pumped about a release that’s coming out in the way that our parents or older siblings might have felt,” Leahy admits.

Marc Taras of PJ’s validates this generational gap, explaining how his core demographic has shifted in the past 15 years from 25-and-younger to 25-and-older.

While these stores are remarkably staying afloat, the general engulfment of culture by the Internet is increasingly pigeonholing them in a niche market. And the fan base for this market may be dying — literally.

The Death of the CD

When it comes down to it, the root of the problem lies in the fact that the CD, the former bread and butter of most record stores, has become financially inviable compared to the MP3.

“If you spend $1,000 pressing a CD, you have to sell 100 of them at $10 before there’s even a dollar actually made,” says Al McWilliams, CEO of Quack!Media, an independent multimedia distributor in Ann Arbor.

On the other hand, you don’t have to pay up-front costs to produce an MP3.

“With digital, you have to make one penny to profit,” McWilliams explains.

While record labels haven’t stopped selling CDs just yet, sales figures might give them incentive to go totally digital. According to eMpyre ramireX, the pseudonym-masked president of Galactic Dust, a Detroit-based independent record label, for every $45 he makes on MP3 sales, he only makes about $5 on physical CDs.

So why do these companies continue to sell CDs? Well, mainly because certain people keep buying them — there’s a sort of CD fetish inherent in bona fide music nerds.

Brian Peters of Ghostly International, an independent Ann Arbor music label, discusses the compulsive tendency of hardcore audiophiles to “want the tactile sense of holding the LP: seeing the art, having that ownership over the product and that connection to the band.”

And, of course, there’s the issue of sound quality.

“The amount of quality information — audio bits — that are on a CD is just such a higher sampling rate than what’s on (the usual) MP3,” explains Mark Clague, assistant professor of Musicology at the University.

Bradish of Underground Sounds speculates that “people who are buying a CD or an LP have usually heard it and know what they’re getting into and are making an investment in sound quality.”

As far as MP3s, Bradish is turned off: “It always comes off flat and compressed and tinny. There’s absolutely no room sound … most vinyl, if it’s mastered correctly … you can actually get a feel for the room it was recorded in.”

Luckily for these record stores, audiophiles have shown a rekindled appreciation for the subtleties of acoustic fidelity. While CD sales are plummeting, sales in vinyl have enjoyed an unexpected resurgence, and local record stores have capitalized on this trend to stay alive.

“We sell a lot of CDs, but they just pay for the rent basically,” says Dale. “We make our money off of (vinyl).”

While the CD market may be drying up significantly, the true music fan’s unrelenting passion for the physical object is a staple that’s preventing these stores from closing down — for now.

Local Record Stores: Keeping Reality Real

So what is it that we would all be missing out on if our local record stores just decided to up and leave? According to the major players in the Ann Arbor music scene: a lot.

For one, record stores are helping to keep downtown Ann Arbor culturally alive in a time when real estate is becoming increasingly smothered by mass-produced chain stores.

Bradish is particularly vehement on this subject: “People have got to realize, what do they want? Do they want corporate control of everything? If so, keep buying on the Internet. If you want to live in a fascist society, keep buying on the Internet … This town’s turning into a giant restaurant anyway.”

These stores are keeping the local music scene alive, too. Just walk into Encore — the front counter is overflowing with shelves of exclusively local music from the past umpteen years. Encore, Wazoo and Underground Sounds all carry extensive collections of local releases. And they do it on an essentially non-profit basis, marking up the CDs just enough to cover stocking costs.

But most importantly, Ann Arbor record stores actively spread the love for local artists. Leah Diehl of the band Lightning Love mentions how Bradish fervently promoted her music, hooking her band up with a show in Ohio and selling her album to people who had never even heard of the group.

And while Google may be cheapening the value of a record store owner’s musical expertise by placing all of that knowledge and more within the easy-access reach of a search engine, there’s a human element inherent in record stores that will never be displaced by the Information Age.

Peters of Ghostly International talks about the sort of invaluable relationship that a consumer can build with a record store owner.

“Matt Bradish at Underground Sounds is really good about bringing in specialty discs. I got the My Bloody Valentine reissue EPs on vinyl. And he knew, the second I walked in he knew I’d want it,” Peters said. “He knows me. I know him. And there’s just that great sense of curation that I think you don’t get at Best Buy.”

And Clague mentions how, while the Internet has revolutionized the spread of culture and information, it “has a way of sort of atomizing everything to make it almost invisible.”

