John Mellencamp suffered a couple of health scares including a heart attack in 1994. He survived leading Billy Joel to joke that his friend outlived the music industry. The recording industry peaked in 1999 with $15-billion-a-year sales. Times were so good that R.E.M. signed a reported $80 million dollar record deal. Within a couple years, the boom ended. The industry committed blunders that led people to pirate music online. At the same time, executives were slow to recognize the threat posed by new technology. The combination of new technology and price gouging essentially killed the record industry.
The boom years in the eighties and nineties allowed consumers the freedom to purchase more music. This led to immense profits for executives, producers, and artists alike. Executives recognized that the bulk of company earnings derived from album sales. In response, they decided to gouge consumers. They phased out the popular cassette singles to force buyers to either buy more expensive (and less convenient) compact disc (CD) singles or full length albums in the CD format. A cassette single ran about $3.50 while a CD single cost $7.50.
The bean counters assumed people would rather purchase a $14.99 CD over the $7.50 CD single. However, music buyers were savvy enough to recognize most artists lacked the ability to put together a quality full length album. Pop acts focused on hit singles as opposed to rock acts which concentrate on full length artistic statements. Often times, albums consisted of one or two good songs and a bunch of low quality filler. As a result, people began searching for alternative outlets to acquire music.
While the record companies moved to gouge consumers, technology developed allowing music junkies to circumvent the music store. By the early 21st century, fans could download their favorite songs on their computers and mobile devices. People began sharing files and the bottom fell out of the industry. By 2011, sales dropped 64% from 1999 and 45% from 1973. The executives failed to recognize the change in technology and did not adapt. Instead of getting ahead of the changes, they decided to sue people for pirating music. Horror stories appeared in the news of people receiving massive bills. Regardless of the merit of the lawsuits, the record industry lost the public relations battle. People had no problem stealing music from greedy billionaires and millionaires.
Sales have not recovered. People buy half as much music today as they did in the mid-80s. Five albums went platinum in 1999. Fifteen years later, Taylor Swift released the only platinum record. Downloads, subscriptions, and ringtones have sold well, but not enough to make up for the losses. Those sales are apparently in decline. The industry has entered into the “era of the single.” It is somewhat reminiscent of the late fifties when consumers purchased 45s. However, that period fed into a creative peak for artist which led to the sales boom. Today, there does not appear to be much creativity and the industry seems to be heading into a death spiral.
The record industry committed suicide. They decided to gouge consumers and force them into purchasing full length albums on CD. However, they did not account for download technology and file sharing. When the industry began to adapt, they chose to sue rather than embrace the changes. These new technologies undercut record sales and have yet to recover.