THE RECORD LABEL OF THE FUTURE
& The Rules of the Pie for Surviving a Changing Paradigm
Where is the music industry heading? How will independent labels survive and thrive in the new paradigm? Is the age of the major label coming to a close? Does an artist even need a traditional label, or even an independent label for that matter anymore? If you are involved in the recording, manufacture, distribution and sale of recorded music, the answers to these questions, and your responses are vital to your continued survival in some shape or form.
Luckily, these are exactly some of the questions that I will attempt to answer in this brief article. And while I don't intend to offer any earth shattering revelations that you couldn't arrive at on your own, I do hope that if you are an artist, producer or owner of an independent record label that some of the thoughts herein encourage you to make a few pro-active decisions, and take a few definite actions rather than a wait-and-see approach. The race is still always to he who can endure. Your ability to foresee and prepare for the coming changes, as well as the end result of current changes may make the difference between business success and failure. But how can you know what's ahead? You'll need to predict the future.HOW TO PREDICT THE FUTURE
It's a basic law of this dynamic, ever-changing universe that there's no such thing as something "staying the same." Things are either expanding or contracting, increasing or decreasing, getting better or getting worse. Even the metal or hard plastic computer or sheet of paper on which you are reading these words, as solid and as stable as they appear are all slowly decaying and deteriorating. Come back in a few dozen years, and you'll see the effects of decay over time. If you know this, then you can look at everything from business phenomena to romantic relationships a little bit differently, and can perform what some might consider fortune-telling simply by asking, "where is this heading?"
Every business, every situation, every relationship is either getting better or getting worse, growing or shrinking, going up or heading downhill. Therefore, as long as you can honestly assess what you observe or experience over a given time frame, you can "predict" where something is heading and take any evasive or remedial actions as necessary. There are even specific formulas(1) you can use to reverse or stabilize a declining trend, improve a flat trend, improve a rising trend, or greatly improve an already stellar trend for any observable statistic like "sales" for instance.
Now having said that, let's examine some observable facts and trends within the music industry that you can use to predict the future, or at least prepare and position yourself for success regardless of what specifically happens.FACTS, TRENDS AND OBSERVATIONS
Among the hundreds, perhaps thousands of facts, stats, and trends that one could develop to analyze this thing we call the music industry, there are four that clearly demand our attention. I'm going to circumvent the debate over the accuracy of specific figures involved, or whether they are facts or just subjective observation, by referring to each simply as an "FTO" (Fact, Trend or Observation).
FTO #1: Sales of CDs are DOWN
FTO #2: Digital downloads are UP
FTO #3: There's a new generation of children who view music not as a vinyl disc, or a CD, but as words on an MP3 player's LCD/LED screen accessible through headphones and earpieces.
FTO #4. The purchasing experience has changed from browsing the aisles of a retail store to downloading from computers or cell phones.
FTO #5: Technology is making it easier for artists to market, release, market and distribute themselves, and even earn a decent living doing so.
Whether fact, trend or observation, these "demonstrables" indicate a new reality is upon us. What it means for the artist, producer and independent record label of the future is this...THE MUSIC INDUSTRY HAS ALREADY CHANGED!
"Of 30 thousand CD titles that were released, only 400 titles sold more than 100 thousand units, and 25 thousand titles sold fewer than 1,000 CDs. The big recording companies lose money 98.7% of the time."(2)
"In a recent Parks Associates study of 4,000 Internet users in the US, 56% of respondents listen to Internet radio on their PCs and 56% download music files."
"The 37-year-old artist recently moved from Los Angeles to North Carolina, where he plans to raise his family on the "decent living" Internet sales generate. Since August, he's sold about 5,000 records over CD Baby. He earned $10 for each album, generating the same amount of money he earned from his first record contract." [Sources: itfacts.biz, IFPI, Nielsen, InStat, RIAA, Parks Associates, CDbaby Talkback...]
As I said, there are thousands of statistics you can find. And the exact figures are less important than the trends they indicate. Our goal, here, is to focus on trends. And what we can deduce from these and other facts, trends and observations, is that today, the Music Industry is not what it used to be, and as trends continue, will never be the same again, and in fact, will be different tomorrow.
We as forward-thinking entrepreneurs hoping to capitalize on the value of music must change with the flow. Therefore, the questions we ask must inherently be different.
The key question that pro-active thinkers ask is not "what's going to happen?" but "what am I going to do given in light this trend, and in response to this continuing?" There are always responses you can make to any situation despite what prevailing wisdom says, and regardless of what others do.
