A UTD Prof Found the Music Industry's Assassin: Radio. Regular Ol' Radio.
A couple of weeks back, Rolling Stone published a lengthy, thoughtful music-biz obit that resonated with industry insiders, with its bad news (album sales down 200 million units since 2000) and inside-baseball history lessons (the collapsed talks between Napster and label heads seven years ago) and the larger and still-unanswered questions (among them, how is an industry that's never been more popular in the virtual world in utter free fall in the real one?). There were some suggestions for salvation offered in a separate story, but they're hardly the solution for what ails the music industry.
In this week's Business Week comes word of another quick fix the industry's considering: getting Congress to force traditional, terrestrial radio -- a $20-billion, 80-year-old industry -- to pay royalties just like its Interwebs and satellite siblings have to do every time they play a song. And while that seems utterly insane -- after all, radio was how the industry marketed its product, to the point where labels illegally paid stations to spin their stacks o' wax until as recently as 2005 -- there's at least one man who thinks traditional radio has become the music industry's competitor, if not its silent killer: Stan Liebowitz, the Ashbel Smith Professor of Economics at the University of Texas at Dallas.
A few years back I wrote about Liebowitz, when he was contradicting the music industry's assertion that online piracy was killing the industry. Now he's reversing course, sort of, by insisting that the oldest music-playing medium around has become one of the industry's biggest problems.
"I am not disputing that radio is very good in picking which songs are going to become very popular," Liebowitz tells Business Week. "But if radio didn't exist, we could see a 50 percent to 60 percent increase in record sales." Because, ya know, people would have to buy CDs rather than hope their favorite song comes on the radio. Which seems like such 1974 thinking in these days of MP3 blogs and XM radio and program-your-own Interweb stations. But that's what he says.
And if you just don't buy it, well, a few months back Liebowitz published a working-draft version of a research paper -- titled "Don’t Play it Again Sam: Radio Play, Record Sales, and Property Rights" -- which you're more than welcome to read right here. In the 40-page paper, he insistst:
The results indicate that radio play does not have the positive impact on record sales normally attributed to it and instead appears to have an economically important negative impact, implying that overall radio listening is more of a substitute for the purchase of sound recordings than it is a complement.
In other words, radio killed the music business when no one was looking (and everyone was listening). --Robert Wilonsky