32 REIMAGINE YOUR BUSINESS

and distributing music dropped significantly in the digital world and

allowed iTunes to sell singles.
While the unbundling of music was good for consumers, it wreaked
havoc on the music industry, which saw a significant drop in its reve-
nues. The sale of digital singles (and albums) and even revenue from
streaming services did not come close to equaling that which came from
selling bundled music on CDs. Music piracy exacerbated the problem
for the industry. As a result of these dramatic shifts, those in the busi-
ness of making music (songwriters, musicians, sound engineers, etc.)
also saw their incomes take a nosedive. The industry had arrived at
a kind of paradox: while the popularity of music among consumers
reached record highs, the music studios and artists suffered a dramatic
drop in their income (see figure 2-1).

FIGURE 2-1

Revenue from the sale of recorded music in the United States,

2000–2017 ($ millions)

$16,000

$14,000

$12,000

$10,000

$8,000

$6,000

$4,000

$2,000

$0
2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

CD Vinyl Video
Digital single downloads Digital album downloads Streaming and subscription
Mobile and other digital

Source: Recording Industry Association of America.

 Business Model 33

Music studios and artists had traditionally used concerts to generate

awareness and excitement among fans in order to sell and make money
on music albums. In other words, concerts were the razors to sell music
albums—the blades.
Companies have used the razor-blade strategy for a long time: sell
razors cheap to make money on the blades. HP sells its printers cheap
in order to make money on the ink cartridges. As the income from
the selling of recorded music (the blades) declined, studios and art-
ists converted the razor (i.e., the concerts) into blades, or the money-
making part of their business. Suddenly free and even pirated music
became the cheap razor to drive fans to the expensive concerts
(see figure 2-2).

FIGURE 2-2

Revenue from concerts and from the sale of recorded music in the
United States, 2000–2017 ($ millions)

$18,000

$16,000

$14,000

$12,000

$10,000

$8,000

$6,000

$4,000

$2,000

$0
2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

CD Vinyl Video
Digital single downloads Digital album downloads Streaming and subscription
Mobile and other digital Concert revenue

Source: Recording Industry Association of America and Pollstar.