The record label of the future is here, but how else can labels innovate and disrupt?
“The old definitions and limitations of being a label, publisher or promoter are breaking down,” said Paul Pacifico, CEO, AIM, the opening speaker at Music 4.5 The Record Label of the Future on 23 February 2017. “Exciting multi-faceted music businesses with innovative approaches and new business models are emerging.”
Some of those new business models were on display throughout the half-day seminar, which was conceived, organized and executed by 2Pears.
The non-traditional label
“The digital age has challenged historical power,” said Alistair Norbury, EVP International Recordings, BMG. “Artists have the power to create in their rooms and technology gives them access to the market. We have to be a service provider. The music business is no longer in the driving seat.”
BMG launched on the same day as Spotify with the objective of making “things better for our songwriters and recording artists,” said Norbury. “We launched a non-traditional record label that wasn’t based on any existing business practice.”
This practice includes having each international office operate as a functioning label in its own right, instead of local label satellites orbiting around a central corporate hub. “International is at the heart of the new business,” he said.
But it’s BMG’s artist-first approach that Norbury says is unique in a label of its size. “Nothing enriches our company at the expense of the artist,” he explained.
“Kobalt was established as an alternative to traditional record label,” said Paul Hitchman, President, Kobalt Music Recordings. “Rather than trying to transform [the traditional record label] business from the old world, we asked what would it be like if you started a partner for artists in today’s landscape.”
Grounded in the idea of a “label service”, Kobalt’s artist-centric offering includes – among many others things –marketing and promotion strategy, production and manufacturing, global digital and physical distribution, retail marketing and playlist promotion, YouTube monetization, synch licensing and brand partnerships, reporting and real-time data analytics.
As important, says Hitchman, is crafting an individual, flexible contract for each artist that enables them to set the right long-term objectives and develop at their own pace.
The growth of the DIY artist
However, many artists choose to go it alone, and there is no shortage of apps and services that can help them make, distribute and market their music. Trackd, for example, “an 8-track ideas studio in your pocket” says founder Russell Sheffield, features simple recording and social tools to collaborate and promote music. He sees Trackd as part a growing ecosystem that will continue to innovate and disrupt.
“User-generated content will be exposed to opportunities and provide new ways for artists to monetize their work, launch their own careers and see what works for their audience,” he said.
And yet, artists still want labels
The fact remains that most artists still want to be signed to a record label. Ananay Aguilar, Mellon Fellow at the University of Cambridge interviewed 52 musicians in depth. “Musicians want to sign,” she said, “despite claims that technology enables independence.”
But why is this? What can labels provide that artists can’t do for themselves in the digital age? And what should labels consider when evolving their business model and offering?
What can labels provide that artists can’t do on their own?
“Radio in the UK is still very important, as is an artist’s access to physical distribution,” said Geoff Taylor, CEO, BPI. “Marketing playlists has to be done with social media, but it can’t be done in a vacuum – radio play needs to come in at some point. Having all these services under one roof creates opportunities.”
“Part of it is recognition of one’s own limitations,” said musician Dr. Tom Hodgson. “As musician do you want to be pouring over accounts or making your music?”
Robert Horsfall, Partner, Sound Advice pointed out the artists with a label also benefit from sometime long-running expertise. “Artists need to surround themselves with the best of breed,” he said.
What’s next for labels?
Hitchman said he looked forward to seeing more label options for musicians. “We’re entering a time where there will be lots of different options,” he said during the first panel discussion. “We’re not the right option for many artists, but some labels will become that.”
So, what’s next for labels, both existing and emerging? What services, offerings and future strategies should be considered?
Integrate live music into strategy and offering
Dr. Tom Hodgson is a musician with band Stornoway, which came onto the music scene as record sales where declining. It made the live side important in terms of fan engagement and revenue, which inspired Hodgson to start Tigmus, an online database of live venues coupled with promotion features.
But, said Hodgson, why have labels yet to venture into the lucrative and essential live-music component? “What’s stopping label and label service taking more of an effort with live music?” he asked. “Can new technologies help reduce the need for labor, costs and financial risk, and can these advancements open up labels to take on an infinite number of artists or conversely that more artists are able to do more by themselves?”
The answer, said Hodgson, was probably somewhere in between.
Become a technology company
“Technology empowers creativity,” said Russell Sheffield of Trackd, an app that enables musicians to record and collaborate on their work, from wherever they are. Should record labels consider this kind of freedom?
Paul Hitchman of Kobalt believes record labels have to be technology companies, in part to nurture the efficiencies that enable viability. Much of this is down to data – collecting it, analyzing it, and applying it to nurture and promote an artist’s career.
“Data, data, data,” said Hitchman. “It’s a key element of the modern market, and we help the artists we work with understand how they can take advantage and recycle it into marketing and touring decisions, along with insights that enables them to get full value out of [the data].”
Different ways of delivering value
“Music operates well as a niche network market,” said Pacifico. In his view, the idea of a one-stop shop is becoming quixotic. Instead, he is excited by partnerships and value-added services that stem from a particular expertise, especially around intellectual capital.
“There are many areas where intellectual capital is relevant, including A&R, costs controls/ budgeting, marketing, strategy for growth, etc,” he said. “But who delivers those services? I don’t think it matters.”
“The current buzz word is “transparency”, said Horsfall. “I suggest “simplicity”. Citing lengthy contracts that are “too long, too overreaching, too fostering of resentment along the way,” he suggests 360 deals where the contract is limited to three albums. “If the relationship is good a new deal can be formed,” he said.
A lot of this has to come to down to trust, he said, especially in an era where services – such as Kobalt, AirBnB, Uber – don’t own assets.
Equal revenue share
It’s well known that promotion on streaming services rarely equates to sales and that not all services follow the same remuneration pattern. Becky Brook, who chaired the event, cited her own experience of negotiating licensing deals. “In licensing you always come up against precedents, and it’s very unlikely to get rates to go down,” she said. “Spotify have got to 55%, but streaming services aren’t able to turn a margin.”
In the view of many record labels, ‘a stream is not a sale,’ said Jon ‘Webbo’ Webster, President, Music Managers Forum, and this has led to a shift in income share by the record labels.
But labels need to do more, said Norbury. “There should be enough for everybody. We need to come together, as without songwriters and artists we are all f@cked.”
Take the long view
“What is success?” asked Webster. “There are many different sorts of measurement.”
Paul Pacifico, CEO, AIM, agreed. “The metrics of success are yet to be defined and will be different for different artists,” he said. “It sometimes comes down to hits versus sustainable careers.”
“The expectations right now are too high,” said Robert Horsfall, Partner, Sound Advice. He argues that labels need to take a longer view with artists’ career instead of unceremoniously dropping artists who don’t continuously occupy the top 10.
Citing the ream of well known musicians who didn’t become household names until well into their career (Bruce Springsteen, Prince, Michael Jackson), he encouraged labels to take the long view. “They should want a lifetime relationship,” he said.
Are you in New York? Register now for Music 4.5 The Economics of Streaming on 29 March 2017.