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FROM THIS EPISODE

A Look into 2006

This is Celia Hirschman with On the Beat for KCRW.

As we turn the focus to a new year, I look among my contemporaries in the music business for the leadership that will help usher in the new era. For most, the business has never been in worse shape. Radio continues to play only a tiny fraction of released music, leaving most artists unappreciated and under-exposed. Artists must compensate for this imbalance by touring the country regularly, seriously adding to development costs for each release. Large music retailers stock less CDs than ever before, owing to slow sales. Less CDs in the stores means less sales potential overall. Meanwhile, consumers continue to demand lower CD pricing, forcing labels to focus on their priority artists. And the brightest light in music marketing, the Internet, still unfairly opens the door to consumers burning work, without compensation to the artist, the publisher or the label.

Though the growth of the iPod is a wonderful oasis in a sea of trouble, it's difficult to ascertain the economic benefits of this medium in the long term, with physical CD sales declining so substantially.

But the business is changing. With the announcement of Motorla's iRadio today, we will soon have a portable hand-held device that can deliver high fidelity sound, with 435 channels of radio. Iradio also offers the ability to buy and download music on the spot, along with a full spectrum of services currently on other mobile telephones.This is the beginning of the next wave for the music business; 2006 brings the release of many more integrated hand-held devices, taking mobile entertainment into the next era.

In the face of all this, one might expect leadership at the top of the music business to help guide the music industry through these changing times. But most major labels remain mute, tongue-tied by their own fears. It's not surprising.

These labels are run primarily by smart executives who built a different kind of business. While technology changes exponentially every day, it's clear that the labels have lost control of managing the manufacturing, production and sales of music in the traditional environment. So that's where the real reckoning will occur in the music business. After all, how necessary is a large label, with sizeable field staffs in a digital world where much of the work is done with a computer and a modem? All of the labels have trimmed down, but I think we're going to see more significant cuts in the coming year, owing to the changing business environment.

Still, the future looks very interesting for some. The independent labels in America with their lean staffs have had a really interesting sales year. Indy labels like Merge from North Carolina, Saddle Creek from Omaha, Beggars Banquet in New York City, and Sub Pop in Seattle, have all shown they could break acts at a fraction the cost; and while the independents may not be able to remedy the sizeable problems befalling the record business or dedicate resources to the future industry, these labels will continue to feed the musicians they work with. They are right sized.

Hopefully, the majors will come to recognize how the business has changed, and will see themselves as the content providers they truly are. Maybe then, they can focus on finding great talent.

This is Celia Hirschman with On the Beat for KCRW.

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