There’s a certain preciousness to witnessing all of these musical trinkets huddled together under one roof, a preciousness that evaporates when this information is relegated to Web pages.

“There’s something about walking into Encore, in a space where the titles are almost falling down because the stacks are so high,” Clague says. “And you get a visceral sense, a physical sense, a psychic sense of the kind of legacy and amount of art that’s been created that there is to grasp … If you just started at one end and tried to listen your way through the store, you’d die before you made it 10 feet past the front entrance.”

Perhaps more than anything, local record stores are refreshing slices of reality in a world that’s been increasingly digitized. While they may be quaint, local record stores are a crucial component of Ann Arbor’s cultural vibrancy as a sort of embassy where audiophiles can converge instead of walking around, severed from the outside world by their iPod earbuds. And while the stores may be on or near their deathbeds, they’re still around for now.

“We can’t take our whole life and put it online. There has to be something you can walk out of your house and actually do,” McWilliams of Quack!Media says. “I have a special appreciation for record stores but I also have a general of appreciation for real life and leaving the house sometimes. I met girls in record stores.”

 

WMG’s secret college beta downloading test

By Jeffrey R. Young/Chronicle.com

Under a blanket of secrecy, six colleges have begun testing an experimental service from major recording labels that lets students legally download all the music they want and put it on any device. But some innovative features have been stripped from the service since it was proposed, leaving it similar to existing services that have not made much of a dent in illicit file-sharing.

The experimental service, led by Warner Music Group, is called Choruss. It has no informational Web site, no brochure, and almost nothing in writing to describe it, even though it is slated to be up and running for students on the six campuses in January. The participating colleges have asked not to be identified, in part because the music industry’s efforts have been criticized in the past and the issue is a political land mine for campus officials.

The only source of public information about Choruss is Jim Griffin, the Warner Music adviser leading the effort. In an interview with The Chronicle, he said the model for the proj ect has changed since his first discussions with college leaders, more than a year ago.

On the basis of those initial talks, the colleges would pay the music industry a blanket licensing fee, similar to what radio stations pay to air popular songs. There was also discussion of the record labels’ signing a “covenant not to sue” for any illegal downloading of their songs by users on participating campuses, he said.

Some popular blogs about technology quickly criticized that scheme after Mr. Griffin began pitching it to college leaders. TechDirt called Choruss a music tax for students, and other observers noted that it might not fully shield colleges and students from legal action if the downloaded songs were by artists not participating in the program.

Mr. Griffin said the bloggers and other critics were basing their complaints on misinformation. However, it seems that the most unusual aspects of the initial plan have been jettisoned since those early talks.

For instance, when asked about the “covenant not to sue,” Mr. Griffin said, “We’d initially considered the idea but have now decided to use a traditional license approach.”

Another substantial change from the early days of the proj ect is that the licenses now would be with individual students rather than with colleges—although on some campuses, student governments or other groups may agree to pay the fee on behalf of students.

As Mr. Griffin described the current plan, it sounded much like previous efforts to sell digital music to students. Account holders would log into a Web site, enter a user name and password, and be granted access to a catalog of millions of songs from major and independent labels. “They can then access a large pool of songs for a flat fee,” he said.

Each of the six campuses will test a different price to see which attracts the most usage. “The most exciting question for me is what terms and conditions and price points will optimize the revenue to the rights holder,” Mr. Griffin said. That is key to making sure artists get compensated for their creative work, he said.

Lifetime Download Privileges

The most unusual feature of Choruss is that users would be able to download any song in the collection to their own computers, with no restrictions. Unlike Apple’s iTunes, which charges about a dollar per song for unrestricted downloads, this would be an all-you-can-grab song buffet. Want to make CD’s? Sure. Put thousands of songs on your iPod? No problem. Even after students stop paying the Choruss subscription fee, they will be able to keep all the songs they have downloaded. “They get to keep them the rest of their lives,” as Mr. Griffin put it. That differs from some subscription music services, which allow access only while users are active members of the service.

What’s to stop students from paying for one month and downloading the whole collection? “Nothing,” said Mr. Griffin.

The basic premise, he said, is that it is so easy to download music from unauthorized Web sites that some model has to be developed to persuade users to do the right thing and pay for the content instead. “If you find a way to make it faster, easier, and simpler to pay, we think people will pay,” he said. “Our gut tell us that the right model is flat fee, unlimited use.”

Many campus-technology leaders wonder just who the secret beta testers are. Cornell University officials have denied a report that they are involved, as have officials at Pennsylvania State University, Illinois State University, and the University of Chicago.

Why the secrecy? A college official familiar with the discussions, who asked not to be named, said colleges just don’t want to be attacked by critics of the music industry, especially since they may choose not to participate after the initial experimentation phase. “They’ve been burned before by premature discussion about this and other proj ects,” said the official. “So, up until the point at which they have their own message nailed down, there’s no upside to discussing it and plenty of potential downside.”

More details apparently will be made public this spring, when students on the test-bed campuses will be asked to pay a monthly fee to try it out.

Already, however, other companies are queuing up competitors that promise more-radical reform.

Noank Media, a company based on a Harvard University research proposal, is working on a blanket-license program that would charge colleges and other institutions a flat fee. Users would install software that would count every time they played a song, for the purpose of distributing royalties to the musicians.

“We’re not going to stop file sharing—it’s probably going to happen in one form or another, and it’s probably folly to try and stop it,” said Charlie Moore, a Noank official who has traveled to campuses in the past few months to drum up interest. “If we’re able to use consumption data to compensate the rights holders of a particular recording, then we think we’ve got a handle on a fair and equitable model for rights going forward.”

The company is still negotiating with the music industry, and if all goes well, it could have a product ready for use by next fall, said Mr. Moore. (It has run a test of the technology with a small Internet-service provider in China.)

When asked about Noank, Mr. Griffin indicated that the music industry is not opposed to the many experiments going on with digital music. “Any school or company would be smart to work with them,” he said. “And we at Choruss are happy to work with them where that makes sense.”

//

A Tale of Two Industries: What Do Books and Music Have In Common?

Kyle Bylin, Assoicate Editor/Hypebot.com
In recent news reports, it’s becoming more and more apparent — that at a time when the record industry is reeling from changes that it barely understands — other industries are beginning to experience many of the same transformations.  Take, for instance, the recent pricing war between Wal-Mart and Amazon – where 10 book titles were dramatically discounted by the big-box retailer and Amazon, including many others, followed suit by decreasing their prices as well.

It didn’t take long before the bemoaning began, that, “If readers come to believe that the value of a new book is $10, publishing as we know it is over,” explained David Gernert, who is a literary agent to John Grishman, in Motoko Rich’s article Price War Over Books Worries Industry.  Sound familiar?  Well, it should.  As far back as 2004, Wal-Mart began to insist that it should be able to sell CDs for less than $10, instead of the average price tag of $15.99.  It’s not hard to imagine similar laments coming from bedeviled music industry veterans, claiming that if consumers, not yet music fans, believed that the value of a new album by Brittany Spears is $10, the record industry as we know it is over.

With both cases, the problem isn’t so much as to whether or not these cultural products will become devalued in the minds of their audiences – inevitability, they will, regardless of who or what pricing war or piracy site emerges – it’s that Wal-Mart, like other big-box outlets, doesn’t really care about the publishing or record business models, as much as they care about driving traffic to their stores and online sites.  So, keep in mind, that if the records you release or the books you publish don’t make good placeholders in their Sunday morning ad – that when substantially discounted, could drive your audience to buy a plasma screen TV or some nifty new furniture – maybe being in these businesses isn’t something that you’re cut out for or should rely on.  After all, if your dream is to sell lots of CDs and novels through them, just don’t forget that the day your content is no longer deemed a method of selling higher ticket items, there will no longer be Wal-Mart paydays for you.  Meaning that, like everyone else, you too, will have to learn to connect with your fans and give them a reason to buy.

Likewise, as some first time authors are learning, just because you have a publishing deal, doesn’t mean they are actually going to market your book.  This relates to the stories of artists going to the record stores in the towns they were touring in to find out that their records weren’t even available there.  Much like Major Labels, Neely Tucker, Washington Post Staff Writer, reports, “Book publishers actively market and promote authors, of course, particularly the big names, but for thousands of writers it’s a figure-it-out-yourself world of creating book trailers, Web sites and blogs, social networking and crashing on friends’ couches during a tour you arrange.”  Again, much like being an artist today, “Being an author has become much more of an ongoing relationship with your audience through the Web, rather than just writing a book and disappearing while you write the next one,” says Liate Stehlik, publisher of William Morrow and Avon Books in Tucker’s article On Web, A Most Novel Approach. “You have to be out there in the online world, talking and participating.”

