Cool as the record business looks to outsiders, and rich as it used to be, the numbers today are dreadful.
As the Los Angeles Times noted last week, global sales plunged from $28 billion in 1999 to $16.5 billion in 2012. And that’s during a time when the middle class around the world was rapidly expanding.
All of which explains why many eyes are now on Lucian Grainge, chairman of Universal Music Group, who believes he can innovate and find new and unexpected ways to make money. “He is putting songs on smartphones in Africa, reviving moribund American record labels and making Lorde into a Grammy-winning global sensation,” the Times reported. “Above all, he wants to forge new partnerships with his industry’s erstwhile adversaries—the technology firms that have upended the way people get their music.”
Among Grainge’s offbeat initiatives is one to allow people to download an unlimited amount of music for $20 a month, despite the risk that consumers could “gorge on music for a month or two, downloading thousands of songs, and then let the subscription lapse.” But music producer Jimmy Iovine told the Times that it’s just this sort of entrepreneurial initiative that’s needed, especially at a company as big as Universal Music.
“Whoever has the biggest company has the responsibility to be bold,” Iovine said.
Peter Drucker would have loved Iovine’s insight. In the late 1960s, Drucker noted with regret in The Age of Discontinuity that “the little fellow, whether a small company or the lone ‘garage inventor,’ has been more innovative than the big company.” And he hoped to see that change.
By 1982, Drucker had clearly seen considerable progress, pointing to a number of large companies that had proven to be highly innovative. “Merck, Citibank and 3M are but three examples of highly innovative corporate giants,” he wrote in an essay called the “The Innovative Organization.”
Indeed, Drucker felt that innovation and entrepreneurship were crucial to large companies not just for their own survival but for the success of innovation itself.
“Paradoxically, the innovations of tomorrow will have to come out of existing large companies far more than at earlier periods,” Drucker predicted in Managing in Turbulent Times. Why? It was in part because “people of substantial specialized skills” were to be “found largely in existing large companies.”
Leave it now to the record business to show that this isn’t just spin.
Do you think the music industry will look very different 10 years from now?