It''s Only Rock ''n'' Roll

The chilling news greeting the record industry at the beginning of 2003 was that Clive Davis, the "Svengali of Pop," was conducting a massive purge of staff in his new capacity as chief of RCA. Davis, who has exhibited the Midas touch throughout a career that dates back to the 1960s, knows how to create stars and sell records. But even Davis sees the writing on the wall.

Overall album sales are in a nosedive. The record industry has had total control over popular music since the 1920s, even as formats changed from 78 rpm records to 45 rpm single and 33 1/3 rpm long-playing records, eight-track and cassette tapes, compact discs, and finally DVDs. The phenomenal growth that the industry has experienced since the 1960s has stalled.

Brick and mortar record stores are showing the strain of this sales decline. The national retail chains -- including Sam Goody, Wherehouse and Tower Records -- are closing stores across the country. Best Buy recently announced that it will close 90 of its 740 Sam Goody stores nationwide. CD sales fell 2.8 percent in 2001, the first decline in a decade, then fell off even more precipitously in 2002, dropping another 8.8 percent.

One of the industry's biggest players, Sony, reacted to the sales slump in what many insiders view as a panic attack by firing music kingpin Tommy Mottola and replacing him with TV executive Andrew Lack earlier this month. Lack lacks experience in the music business, which makes his appointment look like a desperate gamble at a time when the major labels need to understand the nature of their potential customers.

The industry has placed the blame on the fact that consumers are able to swap music over the Internet and burn their own compact discs on home computers. Those elements have contributed to the decline in album sales, but laying the blame entirely at their doorstep is akin to blaming the recession on Sept. 11 alone.

The record industry has been slow to adapt to the fact that its customers are creating a new kind of audience for popular music, an audience that is creating new paradigms for listening to that music. The hegemony that the industry has enjoyed over the distribution of the music has been challenged. The Internet must be viewed, not as the enemy, but as a promotional tool to drive music fans to the content they're looking for.

It's not an accident that a number of highly successful touring bands -- Phish, moe., Widespread Panic, Gov't Mule, Dave Matthews Band, String Cheese Incident and a host of others -- have built an audience base by cooperating with fans in the free Internet distribution of their music.

These groups make their money selling tickets and merchandise at their shows, which are markedly different each night. By creating taper sections at their shows and encouraging fans to exchange tapes these bands use their own music to advertise themselves, demonstrating to fans why it's worth seeing them play a dozen times over the course of a year instead of just once. The fan base feeds on itself. When it comes time to release a studio album, those same fans are eager to purchase it.

The mainstream industry has shunned these groups because the financial strategy in promoting them involves long-term investment. Product development means building a band's base from scratch, offering tour support, promoting the group in local markets using the fans themselves as the spearhead of the marketing program, and making use of whatever remaining broadcast sources are available.

The institutionalization of broadcast radio is one of the biggest problems the labels face in attempting to promote new groups. The radio stations simply won't play untested product. While MTV was in ascendance the industry was able to ignore this problem, but now that the ship is sinking the absence of radio as a legitimate promotional tool for new music is glaring.

Yet the audience is out there. The swelling attendance records at major outdoor music festivals such as the New Orleans Jazz and Heritage Festival proves that this audience will travel far and spend lots of money to hear the music it likes. Cities all over the country are holding smaller versions of these festivals with great success.

So what is the future of popular music?

Clearly, it is developing the new audiences that flock to see the touring rock bands like Phish and Widespread Panic, capitalizing on the festival boom, and making more creative use of the Internet. Merchandising accessories to the music -- T-shirts, caps, etc. -- has become an industry that rivals the album sales themselves, and most major label deals today reflect that fact. But in the end, the cold, hard fact that the music industry may be facing is that the days of mega-platinum album sales are a thing of the past.

The companies that are doing the best business right now are the independent labels that can target their markets more efficiently and are not burdened by a huge corporate superstructure. The music industry may not have to go back to selling its wares out of the backs of car trunks, but it is going to have to accept the fact that less is more.