What is it that we are responding to? What is it that we are actually witnessing? I propose to you that it is nothing less than....(drum roll, please)..the deconstruction of the major label system!THE DECONSTRUCTION OF THE MAJOR LABEL SYSTEM
Yes, as these trends continue, what we are witnessing is the end of the major label era, as well as the reconstruction of related and connected professions, industries and modes of doing business. In this new era, an artist can become self-sustaining by selling on CDbaby, so labels are less vital. CDs are becoming defunct, which means tradition retail outlets are becoming defunct. Word of mouth replaces the need for an A&R executive to go out and find good new talent. Also in this new post-label era,
ipods replace CD players and stereos
MP3s replace physical CDs
sites like CDBaby become a farm/store for indie labels and their music
Websites, itunes and cell phones replace retail stores as means of accessing music
Youtube replaces videos as a means of marketing
Myspace make developing a fan club/base through networking, and word of mouth much easier, and
Blogs enable constant contact and deeper connection with an artist,
and to repeat in terms of traditional label/retailer functions
Selling can now take place at the artist/label level
Promotion is now, to a greater degree than before, more effectively done by the public.
A&R (finding new artists) takes place in the public domain with word of mouth demand driving the artist's exposure
Distribution can occur digitally without need for warehousesHOW INDEPENDENT LABELS WILL BE AFFECTED BY THIS NEW PARADIGM
So what's going to happen to the independent label in all of this?
First of all, the number of independent "labels" will continue to increase. However, it's important to note that in this new paradigm, the word "label" doesn't quite mean the same thing anymore.
Indeed, thanks to services like Discmakers, and CDBaby, and the relative ease with which an artist can start selling her music, the artist herself is essentially already her own label from the day she records her first track in a professional recording studio or basement.
The artist in this new age has the potential to be a label whether or not he realizes it, accepts it or acts on it. With a computer, a cd-burner, and access to the internet, every artist has the beginnings of a viable indie label. (and in fact, to be accurate, because of ease of web access via cafes and libraries, you don't even need your own computer, or your own cd-burner). So the number of self-released, self-distributing artist/labels will rise. Consequently, there will be less of a need for traditional independent labels.
If that weren't bad enough, independent labels will be affected in another significant way. As digital downloads, and ostensibly, illegal downloads increase, the share of the pie that indies are sharing will seem to be decrease.LABELS THEN AND NOW
"Although self-distributing artists may make more money per album sold, labels can help sell more albums by getting them on the shelves of big retailers, generating more income for the artists in the long run. Labels also are usually crucial in developing bands into successful touring acts."--from CDBaby Talkback [Latimes article]
In the past, the artist needed a major record label for the deep pockets and contacts necessary to
find the artist (A&R)
provide an advance
finance the music production
finance big budget videos
get the music played on radio
get the music in the stores
get the video played on television and cable
promote the music
pay the artist royalties
Indies were seen as a place that artists could start their careers all the while positioning themselves to garner the attention of a major label scout who would rescue them for indie-label obscurity and buy out their contract or in a win-win for everyone, sign a distribution or marketing deal with the indie label.
It's still the dream of many struggling artists, even though statistically the percentage of artists who actually live that dream and get signed to the million-dollar major label contract is woefully small.
If everyone on the lower end is playing on the same level field (i.e. a basement band with a CDBaby "deal" now being roughly equivalent to and able to achieve the same success as if it were signed to an indie label "deal"), it would appear that the gap between "majors with money" and "indies/artists with heart" is widening.
Some would argue that this seeming disparity will make it harder for indie labels to compete with majors. I believe otherwise.
But before I share with you the basis of my belief, and a philosophy for dealing with the situation, I'll say that whatever strategy you ultimately implement must be executed on two fronts simultaneously: the consumer front, and the artist front.
In other words, as an independent label, not only must you make the music you sell accessible to the consumer in new and innovative ways, you must also make your label attractive to the independent artist.
As an independent label, you will of course be using all your creativity and skills to provide what's expected of a any label whether large or small
artist advances if possible
funding for manufacturing
funding for video production
press release writing and dissemination
contacts for getting airplay and video play
marketing to a wider audience
And while you as a label will provide these basics, I believe that profitability in the new era requires additional strategies, and a few radical new ideas.
Perhaps, as a thought, the record label of the future may focus additionally on - coordination of the artist's career using the new technology availableWHAT THE ARTIST REALLY WANTS
For the label seeking to market other artists and actually grow a business based around helping artists realize their dreams, how can you compete with the labels in a game that usually requires deep pockets? To answer that question, you first must understand what the artist really wants.
I'll quote you from a new book entitled The Spirit's Business Plan:
[begin quote] "There are only two important questions that everyone asks every day of their lives:
1. Why am I here?
2. How will I survive? These are not mutually exclusive questions. They are actually one in the same. The challenge of the business plan of the spirit is to tie one's spiritual esoteric search for life's meaning and purpose to the practical economic viability, survival and prosperity that life on this plane necessitates. The earth is moving into a new reality. Those who are here on the planet at this time have responsibilities that no generation prior had to be quite as concerned with. In addition, this generation has opportunities which no previous generation had access to. It must encourage those on the earth at this time to live by a new set of values." [end quote]
Perhaps there is a truth here that people are more ready for than we are being led to believe. Perhaps the record label of the future must position itself to be a catalyst for the development of these new value in order to ease the earth's transition into this new paradigm.
