Addicted to blockbusters
Here's another take on how the music industry painted themselves into their current corner. They come from an article on the website Slate.com ("Hit Charade," Mark Jenkins, August 20, 2002.) The Big Five are one of those rare new oligopolies that are ripe for major disruption due to their inability to adapt to changing market dynamics, not because of music piracy. In this case, it's the dependence on blockbusters.
Meanwhile, younger fans lose interest quickly and often don't develop strong loyalties. They're less likely to investigate a breakthrough act's previous albums or buy its next one. The genres that appeal to under-25 music fans continue to sell, but individual performers fade quickly.
This is a huge problem for the big labels, who still base their marketing on long-term stars who release multimillion-copy blockbusters. One album that sells 10 million copies is more lucrative than 10 that sell 1 million, because once a CD takes off, the only fixed costs are manufacturing and shipping, which are trivial compared to production and marketing. And long-term careers make each album less of a risk, since the most loyal fans will buy everything an artist releases and profits are high on back catalogs that keep selling.
Yet maintaining superstars is hard and getting harder. They require large advances, high royalty rates, and massive production and marketing money. And they keep demanding such things even when their careers tank (notable recent examples: Michael Jackson and Mariah Carey). The risk that a contemporary superstar's latest album will bomb is high, since attempts to reach the widest possible audience can easily lead to banality and overexposure
This is the Achilles heel of all oligopolies in general, and of entertainment oligopolies in particular. When n investor expectations can only be met by the megaprofitable, then the merely profitable is ignored. Like roulette players staking their all on one number, like baseball players swinging for a home run at every at-bat, this can lead to great success. But it also can lead to disaster. Oligopolies tend to weed out anything but the blockbusters, but that leaves them dangerously exposed when they have a run of bad luck, or if the buyers simply get tired or bored.
