SANTA MONICA, Calif.-If there ever was a first shot fired in the battle toward a digital age, the music industry was likely the first to hear it. By the close of the 20th century, all the music industry suits were feeling the heat.
Where record companies will fit in an industry driven by digital delivery is largely unknown. And wireless further complicates matters for the labels.
Record-label executives argue that while the distribution model inevitably will change, there will continue to be a need for the many areas of expertise that labels hold on a supreme level. The desire for that expertise essentially will follow the artists’ desire for popularity. Most agree that up-and-coming bands have benefited the most from this shift, as they’re now finding it possible to adhere to a do-it-yourself work ethic while earning enough to pay the bills.
“I don’t see a situation where an artist will be able to go from grass roots to superstar on their own,” said Jeremy Welt, VP of new media at Warner Bros. Records. Artists rarely have a natural inclination to promote themselves, he said; that’s where the labels’ machinery comes in.
“Now you can get yourself up the ladder a bit,” he added, but you can’t go from zero to 10, maybe zero to 2 at most.
Other panelists at the Digital Hollywood conference agreed.
“There’s still all these very big machinery parts pushing things to the next level,” said David Krinsky, director of label relations at RealNetworks Inc.
Mobile’s role
Mobile, albeit rarely discussed at length on the panel, is playing a significant role in the ever-increasing adoption rate of digital-only music.
Wireless carriers have gained some forceful clout in the music industry. Verizon Wireless recently launched Prince’s new single-a deal free of any record company’s involvement whatsoever. Prince has the perfect mix of star power among fans and disgust for major record labels to make such a move successful. Time will tell if other artists and bands decide to cozy up exclusively with carriers and drop record labels from the equation.
Like the music business, the wireless industry has become a marketing powerhouse. Music companies are falling back on promotion and advertising, selling it as the area of expertise they excel at most, but wireless carriers have the immediate attention of almost anyone, and control the entire distribution path.
Roger Entner, SVP of the communications sector at IAG Research, clearly thinks the nation’s No. 2 carrier has gained a major win with its exclusive deal with Prince.
“Prince, a legendary music icon without a record label contract, has found a new way of how to launch his new single and album, promote it and secure an additional distribution channel. This is actually the third event in a progressive development that will most likely lead to the record labels losing their most iconic artists,” he wrote.
Entner cited Sting’s decision to license his 2000 album, “Desert Rose,” to Jaguar and Shakira’s decision to launch her “Hips Don’t Lie” single exclusively with Verizon Wireless before a general release to the public. Both artists experienced great success, especially Shakira’s smash hit of 2006.
“If Prince’s new single ‘Guitar’ is even moderately successful I can imagine that he will earn more money for himself than if he would have had a mega-hit with a record label,” Enter added.
“If record labels are not going to adjust their business model to this shift they are risking becoming merely optional. If you thought online music was a shock to the music ecosystem, think again what the wireless industry is going to do to revolutionize the industry and to bring music to more people than ever in a completely new and direct way,” Enter concluded.
Social networking
As labels draft their strategies for each artist depending on their aspirations, other projects such as social networking and user-generated content may come into play.
“We’re just getting started, but we’re starting to create user-based products,” Welt said, adding that Warner Bros. wants to give fans the tools to creatively tweak with content that will eventually be associated with the artist or band.
But still, the label and artist must keep in mind what they’re after, Sinclair said.
“I think they (social networking sites) just give people a place to experience the artist,” Sinclair said. “The biggest opportunities are for the developing bands there.”
This is part of the beauty of this new distribution channel, Krinsky said.
“The flexibility of digital distribution is great because you don’t have to think about distribution costs” and the artist can decide to put out a series of EPs rather than adhering to the traditional full-album model, he said.
“Artists are kind of able to get more things going for them than they could in the past,” Krinsky said. “We have hundreds of thousands of artists in Rhapsody . and within a month, 95 to 96% of them get listened to.”
Still, Daniel Cohen, senior director at Musicwave Americas, doesn’t see an easy to travel road ahead.
Cohen said the bulk of its business is now in mobile and still they and others have yet to find the business model they’ve been looking for. “While digital sales are growing, overall sales are declining. The labels can’t wait too long because there won’t be much left,” he said.
