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Bomb Garden 

by Luke Baumgarten & r & & r & Selling Masters

& lt;span class= & quot;dropcap & quot; & B & lt;/span & ack in the way back, according to British journalist Robert Sandall, a music industry honcho named Maurice Oberstein asked a question of his peers. Seeing how easy it might someday be to make perfect copies of these new "CD" things, Oberstein asked, "Do you realise we are giving away our master tapes here?" His peers, too busy snorting coke through the Franklins they were making off all the boomers in the world trading their vinyl collections for plastic, disregarded the question. It's proving fatal.

CDs were big money then, and technology didn't yet allow anyone to exploit the format's crippling weakness. Tech caught up, though, and now CDs are just about valueless, selling for $10 where they previously sold for $20. Worse, the CD is taking the industry's white knight with it: Digital downloads aren't much more profitable than physical copies.

It doesn't take an economist (and, after C-plus-ing stats and micro-econ, I ain't one) to note the dangers of balancing such a massive industry on such a narrow, weathered base.

Meanwhile, artists -- despite also taking profit hits on worthless albums -- are thriving. Why? They're more nimble and their revenue streams are more diverse. Unlike record companies, album sales don't make up the majority of their cash flow. They tour. They sell merch. They license songs to car commercials. In the case of Prince, they sell a new album's distribution rights to a paper like London's Daily Mail. The paper then gives the thing away for free in its Sunday edition as a promotional stunt. That's how artists are making money. If the Big Four want to survive, they need to start thinking like artists. Make the album a promotional tool, write off making money on it. T-shirts have better margins.

So how does a record company tour? It buys LiveNation or Bravo, and it starts producing events. How does it sell merch? By buying a hip clothing manufacturer. How does it cash in on licensing? That's tougher, but here's an idea: Buy up as much Daily Mail stock as it can. Prince introduced them to 600,000 new readers.
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