When famed Vancouver-based music producer Garth Richardson heard the news that HMV would close its landmark downtown location at Burrard and Robson streets late last year, he saw yet another nail in the music industry’s coffin.
Once a titan of music retail, HMV has more recently become a Titanic navigating treacherous waters filled with technological icebergs and innumerable pirates. And as the music industry struggles to adapt to rapid changes brought on by technological advancement, rampant piracy and copyright infringement, front-line industry professionals in Vancouver are plagued with uncertainty about the future of their business. Like many people these days, Richardson, who owns the Nimbus School of Recording Arts in Vancouver, took to Facebook to vent his frustration.
“It looks like HMV is closing its doors in Vancouver. The end is near. I just want to thank all the people that did not pay for music and videos. Please take some time to look at your fine work. Job well done!”
His post sparked a flurry of more than 100 comments.
The news of HMV’s downsizing was all too familiar.
Richardson was in Los Angeles when Tower Records closed and in New York when the Virgin Megastore closed.
He described the Internet as the “Wild Wild West,” where people who download songs for free face zero penalties thanks to outdated copyright laws, which he said have failed to preserve the value of intellectual property.
Simply put, he thinks people who download pirated songs online should be sent a bill.
Richardson, who has worked with internationally renowned artists such as the Red Hot Chili Peppers, Rage Against the Machine, Nickelback and Hedley, said these days he works 10 times harder for a 10th of the money he used to make.
The numbers speak for themselves.
In 1999, the U.S. recorded music industry was worth more than $14 billion. A decade later? $6 billion.
A typical recording budget for major label artists he used to work with was roughly $300,000, now it’s about $30,000, he said, and artists expect albums to sound as good today as they did back then.
But Richardson still holds out hope for a bright future in the music industry. He believes it lies in subscription services such as Spotify and Rdio, which allow users to stream an unlimited number of songs for a monthly fee.
Studios face the music amid industry downturn
Although the music business has always been vicious, defining success in 2011 is much different than it was a few decades ago.
“Years ago, your version of success would be making millions of dollars for a record company, and you would be in debt to the record company, and you’d probably never be out of debt to the record company and then you’d get dropped by the record company,” said Jonathan Fluevog, owner of Vogville Recording in Port Coquitlam. “Now, a version of success to me is where somebody can make a full-time living from music, whether it be somebody who has hits on the radio and videos to somebody who is just playing bars at $700 a gig.”
Fluevog, son of Vancouver’s reigning footwear icon of the same name, opted for life as a music producer rather than get involved in the family business. He conceded that profit margins for recording studios are much thinner now than when record companies were flush with cash and eager to unveil new artists.
Nearly all of the musicians who record at his studio have day jobs, even if they’re signed to major labels, he said, and some work under-the-table due to contractual obligations to those labels.
Fluevog said that squeezing a living out of a recording facility these days is increasingly difficult, but an aggressive social media strategy coupled with a lean bricks-and-mortar operation has allowed him to stay in the game for more than 15 years.
But the same can’t be said for new players on the scene.
“If you were to take a million-and-a-half dollars and you were to open up a facility and outfit it with all of the gear you would want, there is almost virtually no way for you to possibly pay back that loan – ever.”
According to Statistics Canada, sound recording studios in British Columbia had 10.8% operating profit margins in 2009, the latest year for which data is available. But a lot has happened in the industry since then, and other Statistics Canada numbers hum a more ominous tune.
Record production and distribution firms had operating revenues of $44.3 million in 2006 and $21.3 million in operating expenses. In 2009, those same firms had operating revenues of $15.8 million and operating expenses of $12.4 million.
Scratch Records owner Keith Parry is no stranger to those numbers.
He’s owned the small independent record shop on East Hastings Street since 1987. In the early 1990s, he branched into distribution, finding success with local artists like the New Pornographers. But a few years ago the bottom fell out of the distribution business as CD sales plummeted with the advent of Napster and other Internet file-sharing services.
Parry said the simple reality is that “people made too much money off CDs for too many years.”
In 2004, things took a turn for the worse when stores stopped buying physical product in bulk. Parry now sits on thousands of unsold CDs and records, and has limited his store’s hours to Saturdays because it wasn’t making enough money to be open seven or even four days a week.