But, wait!  There’s more.  With 105,575 albums released in 2008, those authors in the publishing industry couldn’t possibly relate to how saturated and fragmented of an audience that artists have to market themselves to.  Not true.  As there were 560,000 books published in the United States during that same time period.  For film, counting only those that played at least a one-week/regular admission engagement in either Los Angeles or New York commencing during calendar year 2008, there were 573 titles released.  What does this explosion of choice mean for these industries?  “Our relationship with music has changed forever,” writes music critic John Harris in his article The golden age of infinite music.  “This is a truly golden age – the era of the teenage expert, albums that will soon have to be full of finely-honed hits and the completely infinite online jukebox.”  Mike Masnick of TechDirt commented, “Nearly everything about the music industry today is better. More music is being made than ever before. More people are making music than ever before.  More people are listening to new music than ever before. More musicians are making money from music than ever before. Even more musical instruments are being sold than ever before.  The only thing suffering is the sale of plastic discs.”

In an interview with Jeffery Brown on a PBS’s NewsHour, Lev Grossman, writer and book reviewer for TIME magazine, commented, “And we’re seeing the same thing happen right now, totally new ways of distributing text, totally new ways of buying and selling it.  And I think the novel will totally transform as a result of it.  An obvious thing is just that a lot of people are making it – are being read who were not being read before, before the sort of New York establishment publishers were the gate-keepers. People are flooding around that gate. And we’re seeing voices that never used to be heard getting online, getting read.  And it’s wonderful. I mean, it’s – I’m looking forward to this great sort of Cambrian Period of – of literary fertility and innovation. So, in that respect, it’s – It’s a really exciting time to be reading.”  To which Kassia Krozser, founder and editor of Booksquare.com, said, “What we’re also seeing is new publishers coming into the mix.  We have had several new publishers announce in the past year where they’re going digital first, print maybe.  This allows them to lower their overall costs and introduce new and interesting authors and new ways of telling a story… So, all these different ways of telling story and bringing readers to books is opening up just more possibility, because then they write more.  They create more. And the wave of creativity we have going on right now is incredible.”

More interesting still is Ray Suarez’s interview with Raphael Sagalyn of the Sagalyn Literary Agency on NewsHour back in July.   “When new technologies come into the book business, I think back 20 years ago to the rise of the audio book, there was great concern that the audio book would cannibalize the real book. And that is not true. It helped increase the sales of books,” Sagalyn says.  “It increased the distribution, increased the desire for people to own storytelling, and storytelling is at the heart of what books are all about.”  E-books, with their perceived lower cost in the minds of readers, share some of the same concerns among publishers — that not only will they cannibalize the profits of the twenty some dollar hardcover book, but they will cause people to expect the hardcover to become cheaper due to the contrast in pricing.  To anyone who follows the record industry, such claims are old news.  “The invention of the phonograph was going to discourage people from going out to see live music,” Greg Kot, author of Ripped, writes, “The introduction of music radio was a surefire way to kill record sales.”Home taping is killing music” screamed the magazine ads when the cassette tape was introduced.  Of course, each of those sky-is-falling alerts from the music industry was a false alarm. With each technological innovation, music became more accessible and more lucrative.”

There you have it – whether you take into consideration pricing wars, the lowering of perceived product values, the predictions of the end of industries as we know them, problems with overreliance on big-box retail outlets, the struggles of first-time signed authors and artists, the explosion of choice and oversaturation of the market, the release of digital products at a drastically lower price, similar creative renaissances, or industry views on disruptive technologies cannibalizing profits – it becomes more and more apparent that while both industry’s have lots of differences, in many ways, the publishing industry has lots to learn from what the record and music industries have experienced over the last ten years.  Book piracy becomes an obvious hot-topic of learning and needed discussion, but could it be that the same people, who go through the trouble to pirate books, also happen to be the same people who already buy tons and tons of books too?  More than, say, the “average” book reader?  While we can only patiently wait the results of those research studies, it’s quite possible that their results will be of no surprise to anyone who’s read similar studies on the music piracy.

Universal Music CEO Morris To Bring in Successor

Posted by: Ron Grover on November 02/BusinessWeek

Universal Music Group CEO Doug Morris is quietly making plans to bring in a successor to help run the world’s largest music company , BusinessWeek has been told. Sometime this summer, Universal intends to elevate its international chief Lucian Grainge to take over Morris’s CEO slot for the company whose artists include U2, Elton John and Mariah Carey. Morris, who will be 71 in November, is expected to remain as chairman and has told intimates that he does not intend to retire.

