Remake, Remodel: The Evolution Of The Record Label

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This pre-draft version is strictly for review purposes only and is not for general dissemination or sharing. Chapter 5 | THE CHANGING RECORD COMPANY As the landscape around it changes, so too must the record label. The boom years of the CD album have given way to a more fractured market as downloading and streaming change how consumers experience music. New areas beyond record music are ventured into and the trick for many is in the balancing act of running two parallel businesses. ‘Record companies are changing – for the better. I don’t see them being replaced’ Howard Jones, Sheridans ‘Labels are changing but not fast enough compared to if they were starting with a blank sheet of paper’ Brian Message, Courtyard Management & MMF With the advent of digital, it has become clear that ‘legacy’ industries need to adapt dramatically – or die. The century-old recorded music industry is no exception and all the signs are that it has chosen to adapt. It’s had no choice. In this chapter we look at how resilient an organism the music label is proving to be by examining the changes in the way it does business and the changes in the actual business it does. A set of key indicators is a good starting point for examining the change in the make up of the business carried out by labels in the last decade. From the start of the millennium to 2009, the sales mix has changed radically for companies. Singles In 2000, singles were a physical CD format, priced between £1.99 and £3.99 and were at a low ebb. Only 55m singles were sold that year. Compare this to 2009 and the story is very different – with 152m single tracks sold, the lion’s share as downloads 21 . The advent of digital had three key effects: it reduced the price of a single track to 79p- 99p (even 29p in some promotions); it enabled the consumer to ‘cherry pick’ tracks so that the album format was disintermediated and songs could be bought individually (effectively, anything could be a single); and online availability enabled the fan to impulse buy. This led to the huge boom in singles sales volume that we see. But this was spread across many more titles. This is easily exemplified by the statistic that the average #1 single in 2000 sold 118,700 in the week. Despite the almost threefold increase in market sales, a #1 in 2009 sold a weekly 92,900 on average 22 . 21 2009 – physical single sales 3.1m, digital single sales 149.7m, 152.7 in total - ERA UK Statistics 2010 – last accessed 09.05.11 22 BPI Statistical Handbook 2010. 32
This pre-draft version is strictly for review purposes only and is not for general dissemination or sharing. The additional track sales were coming from the cannibalisation of album sales through the ability to cherry pick individual album tracks. The importance of track sales – compared to albums – was emphasised by Shabs Jobanputra who felt that the need to release an album by certain types of artists wasn’t necessarily a given. In relation to the act Swedish House Mafia, he said: ‘I’d rather just keep having hits and compilations…They sell us more tickets and build our brand and we may come up with a greatest hits in three years’ time. Is the consumer really waiting for what we think they want? We can bundle hit tracks with tickets and T-shirts.’ The head of another major label was also of the opinion that DJ acts make more sense to be signed for a number of tracks with ancillary rights rather than an album deal. ‘If you invested £1m in an act and they sold 100,000 albums, you would probably drop them,’ they said. ‘But if you had ancillary rights, and the feeling was that progress was being made and everyone likes it, you would probably stay in business with them.’ Clearly, for acts operating within certain genres, the interest generated by a hit single doesn’t always have to be monetised primarily by the release of an album. The implications of this include the ability for the label to embark on an artist’s career single by single, reducing the risk involved in committing to an album project, not just in relation to costs, but also creatively, as the artist sees the market reaction to their music, and develops their direction in relation to that. This can make the whole thing fresher, which is key to the appeal of pop, dance and urban genres, all of which can change radically in a short period of time. Albums Although the overall volume of album sales is only down 4 per cent over the last decade, the net price at retail has declined by 28 per cent. Albums are better value for the consumer than ever in their history, but sales haven’t increased due to the consumer using the facility to purchase tracks, rather than the whole album 23 . The sheer range of music available to the consumer, either physically or digitally, has rocketed in the last 10 years. The number of new release albums in the UK has doubled from 19,312 in 2000 to 41,184 in 2009 24 . For the consumer, this is great news as they have more choice than ever before. For the record company, it brings new challenges: twice as many new releases that need to be entered into the supply chain to get to a flat sales line. The additional complexity of the supply chain brought about by the advent of digital makes this an area in which record labels have to be on their game. The requirements of digital services can vary enormously, which means that a new release has to be 23 OCC/Kantar 24 BPI Statistical Handbook 2010 33
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Remake, Remodel: The Evolution Of The Record Label

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