Hardly anybody in the music business understands that the old formula of how to successfully promote a new act is obsolete. The record companies are all aware that there is a big problem but they have no idea what the solution is. What they do understand is that they are unable to recoup their investment in studio time with a good producer, the cost of a good video, the advertising budget, and the cost of the first promotional road tour from the profits on a first hit CD. An act must be capable of repeating and sustaining their initial success in the studio in order for a record company to make a profit because the necessary investment has increased dramatically.

Ever since the mid 1990's the record companies have become painfully aware that there are no acts containing songwriters who can keep on writing more hit songs. All the new acts since the mid 1990's have one, two, maybe three good songs at the most, and any person who's purchased a CD since that time will testify to that. The record companies also know that MP3 downloading on the internet is a factor that has negatively affected their profits. Put that together with their inability to find sustainable new acts and you have the two main reasons why so many record companies are losing money. The ones that are not losing money are the ones that have a library of popular artists from the past who continue to sell.