How Are Record Labels Handling Business Amidst The Download Free-for-All?

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April 6, 2010 ‐ By TheEditor
The not so new business model for record labels

The music industry business model is rapidly changing

by C. Zawadi Morris

In the spring of 2009, the band Coldplay announced they were giving away their nine-track live album, “LeftRightLeftRightLeft” as a free CD download on their website.  Soon afterward, Nine Inch Nails also decided to give away their band’s entire new album entitled “Slip.” What was this business of giving away an album?  Weren’t record label giants hemorrhaging from major losses in record sales?  (In the meantime, I downloaded the free albums).

The following fall, independent artist, Res finished her live performance by spelling out the web address to where anyone could download her entire new album… also for free! Were the indies in the free giveaway game too?  (While I pondered, I downloaded her album too).

Something was happening in music, across both the major labels and with independent artists. Something was changing.  Again.  And so soon, considering we’ve only recently come to fully understand the last major change, which took place during the last decade, from 2000 to 2009, when the traditional music industry business model (for the way music is produced, marketed and sold) was turned on its head.  Before, digital CD technology was developed by the producer to serve the producer.  Later, with the explosion of the Web, that same technology became accessible to all; the consumer became the developer to serve primarily… himself.

John King (2nd from left) at Chung King Studios

John King (2nd from left) at Chung King Studios

“The music business has shot itself in the foot by not having stayed up with the current technology,” said John King, founder of Chung King Studios, one of the first and oldest studios to record hip-hop music.  “Because they haven’t used digital watermarking or any of the protection devices, you can’t blame people for stealing music when it’s $21 for a CD.”

“The reality today is that anyone can bring a product to market,” said Maurice Bernstein, president and CEO of Giant Step Music.  “You can make a fairly good quality music project in your bedroom; you don’t need to manufacture the product to bring it to market and you can use all of the social network sites to build a fan base and market yourself.”

Bernstein founded Giant Step with Jonathan Rudnick in 1995 as a concert promotions and lifestyle marketing company.  Over time, it evolved into a successful mid-size record label, launching such acts as Macy Gray, Donnie, Jamiroquai, Zero 7 and Zap Mama.  By early 2000, Bernstein started noticing the fast-changing music landscape precipitated by advances in digital technology, and he moved quickly to adjust.  He got out of the music label business and converted the company back into a music marketing agency, where he said the company is doing tremendously well.

Giant Step works with artists like Erykah Badu

Giant Step markets artists like Erykah Badu

“New technology has made our job easier, because there are many more ways for us to communicate with people than there ever was before, and now things are viral,” said Bernstein.  “In 2010, there’s a plethora of ways to communicate with people that are quicker, easier and cheaper.  The possibilities are infinite.”

The landscape has, without question, changed.  It’s a virtual music free-for-all.

Yet, major labels have managed to hold on, and with a degree of success:  You need only look at some of the top-selling new artists of last year– such as Lady Ga Ga, Drake, Keri Hilson and the Dream—to know that success and fame in the music industry is alive and well.  So what’s keeping the major labels afloat, if not record sales?

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