Details are still be worked out, according to those with knowledge of the arrangement, but it is being portrayed internally as a promotion for the 49-year old Grainge, who is highly regarded by executives at Universal’s Vivendi parent company. When they signed Morris to a four-year contract extension last year, Vivendi top executives encouraged their long-time Universal chief to bring in a successor, BusinessWeek has been told. Morris will continue to work on key projects for Universal, but will turn over day-to-day operations. Morris expects to maintain his seat on the Vivendi management board, which includes top executives from the French conglomerate’s business units.

Morris, a one-time songwriter with wrote the 1966 Chiffon’s hit “Sweet Talking Guy,” was a record producer before becoming president of Atlantic Records in 1980 and president of Warner Music (WMG) in 1994. In 1995, he moved over to Universal Music’s predecessor, MCA Records, as its chairman and CEO. The company was renamed Universal the next year, and acquired Polygram in 1998. That deal gave Universal labels like Motown and A&M Records. Universal currently sells more than one-third the music sold in the U.S..

 

At Universal, Morris became the industry leader in pushing for digital distribution of music. Universal was the first label to sign on with Steve Jobs’ iTunes, helping to pave the way for other labels to sign on before Apple (AAPL) launched the music service in 2003. Morris was also a key player in the music industry’s fight with Jobs that pressured the Apple CEO to offer variable pricing, by which iTtunes now charges more to download just released music and less for songs from a label’s catalog.
Morris is currently lining up advertisers for the expected launch next month of VEVO, an online service he masterminded for streaming music videos on YouTube (GOOG). Morris has already signed Sony and several independent labels, who will also provide their videos, and is in talks with Warner Music and EMI. The service is envisioned to be a music version of the video site Hulu, a free service by which TV networks generate revenues by selling advertisements. Universal, which has built a large business to sell artists’ merchandise, would also use the service for e-commerce.

Universal wouldn’t comment on the music company’s ongoing succession plans. But the London-based Grainge, who has three school-age children, recently purchased a house in Connecticut and is expected to wait until his kids school year ends in June before making the move to New York.

Grainge, who became Universal’ international chairman in 2005, began in the music business as an A&R executive in 1978 for CBS Records, and rose through the ranks as at Polygram before becoming chairman of Universal’s British operation in 2001.

Q&A: Clive Davis on Singing in the Shower and the Coming Robot Revolution

by Eric Spitznagel

October 29, 2009, 10:57 PM

Nobody wants to be the old dude at the kegger. You know the guy I’m talking about. He shows up uninvited, wearing skinny jeans and sporting a depressingly obvious comb-over and saying things like “You got me straight trippin’, boo.” He’s obviously way too old to be partying with college kids, but he doesn’t seem to notice or care. He’s still clinging to an idealized youth that he refuses to believe has passed him by. He just wants to be treated as a peer, and maybe even a hipster. He doesn’t realize that it’s time to give up the posturing, and accept that with age comes a certain inevitable irrelevance.

Clive Davis is not that guy.

Which is kinda weird. Davis certainly seems like he’d qualify for creepy-old-guy-at-the-party status. At 77 years old, he’s one of the oldest working producers and executives in the music business. And yet somehow he’s also one of the coolest. And no, I’m not just saying that because he’s powerful enough to have me killed. The chief creative officer for Sony Music—who has more awards than most people have white blood cells—has been a music guru for roughly as long as there’s been recorded music. During his 40-plus year career, he’s signed artists as diverse as Janis Joplin, Pink Floyd, Iggy Pop, Bruce Springsteen, Patti Smith, Aerosmith, Sarah McLachlan, Carlos Santana, Billy Joel, The Grateful Dead and Alicia Keys, among dozens of others. While it wouldn’t be unreasonable to assume he’s long past his expiration date, he still manages to keep churning out records. He masterminded Whitney Houston’s not-entirely-embarrassing comeback earlier this year, and just last month helmed Harry Connick Jr.’s collection of covers, called Your Songs. Even when he’s surrounded by music professionals at least five decades his junior—as he was at his annual pre-Grammy Awards party last February, with a guest list that included Kanye West, Rihanna, the Jonas Brothers and will.i.am—Davis, with his trademark tinted glasses and Cheshire Cat grin, was still the hippest guy in the room.

I called Davis at his office in New York, which was exactly as intimidating as you’d imagine. It’s difficult not to think that if you just play your cards right, there’s a chance he’ll sign you to a three-album deal. “Old Clive Davis said he’s surely gonna make you a star,” Steven Tyler once sang, “just the way you are.” While Davis wasn’t interested in discussing my imminent pop stardom, he was more than willing to reminisce about his remarkable career, mostly by listing his numerous credits and doing a roll call of his talent roster with the indefinite article. But hey, if the man who discovered “a Whitney Houston, and a Janis Joplin, and a Bruce Springsteen” can’t get a little quirky in his old age, who the hell can?

