Music, RIP

The music industry is dead. Long live music!

New technology has always profoundly altered music. First it was the violin, an alternative to the violoncello that could “sing.” Then it was the pianoforte, a keyboard instrument that allowed Beethoven to pound out notes that even he could hear.

Then records, radio, MP3s and downloads. After every change, gloom-sters proclaimed in gravelly voices the end of music. Lately, the business has had trouble: since the 2001 deal with Napster file sharing sites have multiplied like rabbits on steroids and sales and downloads have fallen by some 40%.

But in spite of this royalty payments have been rising, even during the recession. The industry isn’t dying, but it is changing profoundly. Live music has been making a comeback. Ticket prices have more than tripled in real terms over the past 10 years, even as concert tours have multiplied. And what fans don’t spend on $170 tickets to Simon and Garfunkel is often plunked down for a t-shirt or baseball cap.

Music’s nostalgic pull has also drawn in corporate sponsors, from soft-drinks to mortgage companies. It’s no surprise that Miley Cyrus signed a Hannah Montana deal with Wal-Mart. But music’s biggest fan is the television. For background and also shows like “Glee” and “Dancing with the Stars” which are music shows in their own right.

The music industry isn’t so much dying as coming home. For centuries the way to artistic success was to perform in front of a live audience. The 20th century’s brief music-publishing experiment is over, destroyed by the digital copy. Some things can’t be downloaded. It’s back to business as usual.

Douglas R. Tengdin, CFA
Chief Investment Officer
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