The Orchard

Check out
this snippet of a Techcrunch story on The Orchard going private:

The Orchard has yet to file an annual report for last year, but for the first nine months of 2009,it has lost $17.5 million on revenues of $45.5 million.

The Orchard specializes in digital distribution. The fact that it cannot make any money is yet another nail in the coffin of the music industry. Perhaps under private ownership, it can transition to a different business model.

I like this because it encapsulates the journalistic narrative on the music industry perfectly: yet another nail in the coffin of the music industry. Pretty much any story on music is shaped around that narrative, regardless of what the story is and regardless of the truth of the narrative.

In many ways (instruments, publishing, licensing) the music industry is doing better than ever. It is only the record industry that’s dying, just like the wax cylinder industry before it and the mass market for sheet music. _Recordings_ as a whole continue to drive a lot of transactions for third party products like jeans, cars and liquor, so there will continue to be money made. Managing recordings continues to be a hassle for consumers, and the business of making their problems go away isn’t becoming obsolete.

Journalists write whatever attracts readers. Readers love the narrative that the music industry is dying. That doesn’t mean it’s a true story, it just means that it’s dramatic and entertaining.

That also doesn’t mean The Orchard’s valuation isn’t really weak. Licensed distribution products don’t yet do a high volume of transactions — $45 million dollars is pretty lame considering how much music they represent. But I don’t know why their costs are so high.

Any thoughts on why The Orchard needed to spend $63 million to earn $46 million in the first nine months of 2009? Why is their business so expensive to run?