“The concept of distribution means selling things in bulk,” said Parry, “and no music will ever sell in bulk again in a physical format.”
For example, the first New Pornographers album he distributed sold 30,000 units, and he would regularly ship out dozens or hundreds of discs to retailers. But as the demand for CDs dried up, even though the band got bigger, stores requested only a few copies of later releases.
He also said that no CD should ever sell for more than $10 these days, given the competition for more convenient digital alternatives. But he also acknowledged that there’s been an uptick in the demand for vinyl records, which Scratch always sold more of than CDs anyway. Yet it remains unclear whether a resurgence in vinyl is merely a trend among hip audiophiles or a sign of a critical-mass backlash against the tinny, thin sound of digital MP3s.
Competition increasingly fierce for entrepreneurial musicians
But studio and retailer struggles tell only a small part of the story.
Musicians now face more competition than ever, not only for dollars but also for opportunities to play original music versus Top 40 covers, which are a much less risky financial venture for small, local entertainment venues.
“Cover bands are thriving,” said Scotty McCargar, a professional drummer who cut his teeth playing with bands such as Bif Naked, Static in Stereo and Strapping Young Lad.
He remembers the decadent days when Universal Music was courting Static in Stereo. The label would fly the band to Toronto, pick them up in a limousine and take them out for “lavish dinners.”
These days he makes a living floating between more than half a dozen bands playing covers and originals. The industry downturn has also meant that many successful bands in Canada now rely on grants and loans to tour and record. That financial support comes from institutions such as the Foundation Assisting Canadian Talent on Recordings (FACTOR), which gets partial funding from Ottawa and contributions from radio broadcasters, the Canada Council for the Arts or the Canadian Association of Broadcasters’ Starmaker Fund.
How that money is allocated is as much a lifeline for some musicians as it is a source of frustration for others, who question why established successful artists still get much of the money.
One of McCarger’s bands, a heavy metal outfit called Southern Death Threat, has applied for FACTOR loans four years in a row.
“Every year, we’ve applied for a video grant, an album grant and a touring grant,” he said, “and four years in row [we’ve received] nothing, absolutely nothing.”
His frustration and confusion was honed partly while he played as a hired gun for Bif Naked.
“Even though I played in Bif Naked, I don’t think Bif Naked needs the $30,000 or the $10,000 grant either,” he said.
“If you can go gold by selling albums, I think you’re doing OK by that point and now you should’ve saved some pennies and maybe not bought your Lexus.”
But FACTOR president Duncan McKie is quick to point out that most big payouts to established artists such as Arcade Fire are loans against touring losses.
Sound recording loans in the tens of thousands of dollars, meantime, must be paid back once an artist starts selling records. However, repayment levels have dropped as CD sales have plummeted, prompting the foundation to review how it does business.
“It’s a little more complex than people understand, and I get that because nobody has the time to read through our rules,” said McKie. “Where they think it’s a simple matter of us handing a cheque to Arcade Fire for whatever amount of money, it isn’t as simple as that.”
He said the foundation is doing everything it can to improve the grant and loan process, and if people feel they’ve been misjudged they can always re-apply.
But the fact remains that the old business model upon which the music business was built is broken, an idea explored in exhaustive detail in Robert Levine’s new book Free Ride: How the Internet Is Destroying the Culture Business and How the Culture Business Can Fight Back. Selling physical content, Levine observed, for around $15 has now been replaced with individual songs sold via iTunes for $0.99.
The industry also found itself competing with free music downloads when file-sharing sites exploded onto the scene and fighting against the cat-calls of so-called “free culture advocates” hell-bent on loosening copyright laws in the name of free expression to the delight, and, at times, the behest of large technology firms.
Although the heady days of “smoking hundred dollar bills” is over for the music industry, Nimbus Studios owner Richardson said more music is being created than ever and it’s more accessible than ever.
“Music is getting bigger and stronger and better because of YouTube, because of iTunes, because of Spotify, because of Rdio; all these new ways of actually hearing it,” he said. “We just have to figure out how we all get paid from it. That’s the real challenge.” •
