February 23, 2009 The Future of the Music Biz?
Hi it's Dan Freeman from Comandante Zero. A couple of months ago as we were looking to finance our record, I did a bunch of research into the current state of the industry and tried to figure out where it was going. I put together this piece for our blog and Ariel Hyatt suggested that I share it here. So here it is. Btw, if anyone wants to read more about this topic, I included a whole bunch of links at the bottom of the post. Enjoy.
The business model of the major labels (I refer to the 4 who are still standing - Warner Music Group, EMI, Sony and the Universal Music Group) essentially dates back to the mid-20th century. The record labels had full control over physical distribution, meaning that they sold records the way Proctor and Gamble sells shampoo: a record would be recorded, mastered and then physically distributed to stores around the world. Essentially the only way for an artist (say the Beatles) to have their album sold at your local record store was to enter into a recording contract with one of these major labels. The labels would take on the job of fronting the money for the living costs of the band while they made this record, the recording/studio costs of the record, the mastering costs of the record, the artwork design, the promotional costs of the record - including getting it to radio stations (and in some cases using payola to get them to play it) and finally the costs of physically shipping the records to stores around the world so that the consumer could buy them.
While the record company did a tremendous amount for the artist - it came at an often terrible price.