Eric Spitznagel: You just produced an album of standards with newcomer Harry Connick Jr. What made you decide to take a chance on this kid?

Clive Davis: One of my goals, apart from discovering new artists or looking for new material, is to stand up for great songs, and prove how great songs can really last, whether it’s from the last century into the new century or from present day into the future. So I wanted to do a new album of great material, and I wanted to do it with an artist I’d never worked with before, and who was probably the best young contemporary pop singer in the world. Harry fit that bill, plain and simple.

When you decide to produce a record for somebody, is it like when the Pope makes a decree? They really can’t say no.

Well, I knew this was new territory for Harry. He came in and we had lunch together, and I said to him what I just said to you. And he loved the idea. But he said, “Look, I’ve never collaborated with anybody before. I wouldn’t even know where to begin.” And I told him, “I’m not trying to change one thing about you. I think you’re a great singer! I think you’re a great musician!” I think he was greatly relieved when we started discussing who should do the arrangements and I said, “You! You’re a great arranger!”

So you never had to pull out the big guns with Harry?

Guns? What guns?

You have a reputation for being very persuasive. Your first job at Columbia Records during the early 60s was renegotiating Bob Dylan’s contract. You obviously know how to make a musician bend to your will.

No, no, no. There was no persuasion. It has nothing to do with that. It’s about my track record. I think people have respect for achievement. They respect if you’re able to succeed time and time again over enough years. It’s not the gift of gab that makes you survive in this business, because that’s only as good as the deal you’re making that day.

Death Row Records C.E.O. Suge Knight once convinced Vanilla Ice to sign over his royalties by dangling him over a 20th-floor balcony by the ankles. Did you use a similar tactic with Dylan?

(Laughs.) No, not at all. That’s not within the realm of my experience.

Ah, I get you. You’re one of those executives who think an artist can be manipulated without physical violence.

I don’t think “manipulated” is the right word. I don’t manipulate them any more than I persuade them. I have a different relationship with every artist I work with, depending on what they look to me for. For artists who write their own material, like a Bruce Springsteen or a Patti Smith, my job is just to translate it to as large a public as possible. There’s a reason why Patti inducted me into the Rock and Roll Hall of Fame. I have a really healthy respect for artists who do it all on their own. I haven’t had great relationships with an Aretha or a Whitney or a Patti Smith or a Jerry Garcia before he died because I tried to persuade them of anything. It’s because I have a healthy respect for their artistry.

But you took a more active role with Connick. You picked most of the songs for his album, right?

We embarked on this project together. Over a five- or six-month period, we’d meet every Wednesday afternoon for five or six hours and just listen to music, looking for the right songs. I felt it shouldn’t just be old classic songs but also more recent composers, and that’s why we included Billy Joel’s “Just The Way You Are” and Elton John’s “Your Song.”

You’ve got an innate talent for matching up artists with material. Where does that inspiration come from? Is it like when people hallucinate on peyote and they’re visited in a desert by a talking fox spirit guide who gives them all the answers?

(Long pause.) I would say semi.

Semi which part? The talking fox or the peyote?

I don’t remember ever seeing that little fox you’re talking about. (Laughs.) But I do know that when I come up with an idea, it just pops into my head. Where it comes from, I don’t know. But it’s not just about me. It really is a collaboration. When Harry and I were working on this record, we’d pick three songs, and Harry would go back to his home studio in Connecticut and do an initial arrangement, a work demo of each track done with a synthesizer. And then I’d listen to them, or he’d sing the songs live to me, and I would go over the tempos. I might say, “Look, you did it at 96 BPMs. I’d like to hear it at 102 and 108. Let’s see what happens if we speed it up.”

Whenever I think of you in the studio, I imagine it’s something like Phil Hartman’s impression of Frank Sinatra. You’re wearing a tux and sipping on a cocktail and saying something smarmy like “It’s a wrap, baby!” Is that a pretty accurate depiction?

I don’t think that captures me at all. When I’m in the studio, my touch is very light and very supportive. My only job is to create a great creative environment whereby rebels—such as a Garcia, such as a Ray Davies, such as a Springsteen, such as a Dave Grohl—would feel comfortable. If you’re working with an artist like an Alicia Keys, who is more in the R&B pop world but writes her own material, she’s got to be allowed to flower and grow and do what she feels. Your touch is very light but your relationship is warm and solid. They look to you as somebody who understands their creativity and allows it to flourish.

