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If You're Still Blaming the Labels, You're Doing It Wrong... Tuesday, August 07, 2012 by paul Startup flopped? Blame the labels. Alienating the artist community? Blame the labels. Creative vision railroaded? Blame the labels. Got bad credit? Blame the labels.
It's not that the major labels won't force you into an unworkable deal, bleed you of every investor dollar you've got, then kick whatever's left into bankruptcy. It's not that they won't railroad your creative vision, and put a committee of producers and writers onto your project until everything's radio-friendly. They will, just like before. Nothing's changed.
The difference now is that you already know this is going to happen, before you start the licensing or partnership process. Which means that in 2012, the major labels simply aren't a viable excuse anymore. That is, for failure to succeed, properly establish transparency with the artist community, develop the creative vision you want, or scale as a company.
That blame-game is officially dead now. Which means statements like these are now just naive.
"Once you have a license, it's valid for a few months and you have to negotiate again and again. We realized it's a huge overhead, the whole licensing and legal thing. There's so much grey zone. You talk to them and they don't have a clue about new models, and are suspicious of new things."
Wahwah.fm CEO Philipp Eibach, in comments to GigaOM prior to shutting down.
And, you can't blame the labels for behaving like the boxing industry. Because we already know that big labels withhold money from their artists, don't pass royalties through, and generally behave in non-transparent and near-criminal ways. Daniel Ek really shouldn't be getting on a stage with Walt Mossberg, pretending that artists are getting paid by their labels, because they aren't. It's just common knowledge at this point, Spotify is guilty by association.
Investors also know better, and they have for years. This isn't Monopoly money anymore, they figured all this out after getting burned in the late-90s and 2000s. But there are absolutely gigantic sums of cash coming into music concepts that specifically avoid label licensing. Which means the greatest levels of innovation are happening around the labels, often without their involvement. And the biggest changes affecting the industry are coming from the outside, not from within.
Just consider a few of the summer's biggest bets, all of which are not directly tied to major label recording licenses.
(1) TuneIn, $16 million
(2) Sonos, $135 million
(3) Roku, $55 million
(4) The Echo Nest, $17.5 million
(5) Ticketfly, $22 million
Death of The Major Record Labels, Myth Or Fact?
Are the major record labels dead? And by "major record labels" I mean the "Big Four" of Sony/BMG, EMI, Warner Music Group, and Universal Music Group.
Well, since they are in business to make money, and have been accused by music fans of only caring about money (which is apparently bad), then judging by sales figures the major record labels are dead, or at the very least, on their death beds.
In 2010, music fans all over the world bought 326.2 million albums. That's the lowest annual total on record (no pun intended). Only one album, Eminem's "Recovery," reached the 3 million sales plateau and only 13 albums exceeded 1 million in sales. Compare that to the year 2000 when Eminen's "The Marshall Mathers LP" sold 7.9 million copies and every album in the top ten sold at least 3.8 million units.
Overall music sales in 2010 were down 2.4 percent while digital purchases were up by only one percent. Neither old nor new music sold very well. New CD sales (e.g. Justin Bieber, Usher, Rihanna) plummeted 16 percent while previously released music (e.g. The Beatles, Michael Jackson, Elvis Presley) saw their sales figures drop by 23 percent. This is the second year in a row that those two categories experienced double-digit drops in sales.
The bad news continues in 2011. Already this year the music biz has broken its record for the lowest sales for a number one album… twice. The Warner Music Group has hired Goldman Sachs to find a potential buyer and Sony Corporation of America announced that it's closing a long-running CD manufacturing plant located in Pitman, New Jersey.
"I don't envy the people at major labels," said Danny Goldberg, former executive for Warner Bros. Records, Mercury Records, and Atlantic Records. "They're narrowing their business right now, and that's what they might have to do. Their business is becoming a combination of catalog licensing—because they all have amazing catalogs—and the pop business. And there's less and less room for anything in between."
One thing major record labels do really well is create a mainstream. This mainstream is crucial for pop artists. Think about it, by its very definition pop music (the "pop" stands for "popular") is for music fans that want to know what everyone else is listening too. On the other hand, rock music and its myriad of subgenres generally appeal to people who DON'T want to listen to what everyone else is listening to.
Established artists like U2, Pearl Jam, Radiohead, and Dave Matthews Band (read a live DMB concert review) don't really need a major record label. They can afford to bankroll their own studio time and concert tours. They are so well-known that they don't even need the major record labels' marketing machines. Their enormous fan base already follows their every move on social networking sites and every one of their record releases and tour announcements makes headlines.
For artists that do stick with the major record labels, they can forget about making tons of money selling tons albums. Instead, look for artists to land "360 deals." These business deals include a partnership in not only album sales but publishing, merchandising and touring revenue as well.
The most famous example of this type of business covenant, although it's not with a major record label, is Madonna's "360 deal" with Live Nation. These all encompassing pacts help both parties recoup lost revenue from declining recorded music sales.
Unfortunately for the industry, recorded music sales will only continue to decline. As the numbers told us earlier in this article, legal internet downloads aren't replacing CD sales. People just aren't buying as much music as they once did. Part of the reason is illegal downloads but another factor is a lack of quality music. There are just not enough good tunes out there that people are willing to pay for.
Copyright 2011 mind-funk-music.com
We do not need to get rid of big record companies. They will get rid of themselves. The writing is on the wall. Corporate greed worldwide has spun us into a recession, due to ineptness of managers and decision makers to undertake financial transactions with due diligence and transparency. This is the cancer of the entertainment industry where executives in A&R will only promote friends and family members, instead of talented musicians. Record labels out there have dropped sales by more than 25% in the last five years, and have started laying off a lot of their staff. This void is being filled by companies on the Net marketing songwriting competitions for a fee of course and A&R production companies. Not to mention all the Indies labels and the radio promotion companies. All these guys ask for money upfront before they will even process your music. The fees range from $20.- per song in songwriting competitions to $300- $5000 for agencies, A&R and other ancillary sharks out there. The concept is to capture the musician/artist on their emotion and desire to make a breakthrough in the industry and play on that psychological anxiety. Songwriting competitions will solicit you with products from their sponsors prior to declaring the results of the competition. Meanwhile you can rest assured you will not be selected amongst those who may benefit from a publishing or record deal. The change has manifested by means of the Net. Independent musicians and other well meaning people are presently feverishly creating a digital age where the success of the music will be determined by the fans and the dj’s in the radio stations. Mainstream charts and record labels will still be in control for a while until the convergence of the cost of marketing and the cost of the artist cd will reflect reduced profit margins for the marketing team and greater earnings for the artist. Star status will soon become a thing of the past and huge revenues made by some labels will shrink, enabling other fresh talent enter the music industry. The artist will also feel the economic downturn of dwindling revenues and will resort to live performances to increase their profit margin. Good live bands will rule. Playback and miming will get hurt. The consumer will reap the benefits.