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How the Music Industry Saved Itself

Remember those doomsday predictions? Well, it turns out that online music isn’t killing the record business — in fact, it’s helping

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A decade ago, around the time Tower Records was going the way of the eight-track and album sales continued to nosedive, the music press was flooded with think pieces about how to save the labels from drowning in red ink. Many of those zeroed in on the cost of CDs ($10 price point!) and the various ways in which labels could tamp down digital sharing. ”Everyone wanted the silver bullet — that one thing that’s going to save the day,” says Spotify head of content Steve Savoca.

The music business has been in a free fall for years (from a staggering 785 million albums sold in 2000 to 326 million a decade later), but stability is resting comfortably on the horizon. Overall sales are still down in 2013 compared with the first half of last year, but the industry is optimistic thanks to the growing market share for digital music and the explosion of streaming volume (more than 50 billion songs so far this year) on the backs of event albums like Justin Timberlake’s The 20/20 Experience, Daft Punk’s Random Access Memories, and Jay Z’s Magna Carta…Holy Grail. So what’s changed? The rules…

Give Away A Little, Get Back A Lot
When the MP3 became public enemy No. 1, the assumption was that if you offered any music for free, the buying public would never again pony up for an album. But music fans respond to getting an advance taste for free. A number of high-profile artists — including Timberlake, Daft Punk, Vampire Weekend, Queens of the Stone Age, and David Bowie — made their new albums available as free streams a week before the release dates, and they all enjoyed a significant first-week sales bump over their previous releases. ”We reached out to iTunes about [offering] the stream,” says Vampire Weekend manager Ian Montone. (The album, Modern Vampires of the City, debuted at No. 1, with 134,000 copies sold, an 8 percent increase over their last album, 2010’s Contra.) ”[Streaming] seems to…easily connect the dots between fan to actual consumer — someone willing to click and buy the album.”

Offer Options
For years, industry executives assumed that people only wanted their music one way, but actually they’re happy to diversify their intake — a streaming subscription here, a handful of iTunes downloads there, and yes, even good old-fashioned CDs. ”We’ve heard from retailers that people go into their stores and they’re checking stuff out on Spotify on their headphones, and then deciding what to purchase based on it,” says Savoca. ”That’s very heartening.”

Embrace Even Older Technology
Even when the business was bottoming out, there was one part that was steadily rising: vinyl. It turns out that people are willing to pay more for a product that feels special — and sounds awesome. (There were 4,551,000 pieces of vinyl sold in 2012, compared with only 990,000 units moved in 2007.) ”The labels are doing what they should do: releasing new albums on vinyl and offering a free download that comes with [it],” says Matt Schnable, co-owner of Harvest Records, an independent record store in Asheville, N.C. ”They’re servicing the person who wants the physical thing, and then also at the same time wants to take it wherever.”

Work Outside The System
Of course, if you’re one of the richest, most iconic rappers working, you can write your own rules. For the recent rollout of Magna Carta…Holy Grail, Jay Z doubled down on the ”give a little taste” strategy and partnered with Samsung, which bought one million digital copies of the record and gave them away early — and for free — via an app available only to Samsung customers. Essentially, the mobile company underwrote a leak of the new album. And Jigga still sold: The album stormed to the second-biggest opening of the year, moving 527,000 copies. What’s more, Magna Carta…Holy Grail did a record 14 million streams on Spotify during its first week, reinforcing the idea that the Internet can be a huge sales catalyst for hip-hop artists. Just look at the proliferation of free online mixtapes, which have translated into huge major-label sales for the likes of Drake, A$AP Rocky, and Wiz Khalifa. ”Five years ago, labels did not like me at all,” says KP, founder of DatPiff.com, one of the Web’s leading mixtape clearinghouses. ”[Now] I work with almost every major label hand in hand to collaborate on these releases, because they see the benefit it has for their artists to create a presence on the Internet.”

Don’t Be Like Kanye
Kanye West could certainly have used a little more presence. In the lead-up to the release of his album Yeezus, West made a handful of appearances but mostly skipped promotion altogether — and he refused to adopt the industry’s new model: no advance streaming, no preorders. ”I could give a f— about selling a million records,” he told the audience during his June 9 set at New York City’s Governors Ball music fest. Guess that’s a good thing: Yeezus sold a first-week career low of 327,000 for West, and the buzz died down almost instantly, with sales dropping 80 percent in week 2. Here’s hoping he’s better at feeding baby North than the promo machine.