Résumé en français : L'industrie de la musique accuse le téléchargement illégal d'assécher leurs ventes... mais cela veut-il dire pour autant que les labels n'ont pas d'autres sources de revenu?

If you listen to music business representatives talk, you would think that the music business is in financial peril. They say that illegal downloads of mp3s are destroying the industry while putting artists and thousands of jobs at risk. This all sounds like scary stuff but perhaps we shouldn't believe the hype because, after all, hype is what this business is all about. In fact, at a closer inspection, these broad doomsday statements are actually quite contradictory. In 2009 the industry took in over 1.5 billion euros, which was an increase of 2% above 2008. So if Internet piracy is killing the music industry, where are all these profits coming from?

To understand this better we have to go back to 1976 when a relatively unknown artist named Peter Frampton released a double live album titled 'Frampton comes alive'. This came at a time when record companies were designed to operate at a loss to help their parent companies with tax breaks. For example if RCA Victor was making millions from selling hi-fi equipment and televisions it was only to their advantage to have their music divisions loose enormous amounts of money in order to offset their profits. Peter Frampton's album changed all of this by making a profit a huge profit. It sold over 16 million copies while at the same time the Bee Gee's released 'Saturday Night Fever', which sold over 25 million copies. Suddenly the record companies had a problem: they were making too much money! To alleviate this problem they decided that they needed more high selling artists to sustain their profits while at the same time they offered these new artists millions of dollars to record their masterpieces. This money that was 'given' to the artists was, in fact, more like a bank loan than a gift. This worked out great for the record companies. If the record sold well they got their money back, while if the record sold poorly, they were able to post a tax loss. For the artists, however, it was an entirely different story. Many artists found themselves with record contracts but with all of their sales revenues going directly back to the record companies, they were left practically destitute. Their only source of income was to tour, and tour they did..... constantly. Of course all of this was good for the record companies because it was like free promotion on their investments. The artists were also savvy, realizing that there was much money to be made from merchandising their brand with tee shirts, hats, photo albums etc. In fact Gene Simmons, the bass player for Kiss, famously said "I don't just want to be in a rock n’ roll band, I want to be a rock n’ roll brand!"

Flash forward to the present where the record companies can no longer recoup their investments due to the loss of sales, which is a direct result of mp3 downloading and sharing. While they are, at present, unable to combat music piracy, they do have other tricks up their sleeves. Now when an artist signs a contract he must agree to a certain amount of tour dates per year with a large percentage of the gross touring profits going straight to the record company. The results can be seen in the numbers: in the US, concert ticket sales have gone from $1.5 billion in 1999 to $4.6 billion in 2009 with the average ticket prices jumping from $25 to $63. This is not due to inflation because if ticket prices rose accordingly, the average price would be around $35.

Touring isn't the only pie that the record companies have their fingers in. One of the biggest merchandising companies in the world, Bravado, has been recruited by almost every major label to sell artist-related products with only a small percentage of the profits actually reaching the artists.
In fact most music related merchandise is no longer sold at concerts but at large retail outlets such as Wal-Mart and Carrefour.

It seems that while the record companies have experienced drastic declines in sales, they have proved themselves adept at surviving whatever evolutionary obstacle they face. Darwin would be proud. As for the artists, it's still the same: they are controlled by their contracts. As Tom Waits famously said " The large print gives and the small print takes away'.