We all know the music biz is in trouble: Its health is generally measured by sales figures, with reports of the financial failures of major labels a close second. But for people working in the trenches, the industry’s health is measured by one simple metric: whether or not people are getting fired. This is applicable broadly, too. Arguably the biz can absorb the various changes going on, and may be making more revenue from other sources even as sales decline. But if they’re not making money, that will be reflected starkly in companies either closing completely or cutting large numbers of employees. To find out what the trend is on this score, I went through five years’ worth of Billboard Bulletin stories looking for news of closings and staff cuts, and summarized my findings on a couple of charts:
The data are divided up into indies and majors, with the yellow line representing the total number of companies that closed (chart 1) or companies that made major staff cuts (chart 2). Some findings:
It’s possible, of course, that all these closings and cuts are for the best. Maybe shedding all these employees will allow major labels to operate at a profit again. And maybe weeding out the failing companies will allow the successful startups to thrive. That may end up being true. But for the people at the heart of it, the ones going in every day and putting their time in, things don’t look good.
I’m pretty sure that the major Indie label players (Sub Pop, Merge, Matador, Saddle Creek, Domino, Epitaph, Mute and the biggest of them all, Beggars Group) are pretty safe from closure (especially Beggars what with Vampire Weekend, M.I.A. and Radiohead on their satellite label XL), but i’m a little worried about the little guys (Moshi Moshi, Arts & Crafts, Dance to the Radio) that make great music, but don’t shift alot of music. Arts & Crafts, for instance, is putting out Los Campesinos! second album We Are Beautiful, We Are Doomed out in a very market unfriendly way (limited copies, packed in a long box, CD-only) and Moshi Moshi failing to sell Kate Nash in any big way here in the US despite the fact that she’s infinitely more talented than Adele and Duffy, who both have seen massive success in here.
Furthermore, I have little hope that my prediction that Chinese Democracy will save the music industry because of people like me who just want to say that they finally own an official copy of the album.
@DocStrange: yeah, I didn’t want to use the term “indie” but couldn’t think of a better one; I really meant “non-major label,” which incorporates everything from the labels you mentioned to startups like Pandora to regional distributors like Caroline. I think it’s a lot of the less visible non-major-label companies that might be in trouble.
How much of the sudden uptick in ’07/this year is due to the overall economy going to the crapper? I suppose ’07 wasn’t a disastrous as this year, but there were plenty of signs.
Nice job, Mike.
It’s interesting that ’06 was the better year for employment, because in terms of raw sales it was pretty disastrous; if memory serves I think that was the first year in the string of down years this decade where the percentage drop in album sales went into the double-digits. According to Billboard, the only year that was decent this decade was ’04, when sales were up over ’03 for most of the year–and then a weak Christmas left the year basically flat. Which makes me wonder if the ’06 easing in layoffs was a trailing indicator.
Some of the layoffs would have happened even if revenue had held steady. That’s because of the superior economies of scale offered by digital media. As digital sales replace physical sales, fewer people are needed in the field to service stores (fewer music retailers exist), fewer workers are needed at distributors (fewer CDs sold means distributors cut back or go out of business), less warehouse space is needed (fewer CDs in inventory, lower sales). If each lost CD sales was replaced by a digital album sale, there would have been some cuts (though probably not a lot, since majors probably would have employed people they could do without). Since digital has not replaced lost CD revenue, the cuts have been deep.
As for being safer at a major, that may not be the case. Since there are far more people employed at the majors, it takes many indie layoffs to equal a single round of layoffs at a major. And I’d bet there is a reporting bias in the numbers taken from Billboard. Every round of layoffs at the majors gets covered by Billboard. Indies don’t get the same coverage, so there may be many layoffs/closings at indies that were not accounted for.
@coolfer: I see what you’re saying about the reporting bias (though where do you go for that sort of info?), but I think regardless the trend overall over time is probably about the same, no? This originally began as an investigation into the fate of all the music-biz trenchers, the distros and the publishers and like that, which don’t usually get covered. In 2005, three distributors folded.
And I guess you could say that it depends on the indie–that a fiscally secure indie is a safer employer than the majors. But the fact is, if you work for a place where there are layoffs, you can theoretically dodge those. If you work for a place that folds, everyone gets screwed. And given how close to the margin most indies operate, and the tightening of credit and all, unless you’re working for a very established place, I’d probably take my chances with a major at this point. Of course, I bailed out entirely, and the real solution is to work for a company dealing with live music, so what do I know.