Remake, Remodel: The Evolution Of The Record Label

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delivered in dozens of different formats with technical variations. This is a long way
from the simple origination of a compact disc.
The management of this complexity has become a requirement and a specialty of the
record company.
As Martin Mills says, ‘More is required of a label as it is a more complex business
today, even down to boring things like managing metadata.’
The balancing act of running two parallel businesses
From more or less a standing start as late as 2003, digital sales now account for over 20
per cent of the recorded music market in the UK 25 . The major focus of companies in
looking to the future has been on digital and new models of business, and the growth in
online sales is the result of this.
But at the same time, the vast majority of the sales line continues to be the physical CD.
Record companies have to manage two parallel businesses – each with very different
dynamics. And they are doing this while managing a declining overall sales line with a
resultant pressure on overheads.
Boyd Muir Executive Vice President and CFO, Universal Music Group International,
highlights the difficulties with shifting into new business avenues. ‘It probably takes 80
per cent of our effort to do 20 per cent of the business,’ he says. ‘I spend a huge amount
of my time figuring out things we don’t know about.’
Complexity was often cited in talking to industry people in relation to the making sense
of data.
Forecasting income and cash flow, as well as budgeting, has had to evolve quickly from
models that were driven primarily by album and single sales income to models that aim
to capture all income streams to give a total revenue picture.
As Shabs Jobanputra says, ‘We have a per-month target of revenue and profit, regardless
of releases.’
Chris Ancliff General Counsel-International, Warner Music Group, talked about the range
of product types in digital (streaming, download, subscription etc.) and how this knocks
on into the complexity of contracts and royalty accounting. ‘It needs more dedicated
people to be looking after deals with services and telcos and a label can provide these
people,’ he says. ‘A label brings an understanding of the marketplace.’
Alison Wenham highlights the importance of labels’ skills and infrastructure in
managing the often-complex picture of licensing as ‘rights management is more
complicated today so acts really need an expert.’
25 Combined digital revenues across singles and albums now account for 23.4% of the value of the
recorded music market – ERA UK Statistics 2010 – last accessed 09.05.11
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