How Are Record Labels Handling Business Amidst The Download Free-for-All?
According to Bernstein, the music industry continues to thrive because the record is no longer the focus. The record has become a mere marketing tool used to raise the stock of something far more pliable, far more sustainable: The artist.
The three main pillars of music industry revenue are recorded music, live music, and PRS revenues (royalties collected on behalf of artists when their music is played in public). Even when records were selling, music label executives looked to tours, royalties and endorsements for by-product revenues. But now that internet and digital technology have rendered music as an inalienable right, the focus has shifted squarely on the artist. PRS revenues and concert revenues are no longer the by-product, but the goal.
“When you’re a major-selling artist like Coldplay, giving away an album is not really giving away that much,” says Julie Dexter, an Atlanta-based independent artist and owner of Ketch A Vibe Records. “It’s a great form of promotion that builds loyalty amongst your fan base. If the album is good, they’ll spread the word, then your popularity increases. At that point, you can market or sell whatever you want.”
So it turns out that Bernstein’s prediction that the music industry’s focus would move toward marketing was spot-on. His prediction for the coming years is that the internet will serve as a tool for laser-marketing to audiences with highly specific tastes and lifestyles. But, he adds, to be meaningful, the marketer will need to know his or her base and know it well.
“That’s why we have created a community of what we call ‘power users,’ early adopters, culture vultures,” he said. “They are the first touch points with new artists. If our power users like something, they’re influential enough to do something about it, or they’re plugged in enough to tell their friends. We’ve built this relationship over 20 years.”
And that’s where major labels still have an advantage: A promotions budget and a popular brand name. Today’s major-label artists make a record, then spend the next couple of years doing everything but make music. It’s a response to the times, in a world where free music has become a right, not a privilege. With revenue from album sales stripped away, they turn their attention to other things, like endorsing makeup, judging reality shows, pushing liquor, selling bras, etc.
But King believes there’s still hope for reviving a revenue stream through record sales, with a sales model that is compatible for today’s technology junkie: “I think the future is brighter than the present. I think the big companies will turn into a bank and publisher for some of the smaller labels,” he said. “People will be required to upload a label’s or ISP’s software, and if you download music, it will go through a tollbooth.”
In the meantime, it remains a double-edge sword for indie artists. Technology enables them to “do it yourself” successfully. And with profit margins on each record sale that much greater, they can make a steady living. But the big-sized fame eludes them. In the end, heavy and steady doses of promotions are a requisite, in order to be heard over a chorus of a billion others online.
Some independents are trying the album giveaway strategy, hoping to make it up in revenues from live shows. But according to Dexter, that’s taking a huge gamble.
“I’m trying to be like the majors! I want to sell out shows and sell some bras too,” said Julie, half-jokingly and half-seriously. “But right now, my music catalog is my pension, and I can’t afford to give away an entire album totally for free. Nope, that ain’t happening.”
