Wednesday 30 January 2002

Pop go the rock stars as tech rules

Poor Mariah Carey. Last week, the pop diva got dumped by her record label, EMI Group. Rich Mariah Carey. The 31-year-old singer walked away from EMI with US$49-million in her jeans. Ms. Carey keeps US$21-million from her contract with EMI-controlled Virgin Records. And EMI is paying her another US$28-million merely to go away.

EMI had only recently signed Ms. Carey to a multi-album deal. Now EMI - whose stable of stars includes the Spice Girls - says it will write down Ms. Carey's golden handshake as an exceptional charge. It's difficult to identify the loser in this bitter divorce. But winner or loser, Ms. Carey is not alone.

Several established pop stars - Rod Stewart, Sinéad O'Connor, Van Halen - similarly have been dropped from their labels. David Bowie once leveraged his catalogue to raise US$55-million through a bond issue secured against future royalties. But he, too, was recently axed by EMI.

It's tempting to regard these ruptures as little more than gossip-page anecdotes about ego-pampered rock stars feuding with cutthroat record execs. But in truth, they are symptoms of a major shakeout in the global music industry. A generation ago, major record labels were powerful gatekeepers who fashioned music tastes, sponsored the careers of rock stars and drove demand for records through their market power over the radio industry. Rock stars were marketed as mythical demi-gods who, whisked around in limousines, trashed four-star hotel rooms and collected gaggles of gorgeous groupies.

For record labels, these extravagant indulgences found justification in robust cash-flow charts. Rock groups - Led Zeppelin, The Who, Pink Floyd - filled football stadiums and churned out albums that sold 20 million copies. The good times were rolling.

Today, however, global music giants - EMI, Universal Music, Warner Music, BMG, Sony - are frantically attempting to respond to threats beyond their control. First, sales are down. In 2000, global music sales fell by 1.2% to US$36.9-billion. Revenue erosion has been more severe in North America. In the United States, mid-year 2001 sales dropped 4.4% - from US$6.2-billion to US$5.9-billion - from a year earlier.

Second, music tastes are fragmenting across a wide range of genres. In 1991, rock music generated 35% of U.S. sales. But at the end of the decade, that figure had dropped to 25% as hip hop sales increased. This fragmentation has been a challenge for big record labels, whose market model was long driven by profits produced by a small clutch of rock stars.

Third, young people are downloading songs on the Internet and listening to music on MP3 players. Why pay $15 for the latest Puff Daddy compact disc (whose manufacturing and distribution costs are only $2.50) at a bricks-and-mortar retail outlet (whose markup is $6) when you can download it for free?

Confronted with these realities, big record labels feel they can no longer keep a large stable of fading rock stars on their books in the hope that, some day, they may produce another hit record. Global music giants are increasingly driven by short-term results. Take Mariah Carey. Her 1993 album, Music Box, sold 23 million copies. But her most recent record for EMI, Glitter, sold only two million. In the music business, that's a failure. So Ms. Carey was dumped.

A rationale for this short-term strategy can be found on the Billboard charts, where newcomers with little pop star aura dominate the Top 30. On this week's chart, top-selling albums are by such recording artists as Creed, Linkin Park, Nickelback, Ja Rule, Nas, and Shakira. Yet long-established bands - Pink Floyd, Madonna, Rod Stewart - are way down the list with "Best Of" records.

Against this backdrop, a group of big-name pop stars was calling on California lawmakers last week to liberate them from their "slavery" under the control of music giants. Led by Courtney Love, the pop stars - including Carole King, Sheryl Crow, Stevie Nicks, and Don Henley - said they are labouring for music giants in "indentured servitude".

Ironically, the contentious issue is the length of contracts. Pop stars want legislation preventing record labels from insisting on long-term contracts. Record labels, for their part, want to retain the right to sign artists to long-term deals. Yet, as the dumping of Mariah Carey demonstrates, they also want the freedom to terminate contracts when they please, whatever the cost.

David Bowie, meanwhile, has decided to bypass music giants by selling his songs via the Web, where music can be offered as a loss leader to sell merchandise. Other pop stars will likely follow his example. That's precisely why media giants - especially Vivendi Universal - are moving into the Web space to deliver music.

The stakes are high in the standoff between pop stars and the corporate giants that produce their records. Record executives are still singing Led Zeppelin's The Song Remains the Same. But pop stars are chanting Bob Dylan's The Times They Are A-Changin'. Perhaps both sides should listen to the Rolling Stones song, You Can't Always Get What You Want. Consumers, meanwhile, will be the main beneficiaries of these battles, as music becomes cheaper, more abundant and easier to access. Empowered by technology, the kids are all right.

(National Post)

Many thanks to Mariah Buzz.



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