December 5, 2004

Economics of the Music Industry

More on the Decline of Rock: A reader writes:

My personal theory about the decline of rock-- record company profits are not perfectly correlated with record sales. If a group becomes too popular (say Led Zeppelin circa 1976) they can get a better deal for themselves and reduce the margins of the companies. Ergo, record companies pursue a series of disposable acts rather than nurture those of the highest quality. (Nothing wrong with it, just smart business.) Disco, boy bands, and rap are producer driven and hence ideal forms for the record execs. The Clash, Stones, and Grateful Dead are bad investments.

The Clash used to drive their record label nuts by insisting on lower than usual suggested retail prices for their records.

I don't know enough about the music industry to say if this is true, but this economic logic has almost killed off the sit-com, with reality TV starring amateurs replacing it. The supporting cast of Seinfeld showed just how much leverage even lesser stars had when they got paid about $22 million apiece for the final season. Supposedly, NBC offered Jerry Seinfeld personally $5 million per episode or $110 million to do one additional season (on top of the $66 million in salaries the other three would split, showing the top-rated show would still be profitable even if it paid out $176 million in salaries annually), but he turned it down, saying he had enough money. (Jason Alexander claims Seinfeld has made a billion dollars total in royalties on his ownership of the show.) Likewise, the six member cast of Friends made about a million dollars apiece per episode or $132 million per year (or $143 million if Jennifer Aniston really did get an additional $500,000 per episode.

Or, you can hire some attractive but anonymous exhibitionists each year for your reality series and promise [portentuous pause, in the manner of Dr. Evil threatening world leaders] one million dollars to the winner!

My published articles are archived at -- Steve Sailer

No comments: