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. are believed to be close to launch services in this space while 7digital has a locker system in beta. While anti-piracy concerns and different views between rights holders and service providers on rates of payment is holding some services back Amazon’s went ahead in the US and launched a non-licensed cloud service recently (Cloud Drive). Also Catch Media launched My Music Anywhere, a fully licensed service, with Carphone Warehouse in 2010. MMA launched in Best Buy UK stores in 2011 and Catch Media expect to launch a similar licensed service in the US this year. Both Rob Salter at Tesco and Gary Warren of HMV supported a hybrid physical and download solution. In this model, the consumer would be offered downloads – either included in the price when they buy the CD or as an inexpensive extra. Again, agreement on rates, especially music publishing in this case, seem to be holding these types of service back. However, high quality download site Bleep is now able to offer a download as added value with CD or vinyl purchase on much of its catalogue through agreements with several small independent labels that make up much of their offering. Rob Salter sums up the issue when he says, ‘For some consumers, there is no value in the disc; for others, all the value is in the disc. What you can’t do is sell them it twice.’ Is this something the publishers will want a double mechanical for? ‘The publishers’ problem is not selling things twice,’ he says bluntly, ‘it’s selling them at all.’ Martin Mills feels that the consolidation of the majors has had a huge impact: in the digital sphere this is significant as a service would find it hard to launch without Universal on board ‘as they are just so big’. Alison Wenham identified a problem of labels demanding big advances from new services which crippled them and left nothing on the table for either marketing or indie product. She added that she feels this has now changed and that labels are now being more realistic. Overall , the feeling is that digital is coming through its infancy and that we are moving into a productive period with new services and the requisite scale that comes with it, all subject to four key factors: Legislative measures to protect the legal market; Experimentation from investors in new models; Creativity and risk-taking in licensing; Flexibility in pricing. The more digital the business becomes, it brings with it clear business benefits such as: Cost efficiencies; Better margins; Less stock obsolescence; Better market information and speed of response; Fewer barriers to new quality music; 48
This pre-draft version is strictly for review purposes only and is not for general dissemination or sharing. Easier and more accurate business planning due to smoother revenue numbers and less unexpected product returns; More overall consumption of music across more artists; A more compelling consumer experience. It was notable that the heads of the biggest independent (Martin Mills) and the biggest major (David Joseph) were both highly optimistic about the digital future of music. So, although the majority of recorded music business is still based on CD sales, the DIGITAL business is growing, maturing and diversifying. In certain sectors and genres of the business (e.g. singles, alternative new release albums etc.), digital has already out-paced physical; but overall it is still insufficient, in terms of revenue and returns, to compensate the decline in CD sales. Nevertheless, although still in its infancy, the digital landscape is starting to map out the possible future directions for music sales. For a business less than a decade old, that is real progress. Contents Chapter 7 | NEW FUTURES After a painful decade, labels are changing what they are and what they do, but recorded music remains at the very heart of it all. Rather than being scattered to the four winds, the pieces are starting to fall together into place. With some difficult lessons learned, just what might the record companies of tomorrow look like? Writing this report has been a great opportunity for me – having worked in labels most of my life – to take the temperature of the industry three years after my departure from EMI. Being away from the day-to-day realities of a label has enabled me to write with the benefit of a little distance and perspective, meaning it has been possible to identify the key trends in the ways the industry is shifting and to meet the challenges it faces. That distance has hopefully also enabled me to be a little less partisan than perhaps I would have been had I still been absorbed in the daily running of a record label. The shifting balance of power that comes with a radical change in the market can result in factions, dogma and finger-pointing between different areas of the wider music industry and the setting up of reductive (antagonistic) dichotomies: major/indie; recording/publishing; management/labels; retail/labels etc. There is a clear tension between protecting existing interests/businesses and creating a radically new music industry. But what is striking is that across the industry the appetite for change has never been healthier. 49
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