I totally want to hug you right now. You’re like the music industry’s daddy substitute.

When I do get into the creative arena, it’s by coming up with “Smooth” or “Maria Maria” for Carlos Santana, or coming up with the hits that brought Dionne Warwick back into the mainstream, up through “That’s What Friends Are For,” or all the songs that Whitney Houston has ever recorded. In those cases, I’m on the creative front lines. When I’m working with a Whitney or a Warwick, I’m not just the head of a company or creating an environment for self-contained artists. I am very much a part of the creative process. It’s me and the artist. Whether it was Santana doing what he’s doing with Supernatural, or coming up with the Great American Songbook idea for Rod Stewart, or coming up with new material for a Manilow or a Whitney Houston that’s led to a long-term career, you go on the line and look at the results. I’m a part of the creative team.

Are you a closet crooner? Do you sing in the shower when nobody’s listening?

(Laughs.) No. Never. I’ll listen to plenty of music, either on my iPod or CD player. But I prefer listening to those who really can sing.

You won’t belt out a little “I Will Always Love You” just for the hell of it?

Not at all. I listen to music all the time. I’ll bring home new records every weekend, as soon as they hit the charts. I don’t want to get arrogant about my track record. I earn it the hard way, by keeping my ears fresh and making sure that I don’t go over the hill.

There aren’t a lot of guys in their late 70s saying, “Yo, that new Lil Wayne track is dope!”

They don’t hear new music. Or they look for songs that would’ve been a hit 20 years ago that would never be a hit today. To keep fresh, to give advice, to be a fountain of expertise, it requires hard work. You gotta keep your ears to the ground, in every category, whether it’s rock or hip-hop or pop. I listen every weekend to those records that hit the charts.

During last February’s Recording Academy tribute, Bill Maher called you “the greatest enabler of music in our generation.” That’s a curious choice of words. Do you consider yourself an enabler?

(Laughs.) You know, I’ve only ever heard that word used in a different context. But I think he meant it as a compliment.

Is it possible that you’ve enabled artists who maybe shouldn’t have been making music?

Obviously I love to discover talent and help to nurture it. I’ve helped artists who’ve gone on to meaningful careers and it’s been very rewarding. Whether it’s a Patti Smith or an Alicia Keys or a Whitney or whomever, I’ve been a part of their lives and they’ve been a part of my life. That is what I love doing, that has been my joy and my passion. To hear a demo or just somebody playing a new song on the piano, and to be able to say, “I love that song.” And to record it, whether it’s with an Aretha Franklin or a Dionne Warwick or a Barry Manilow or a Whitney Houston, and that song goes on to be sung and recognized all over the world. I get a great deal of fulfillment from that.

Yeah, but that doesn’t really answer my question. Let me put it another way. You know how sometimes you try on a shirt at a fancy clothing store and it looks great in their dressing room, but then you take it home and realize it’s an overpriced piece of shit? Have you ever signed an artist after the excitement of watching them perform live and then the next morning you think, “Oh fuck me, they’re terrible?”

Not so much. I take the signing of an artist very seriously. Obviously I evaluate their talent. There are times when an artist might not grow to the potential that you’d hoped for. If it’s an artist who sings, for example, like a Whitney Houston or a Jennifer Hudson, you don’t think, “Oh, they don’t sing as well as they used to.” No, I don’t think that happens at all. It’s about the development of their creativity. Has their writing talent continued to grow and evolve? If you see somebody when they’re 21 or 25, they’ve spent all those formative years pouring themselves into that first repertoire. And when you sign them, you hope that they’re going to continue to grow over the next two years.

I guess what I’m really trying to ask is, do you owe the nation an apology for Kenny G?

(Long, awkward silence.)

(Nervous laughter.) That was just a joke, obviously.

(Laughs.) Yeah.

O.K., uh… let’s talk about Whitney Houston!

O.K.

You helped stage her latest comeback. Was that her idea or yours?

I called her and said it’s time. She hadn’t recorded in many years, but the mail I get from all over the world, it’s obvious that people miss Whitney. Even as music changed and hip-hop became more dominating, both in the urban and the pop sector, everybody missed her. Whitney didn’t just have hit records, she had songs that stood the test of time. So I called her and said it’s time to get back to work. She said alright, if you’re calling, let’s see what we can do. That’s what happened.

