Recession Keeps Knocking, Implications Await Music Industry

Americans are now bracing for a potentially serious economic recession, one sparked by a housing and sub-prime mortgage lending meltdown.

During the recent holiday season, consumers displayed healthy purchasing levels, though household incomes may suffer more pressure ahead.

Just recently, the White House floated a $150 billion stimulus proposal, and the Federal Reserve has been steadily lowering interest rates to spark spending.  But Wall Street remains unimpressed by the recovery prospects.  This year alone, the Dow Jones Industrial Average (DJIA) has dropped nearly 10 percent on bearish sentiment.

So how does that affect the music industry?  Within the recording sector, disruptive changes are already well underway, though a broader economic downturn could exacerbate existing drops.  Already, US-based album sales are 10 percent below 2007 figures, potentially part of a rocky ride in 2008.  “This could be an incredibly tough year,” one major label executive admitted.

On the digital side, investment in newer startups could cool, though smarter, bootstrapped companies may proliferate.  And the live performance sector may also feel a hit, thanks to reduced levels of disposable income.  The last major recession in 2001 lasted roughly eight months, though economists are projecting a more severe downturn ahead.