A Memo to Record Executives

By Nicholas Thompson, Washington Monthly. Posted October 2, 2003.

Every two weeks or so, I pack up my Taylor acoustic guitar, fill my backpack with CDs of my music, and head down into the New York City subways to busk away. I make good money, and I get to watch and study people, too. For example, I can now tell from about 50 feet away whether a woman is likely to give me money.

If she's walking fast, wearing headphones, angrily porting a briefcase, or chasing down one of her children, that's an easy no. She wouldn't throw a dime into Jimi Hendrix's case. Other women, who are more aware of their surroundings, have greater possibility. Usually it boils down to makeup and midriffs. If the woman is decked out, she may look at me, but only to see if I'm looking at her. But if a woman is dressed casually, walking slowly, and thinking about something beside herself, she's likely to listen for at least a few moments, and then I have a decent chance she'll enjoy the music, stop, and maybe buy an album.

This is but one of the lessons I've learned from performing in train stations that I think could be helpful to the floundering music industry, or at least to the many talented musicians stifled by it. These lessons haven't gotten me rich, but I've sold about 500 records in the subways playing sporadically since releasing my new album in January. I make more money down there per hour than I do as a journalist. And while my sales and profits have gone up, the music industry's have gone down. Sales of recorded music in the United States have dropped by more than a 100 million units in the past two years, and, after decades of steady gains, industry revenues have dropped 15 percent over the last three years.

Different experts will give different reasons for the decline. The music industry itself blames its customers, or more specifically young people who download music for free from increasingly popular file-sharing networks. Others, such as Josh Bernoff of Forrester Research, blame competition from video games and other entertainment. Whatever the reason, it's clear that the music industry's old model of doing business isn't working so well in today's market. That old model relied on labels plucking out a handful of bands they believed would sell big, and investing millions of dollars in production, promotion, and marketing to get them the time on the radio dial or the space in the record stores they required to catch fire. The industry defended itself against complaints by saying they were simply meeting the demands of popular taste.

In truth, there was always a tautological element to this argument. The music industry functions like a cartel, and the public's preferences have always been limited by the choices they were given. Now that the market for music has changed, and CD sales are declining, the record industry is hiring lawyers and lobbyists to squelch the new technologies that are changing the music business. Over the last few months, the Recording Industry Association of America has issued hundreds of subpoenas to college kids who swap music over the Internet. Meanwhile, the industry's lobbyists have convinced Sen. Orrin Hatch (R-Utah), himself a songwriter, to float the idea of allowing companies to remotely slag computers whose owners used them to download movies and songs.

But the industry's efforts are counterproductive. About 60 million people in the United States have already swapped copyrighted material over the Internet, and that number isn't likely to shrink. The times are a changin', and record companies should learn to how to profit in this new environment. With all the modesty required of a guy who doesn't make enough money on a given night to buy front-row seats at a Mariah Carey concert, let me offer a few pointers.

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