How much of her comeback involved changing the locks so that Bobby Brown couldn’t get back in?

(Laughs.) I won’t even answer that, because you know it is what it is.

You have no opinion about her relationship with Bobby?

I’ve never gotten involved in the personal lives of my artists. Whitney and I have a very close professional relationship. The caring is there. But I don’t get into the personal life. I honestly don’t.

Whitney openly discussed her drug problems with Oprah last month. On a scale of one to ten, with one being pretty darn obvious and ten being “no shit, Sherlock,” how aware were you that Whitney was using drugs?

I think when she decided to do Oprah, we knew it was going to be a very soul-baring interview. I think she was ready. I think she was ready to do exactly what you saw on Oprah.

Did she give you a little advance warning that she was gonna spill the beans?

(Laughs.) We knew that she was going to do it, because we both had to go to Chicago for the show.

Yeah, but did you know that she’d admit to freebasing cocaine?

It wasn’t a surprise. She felt close to Oprah, and as she expressed on the program, if she was going to talk about what occurred and what took place, she felt comfortable sharing that with Oprah.

It’s been said that if you remember the 60s, you weren’t really there. Do you remember the 60s?

I remember it for no other reason than that it changed my life. I never knew that I’d have a career in music, I never knew that I would end up on the creative stage. It was nothing that I was prepared for. Whether it began with being offered the presidency of Columbia Records overnight, or whether it was finding myself at the Monterey Pop Festival in 1967 and signing Janis Joplin and Blood Sweat & Tears, and then seeing these artists become worldwide household names. My life totally changed in the 60s, so I remember it for a whole host of reasons.

So you weren’t the guy at Monterey saying, “Dude, I can taste colors?”

(Laughs.) No, that wasn’t my thing.

And yet you still managed to sign Janis Joplin. How much Southern Comfort did you have to drink before she said yes?

Zero.

We’re talking about the same Janis Joplin, right?

If I’ve learned anything in life it’s that you need to be true to yourself. In the same way that you want an artist to be true to him or herself. Monterey was a new culture for me. The customs were different. The attitudes were different. The music was different. It was a first time experience for me. When I was with Janis, I never pretended to swig from a bottle of whiskey or go one-on-one with her. A big rule for me is that you don’t try to out-drink your talent.

Because… you’ll lose?

Because they look to you for expertise. My stock-in-trade, what I’ve worked very hard to achieve, is that I’m an expert who can be relied on to create a trusting creative atmosphere. And Janis sensed that.

What are your thoughts on music piracy? The lawsuits clearly didn’t work. What can the industry do at this point?

I think we’ve got to continue being as vigilant as we are. It’s a terrible thing for people to think they can get something for nothing. We’ve got to redouble our efforts. We can’t stop fighting for the rights of our songwriters and artists. We depend on their creativity. They deserve to be rewarded for their efforts.

Can I make a suggestion? You should just start randomly showing up at people’s houses with a baseball bat, screaming, “You want to steal from me, motherfucker? I will make you eat your own balls!” I promise you, I will definitely buy Santana’s new album if it means Clive Davis won’t beat my lower back with an aluminum bat until I pee blood.

(Laughs.) Well you’re very nice. Thank you.

What do you think about the auto-tuner technology that’s so popular with some pop singers lately? Do you consider it cheating?

I don’t think it’s… in what context is it cheating?

It’s using studio tricks to alter a singer’s voice that might otherwise be god-awful.

Well, I’ve never worked with an artist whose voice is god-awful, so I couldn’t say. I think it’s perfectly acceptable to utilize a technology that makes sure the pitch or the tune is perfect. But I’ve never seen it used with any of my artists to substitute for their natural voices.

I have a theory that the music recorded with auto-tuners is being produced exclusively for robots. Have you really listened to this stuff? It’s like easy-listening for C3P0.

I think for a record to be successful, or for an artist to be successful over a period of time, they have to deliver. Not just in the studio, but in a live setting.

But what if this music is triggering some emotional response in robots? What if it’s inspiring them to lash out against their creators?

These artists could have hit records—and maybe they’re doing it with the technology you’re describing, and it’s a hit record disguised by a lesser talent. But then they go on tour and they can’t deliver, and they might have a hit record but they’re not selling albums. To really survive as an artist, you’ve got to be able to do both.

Yes, I understand that. But how do we stop the inevitable robot uprising?

(Long pause.) I guess there should be vigilantes to prevent that from happening.

(Laughs.) Thank you! It’s about time somebody came out and said it.

Seems pretty obvious to me.