Turning Fame into Fortune

In a world where the definition of the music industry is changing every day, the one constant is that music creates celebrity. There are worse problems than the challenge of turning fame into fortune.

-Chris Anderson, Free, Chapter 14

Recall that human social and economic interactions all conform the the Pareto principle. This is true not just in terms of a minority of blogs receiving the majority of links or a minority of iPhone apps accounting for the majority of downloads, but also in terms of a minority of books published each year accounting for the majority of sales, and a minority of musicians whose work accounts for the majority of music consumption. The rule of thumb is that the minority accounts for 20% and the majority they account for a whopping 80%; but on the internet often 1% accounts for 99%.

Chris Anderson's first book was devoted to the existence of this distribution in media, new and old. It is well documented and uncontroversial.

In The Black Swan, Nassim Taleb said that the worst advice he was ever given was to find a profession that scaled. Music scales; you can replicate a digital song file perfectly an infinite number of times and distribute it globally through the internet. The person who gave Taleb advice saw this as a good thing for a musician's career--the cost of creating the product is nearly nothing, and the potential audiences are enormous!

Taleb knew better. Industries that scale conform to the Pareto principle much more severely than the ones that don't. A dentist may never be able to make as much money as Madonna, but if he works hard and consistently he can make a lot of money over the course of his career. Madonna may make millions, but the average musician couldn't make as much money as a dentist if they devoted themselves to working just as hard or harder at music.

Music creates celebrity. Anderson calls this the "one constant" in the rapidly changing landscape of the music industry. The fact of the matter is that whether or not songs and albums are sold at a price, for free, or pirated for free, it will make no difference whatsoever to the vast majority of musicians because most of them will go largely unnoticed.

The economic reality of digital media and online distribution will push the price of recorded music down and down until we will all be able to get most of it for free, one way or another. For the recording studios, the record labels--for all the institutions that emerged to minimize the costs specific to a world before modern technology--this is terrifying and will demand adaptation to avoid certain extinction. No doubt many companies that are unable to make the change will die.

But at the end of the day there will be very little difference for the musicians themselves. Before digital technology and the internet, most musicians made next to nothing and a few made an enormous amount. After the transition...most will make next to nothing, and a few will make an enormous amount. But wait, I can hear you protesting. You just said that we'll be able to get most of our music for free! How can anyone, even the very popular, make money off of a product they cannot charge a price for?

Chris Anderson put it perfectly: There are worse problems than the challenge of turning fame into fortune. In the 14th chapter of Free, he goes over the very interesting case of China, where piracy rates make the American filesharing scene seem marginal by comparison. There, musicians make their money by doing work that doesn't scale. I was interested to learn that most of the money they get from concerts does not, in fact, come from ticket sales but from sponsors. Nevertheless, they do make money, and a lot of it. The famous ones, anyway.

I have to admit that when I read Free, it mostly felt like a case of been there, done that. After reading my fair share of books focused on new media, there was very little that I hadn't heard before, in some form. But listening to the section on China was when something finally clicked for me. People have been terrified about what the transition to the digital world will mean for the music industry, but in all likelihood nothing will change, in terms of who will be able to make a living from it. There will be a tiny fraction who make a great living, a few who can make a good living, a yet larger group who can make a decent living, and the vast majority will not be able to make much of a living at all.

All the worrying will ultimately be pointless for the actual musicians. Of course, it will be entirely justified for those invested in existing institutions, but nothing can change that. That is the nature of innovation.

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