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    Record Labels Are Losing Power to Fans, Artists

    by Jason Feinberg
    October 9, 2009
    Photo by "m kasahara":http://www.flickr.com/people/pollyann/ via Flickr.

    Over the past month, I received a significant amount of feedback on my recent MediaShift article, What Will Record Labels Look Like in the Future?. People from all areas of the music industry reached out and shared their feelings on future business models, and strategies for moving forward.

    Regardless of their background, practically every person I spoke with agreed on a core set of truths about the future of record labels (and the industry as a whole). The consensus is that:

    The music is the gateway to the live show, the T-shirt, the licensing for a movie trailer." -- Larry Weintraub
    • Financially, the current situation most record labels find themselves in is not sustainable, especially for companies whose main source of revenue is selling music as their primary product.
    • Sales of digital music have not come close to replacing the revenue lost from the decline of physical sales. Overcoming this requires a significant shift in label expenditures, and revenue sources.
    • Investors are finding it very difficult to find opportunities that have an acceptable chance of return on investment. This applies to releasing music, as well as ancillary services and products around music.
    • Power is shifting away from labels and back to the artist and management. Labels still provide valuable services, but, for the first time in decades, they are no longer the center of the industry.
    • The ultimate power now rests with the fan. The dollars they spend are being fought for harder than ever before. At the same time, fans are demanding more content than ever before.

    Here’s what the experts had to say.

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    Feedback From the industry

    Paul Resnikoff, founder and publisher of music industry news site Digital Music News, has a bird’s eye view of the entire music industry.

    “I just wonder if music can ever be monetized to the same degree; I think that [NBC’s Jeff] Zucker really hit the nail on its head with his ‘“analog dollars to digital pennies”:http://www.nytimes.com/2008/03/10/technology/10online.html?_r=1’ comment,” Resnikoff said. “It might resonate for years to come.”

    i-7f82c653afa7805bfa8a4c1d29662931-george-howard-thumb-180x180-1140.jpg
    George Howard

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    George Howard, the former president of the Rykodisc label, an advisor to Carly Simon and an assistant professor of management at Loyola University in New Orleans, feels financial sustainability is directly linked to an artist providing more assets directly to their fans.

    “Record labels in the future will concern themselves with all the heretofore locked assets that an artist has, and [with] utilizing music as a sort of gateway to a more dynamic relationship between artist and constituent,” he said. “It will be a direct relationship — no middle-man. There will be an increased focus on so-called sentiment analysis, and utilizing the social media tools to create an accelerated word of mouth.”

    Jay Coyle, owner of Music Geek Management and a direct-to-fan marketer agrees that the responsibility falls back on the artist.

    “As for the future, I think it really relies on the artists themselves forging a small team to build and execute what the major labels used to,” he said. “I don’t think the old model is totally dead, but more success will be found with hard working managers and artists…who focus on direct-to-fan marketing and sales. If they feel they need a label involved, then all parties need to do their fair share of working hard for equal rewards.”

    An Entirely New Model

    Fanscape CEO Larry Weintraub is an industry veteran with 25 years of marketing experience. His extensive work in social media has given him insight into the relationship between the brand and the consumer. He has constructed a start-to-finish scenario of what the record company of the future looks like:

    The record company of the future is a one or two person operation. It’s the artist and if the artist is not a business person, it’s their ‘manager.’

    The artist finds a way to record their music on the cheap. Whether they record it live at a club or multi-tracked on their home computer, it costs them very little. If they want to spend a little more, they have a job and put a little cash aside each month.

    i-2e2427b28ec6147cce83df97423cc9af-larryweintraub-thumb-150x187-1144.jpg
    Larry Weintraub

    With the finished product they go to Craigslist and find someone who can help them do their artwork for next to nothing.

    Armed with a finished album and a nice piece of accompanying art, they give their music away to the world. It’s available to stream on their MySpace page; it’s available for free download in exchange for an email. To the paying world, it’s available on a site like CDBaby.com that also helps them upload the music to iTunes, Amazon, Rhapsody, and everywhere else. When the artist plays a show, they sell their “burned” CDs for $5 with a copy of the artwork and a personal letter saying thank you. They give each paying customer three extra burned copies to give to their friends.

    Music is free. And they realize this. If people are willing to pay, they may do so. But the music is the gateway to the live show, the T-shirt, the licensing for a movie trailer.

    Then they promote their album by managing a fairly simple website; a MySpace page will do. They respond to every single person who makes a post. They blog about what is going on in their lives. They ask for opinions about the music. They respond graciously. They have a YouTube channel for live performances, they have a Facebook page and a Twitter account. They communicate with their fans. They let them in.

    The chances for becoming a star are slim. But they always have been. Now the artist is in control. They are not indebted to a major company that doesn’t really care about them. It’s up to the artist to make things happen.

    The Artist’s Perspective

    i-8650b89bad3eb7a85644eb98ae21dba1-steve-large-thumb-150x142-1146.jpg
    Steve Vai

    Multiple Grammy Award-winning guitarist and independent label owner, Steve Vai has seen all sides of the record label equation. After years of major label releases, Vai recently released his new DVD “Live in Minneapolis: Where The Wild Things Are” on his own independent label, Favored Nations. (Disclosure: my company is managing the marketing for the DVD.) He offered an artist’s perspective on the future of releasing music.

    “The two things that will always be needed in the music business are the content (the artist and their work), and the people that know how to sell it (the labels or the glorified marketing team),” he said. “The brain muscles between these two entities are usually pretty different and nary do the twain meet. The way in which we create, record, distribute, purchase and play music will continue to evolve into technology that we are not even comprehending at this time; but there will always be the need for music to be made and for someone to know how to market it to the audience that craves it. Because ultimately there is a vital need for people to be stimulated by the music that resonates with them. It satiates the soul… for a time. “

    *****

    Stay tuned for part three of this series, which will offer more thoughts from a variety of industry professionals.

    Jason Feinberg is the president and founder of On Target Media Group, a music industry online marketing and promotion company. He is responsible for business development, formulation and management of online marketing campaigns, and media relations with over 1,000 websites and media outlets. The company has served clients including Warner Bros. Records, Universal Music Enterprises, EMI, Concord Music Group, Roadrunner Records, and others with an artist roster that includes Har Mar Superstar, Flipper, George Thorogood, Steve Vai, Robben Ford, Chick Corea, and many more. You can follow Jason on Twitter @otmg

    Tagged: business models direct to fan future music industry record labels steve vai
    • I believe artist should release songs on their own website and let fans pay for the songs they want to download. that way the artist can capture the fans email so they can offer other items for sale in the future.

    • Kathleen Berns

      Personally I see the music industry in two ways, first of all its an art form a means in with artists express them selfs and this ought to be shared with the public, on the other hand its also a business in which a lot of work and capital is injected into its production, why should so called fans get this music which is basically a marketed product for free?

    • Live performance and smart use of new medias shall be the solution. Yet, that’s true that independent managers or consutant are a key for success now that labels are almost dead.

    • S

      One artist has been writing about this *a lot* and she makes some amazing points:

      Part 1:
      “why i am not afraid to take your money, by amanda palmer”
      http://blog.amandapalmer.net/post/200582690/why-i-am-not-afraid-to-take-your-money-by-amanda

      Part 2:
      “Virtual Crowdsurfing”
      http://blog.amandapalmer.net/post/212321239/virtual-crowdsurfing
      “”

    • As an artist (someone who makes visual art), it irks me when the press says artists but means musicians or performers. It was bad enough when the commercial press did it (seemingly starting during the rise of rap music) but to see PBS and NPR now doing it sometimes –ugh. It has gotten to the point that artists have to specify (“I’m a visual artist”) so that people don’t think they’re calling themselves music-makers. (One of these years, I’ll put together an essay on this topic.)

    • The birdie brings the higher perspective to the world. Birdie Num Num.

    • Michael Hardie

      Your perception that calling musicians or performers “artists” started with rappers is way off.
      If you do your research you will find that it goes back at least to the beginning of the recording industry. As in “recording artists”.
      Frankly it “irks” me that you think, somehow, that musicians and performers are NOT “artists”.
      Perhaps if you were a real artist you could actually tell people you are a painter or a sculptor. Then you, and everyone else, would not be confused.

    • Michael Hardie

      Further comment. Regarding Larry Weintraubs’ comments (and the article in general). We are well aware of what people are doing with home recording, craig’s list, myspace, etc.
      Is that really “where it is going?”. Because, if you really know anything about the record business, the chances of making a great record “on the cheap” are extremely low. The Beatles certainly never did it.
      While the writing is the MOST important factor in making a record, production certainly counts toward making it great.
      Are you really telling me that the future of the record business is in people releasing poorly made products on MySpace?

    • see…

      NOT FOR PUBLICATION
      Just reporting “personal attack” comment (attack upon comment-maker rather than response to article):

      Michael Hardie said:
      October 14, 2009 10:18 PM

      …Frankly it “irks” me that you think, somehow, that musicians and performers are NOT “artists”.
      Perhaps if you were a real artist you could actually tell people you are a painter or a sculptor. Then you, and everyone else, would not be confused.

    • see…

      great. well. no human checking at all of the comments, is there?

    • Thanks for all the comments. To address a few things discussed –

      I think the main idea here is that the industry is shrinking from a monetary perspective, and those that want to stay afloat need to accommodate for this – be it thru reduced recording costs, lower level marketing, or accepting that superstardom is fleeting and generating just enough income to get by may have to be good enough. Getting paid 40k a year to play music will beat getting paid 40k a year to sell shoes 99% of the time.

      So I do think, in many ways, things are reverting back to the simplicity and grassroots ways of indie artists in the 80s. Cater to a core set of fans, keep costs down, and use any network available. One real fan at a time is more valuable than passive mass awareness (the way the industry has been shoving music down the public’s throats for decades).

      Jason

    • We are now entering a participation economy. Many major labels are now struggling because the independents are more in touch with the needs of the the fans. The music industry needs to fix up and learn to listen before its too late.

    • chrissie

      This is what the future of record labels is all about .

      http://wtyf.wordpress.com/2009/09/29/the-sustainable-record-company/

    • adam mcinnis

      I agree with most of the information given, as well i’ve used it in several recording projects that i’ve worked on. As a recording artist, producer, and songwriter i realize it is imperative to understand all the “hats” to wear in this business. All i can add to this blog is that for any musician or band out there, do not be discouraged by the decline if your music is great. Great music will always have a chance, it just seems alot of the times that ear candy is what is played on the radio with little substance. But one thing i have learned is the substance is still what the “average” person is listening to and also what investors are still supporting. I personally have attained a budget for every project i’ve done in the last 3 years and a hefty one at that. They have all made it to some degree of success, either critical acclaim or notariaty. For some investors who’ve made there money in other avenues, getting their return isn’t always first and foremost, RESPECT is their #1 outfit. Go after investors of this caliber, of course everyone wants to make money in this business, but if your having a hard time gathering the numbers that record labels want in return for their investment. Search for a person or group of people that want to be apart of something inspiring. If you can deliver on that you’ll find the project will start to fly on it’s own after it hits a certain cliff. Good Luck!

    • Doesn’t anyone stand behind their products any more? Can you blame the fan for wanting their music ‘free’ when people are advocating purposely recording low fi records with no value? Artwork by a student (offering no brand ID? more than likely)? A myspace page being ‘enough’ of a presense? Don’t think so.

      As a challenge, in 2007, I started a label, Blue Coast Records, where we’ve priced our discs at $40 per unit. I don’t really care if someone thinks the price is too high. They can listen to the whole album, in it’s entirety without paying. We have sold thousands of physical discs and downloads.

      We sell at our website, we sell through traditional distribution, we sell directly to China and get paid in advance of shipping. We did everything that people thought wasn’t possible. No major label needed… they can’t compete with ‘paid in advance’.

      Marketing and consistent branding works. We knew our fans were out there and we let them know we existed. We talk to them via emails and forums. They return the favor with more postings. It’s not brain surgery, it’s promotion.

      Direct to fan is nothing new. It’s the way it’s always been. The fans make a choice where they’re going to spend their hard earned cash. A new video game? A new pair of shoes they don’t need? Season tix? Music? It better be the best you can offer.

    • Here’s an interesting thing: Music may “pay” less but with a smaller business model now possible with far less “infrastructure” with whom to divide the spoils, it may actually pay the artist… at all! How many major label recording artists are secretly broke or worse… in terrible debt?

      The edemic, swollen production/video/promotion/development budgets have been ensuring artistic failure, as far as a label is concerned. If what is paid out is massively more than what is paid in, there is a problem with no “catch up”.

      Bottom line- With today’s technology enabling the “making” – and “marketing” of music, artists who never had a chance at turning a profit can now, with work, do so. And smart Indies can rule.

    • My thoughts on some points:

      MySpace is no longer enough by itself. It doesn’t offer the tools that emerging artists need in order to connect with fans (Reverb Nation is probably a better bet and artists can manage their MySpace page from there).

      Making recordings “on the cheap” is probably a relative term. You can get a “good enough” to “pretty good” recording for a few thousand dollars where it used to cost much more. Additionally, there are many more people developing expertise in engineering and producing recordings, making the market price decline.

      Lastly, this period of time will see the growth of musicians who have ambition and motivation. Those who sit back and wait for someone to find them are out of luck. If an artist has decently compelling music and is willing to devote a significant portion of their time to DIY marketing, they will be noticed by someone on the marketing side who can take it to the next level. For better or worse, it may be that desire will win out over talent in a lot of cases.

    • Jaysen

      It’s a great and romantic ideal to think that power may be being delivered back to artists, but under the grim of it all another very different truth is evident – that executives are now taking their money and jumping ship, leaving artists in the lurch. It’s a shame a more fairer agreement can’t be met. http://bit.ly/6T0dAa

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