2. Payment Related to want #1, there is the more earthly desire for attention and money. Beyond the search for purpose, the artist wants to focus on making music, become known for their creativity, while being afforded a comfortable lifestyle based on the financial reward for their creations. They want to get paid. There is a basic human need, (or perhaps a little more pronounced than most) for attention, recognition, exposure, acclaim and approval.
3. Protection Few artists may admit it, but it's my experience that the creative soul that inhabits the artist personality shuns the responsibility and structure of self guidance in favor of the bliss and freedom of creative pursuits. In some ways, artists like to be shepherded, guided and protected by those offering the structure that they realize is necessary in this world, but for which they have no inclination to set up for themselves. As artists, they naturally wired to see the world differently than non-artists. That's what makes them artists. (It's also why many artists end up being taken advantage of in this game).
Given these 3 basic needs for Purpose, Payment and Protection the question is what can YOU, as the independent label of the future, offer the artist that she cannot get by doing things herself or with a major label? What and how can you offer something that speaks to these needs in a way that labels cannot match. The game will always go to the more creative.
Sorry, I'm not giving you specific answers here. But the things YOU can come up with given YOUR unique purpose, passion and talents are ten times more creative and effective than any I could come up with on your behalf. Besides, I'd much rather pique your interest, spark your creativity, and be a catalyst for the brainstorming session you will conduct in search of solutions than give you any of my answers as "the answer." The truth is, the answer does not yet exist. The landscape is still too fresh.THE RECORD LABEL OF THE FUTURE
As independent record labels adapt themselves based, perhaps on these questions and many others, the nature of what differentiates a true "indie label of the future" from a self-released, self-distributed artist venture and the gap between them, will have to change and widen. In other words, if you want to really offer something of value to the indie artist, you have to offer something that majors and money cannot buy. The key, I believe, lies in offering a uniquely different experience based on a value system and lifestyle that the industry as a whole is too far removed from to see growing at the roots level.
As trends continue, CD sales decline, digital media expands, the record label of the future must adapt. To help you philosophically with how you need to think in order to weather these changes, and with the underlying assumption that we want to keep everyone living in the manner to which they've grown accustomed, I offer you....RULES OF THE PIERule of the Pie #1:
"As your slice of the pie decreases, bake a bigger pie."
This applies to going global in marketing efforts. If the trend locally is limiting the amount of money you can make, then expand nationally and internationally. Bake a bigger pie.
But of course, it isn't always possible to bake a bigger pie, which brings us toThe Rule of the Pie #2
"If the pie is getting irreversibly smaller, bake more pies." This applies to facilitating success for more artists. If you have to sell digital downloads for $1 to make them attractive to consumers, then do what itunes does, and sell the products of more artists so you can profit on volume.The Rule of the Pie #3
"If the pie is no longer tasty, bake a different pie."
If the music industry as a stand-alone source of revenue is declining, then expand to gaming for example. Sell what people are buying and where they are buying. Incorporate music into the products that people are purchasing in huge numbers and generate your income there.Other solutions:
The rules of the pie are by no means the only way that creative entrepreneurs can adapt to the changing pie scene. In fact, I predict that a whole new set of rules will be developed. Who knows, some creative label owner may come with
rule of the pie #4: "screw the pie, feed them cake," or
rule of the pie #5: "make money teaching them how to bake pies & sell them baking tins"
rule of the pie #6: "change the game: add a different desert to the menu"MY TOP SECRET PREDICTION:
I suspect, based on some reliable sources deep within the industry, that something along the lines of rule of the pie #6 is going to appear that will change the whole nature of the game and make millionaires out of the early adapters. Of course, I can't reveal everything in this article, but stay tuned. (hint: It may involve radio and a brand new technology.) But, having said all that, let's wrap things up so you can get going on your own solution.SUMMARY IN REAL TERMS
So here's where we are. The music industry is changing. While there will always be a segment of the population (albeit a shrinking one) which will want high quality music on CDs with jewel cases, pretty packaging, liner notes, created by artists who themselves desire the status of an association with a major label, the growing majority of consumers and artists will be adapting to the new paradigm of digital downloads and self-distribution.
You're mission, therefore, as a record label of the future, if you've read between the lines of this short article, is to
embrace the new trends and technologies
offer the intangible
enable the self-distributed artist trend in such a way as to make the prospect of being signed by your label a more desirable options
expand to global, underserved markets
form relationships and synergies in booming industries, and
add your own list of creative responses here, rather than waiting-to-see
Now, what this will all look like when all is said and done, no one can perhaps predict with any degree of specificity. But one thing is clear. Change is upon us. It is inevitable.
You must be the enablers not the enemies of the new era; facilitators not foes of the future. It is only in this way that you will survive the shake-up and shake-out that will occur as the change--inevitable as it is--comes upon the music industry.
You and your record label of the future, if it is to live, must live and exist in the now.
[For more detailed strategies for becoming a record label of the future, check out the Hip Hop Record Label Business Plan available at http://www.hiphopbusinessplan.com