Majors to New Bands: No Use For You!

Here’s a little epiphany I had yesterday that I don’t think many musicians are thinking about, or maybe so many acts are just resigned to an indie existence that it doesn’t even really bother them.

My idea is: the industry no longer needs to invest in new talent in order to be profitable. Due to plummeting album sales (check this out from the New Music Seminar) they don’t have the budgets anyway, but even if they did, it probably wouldn’t be the most profitable option.

The argument resides mainly in the ideas put forth by Chris Anderson in his book and blog “The Long Tail.” The pre-digital, pre-web markets of yesteryear were based on limited shelf space. Anderson explains how a Tower Record store in NYC paid rent, and that rent was divvied up so that the rent for each little shelf space that held a CD had it’s own fraction of the rent. In this model its easy to see whether it’s profitable to stock a CD by asking, “is it losing money, breaking even, or making money after the rent cost to shelve it?” The result of this business model was a trend towards stocking the biggest hits of the day. Sales for a new CD generally peak at or near the release date, so new releases had the highest return on the rent cost to shelve them. Once sales started to tale off the standard dogma was to replace the CD with the next big hit, and thus maintain the highest profit margin. This drove the whole industry towards “New Releases.”

As Anderson points out, we now have entered a digital web-based market that has unlimited virtual “shelf space,” and basically no cost of rent for that shelf space. What this has revealed is that residual markets for music are actually pretty darn good, even if they can’t compete with the huge temporary peak in sales that follows a new release, the new dogma of today is, aggregate enough good residual earners and it can be just as profitable as the “New Release” market of yesteryear. For instance Rhapsody boasts nearly half its sales from music that is not available in physical stores. And this sector of the market is growing fastest.

What this means for the major labels is they are sitting on a goldmine. Their enormous back-catalogs of music have a huge hungry market that is waiting to consume it. Maybe no single title will rival the latest Gaga release, but wait long enough and eventually they rival her residual sales. How many strong residual earners (eg Michael Jackson, Pink Floyd, The Beatles-Amazon and iTunes STILL don't offer downloads of the Fab Four!!) do you need to equal one temporary hit? Probably not that many, and major labels are sitting on 1000s of titles, many still unreleased digitally, that in aggregate have astounding earning potential.

If I was working at a major label I would be thinking about how to license my enormous back-catalog that already has a built in market. I would not be thinking about which unknown band to take a costly risk on next. To the unsigned bands and musicians of today, major labels just don’t need us!

Does this mean give up? Hell no! Unless we all want to see a huge reduction in the new music that comes out, we need to band together to create the future of the market, converge on curated streams of music, and together we can define where people hear new music, and find out what’s good. It is most certainly up to us to do this in 2010.

In closing I’d like to show you this (hilarious) graph offered up by LiveNation, apparently in all seriousness, at one of their latest conferences. Bless you for your optimism LiveNation, if not for your completely unfounded, unsupported, “New Model.”

Technorati Tags: New Music Seminar,Long Tail,Chris Anderson,Tower Records,digital market,Rhapsody,Lady Gaga,back-catalog,Michael Jackson,Pink Floyd,The Beatles,Music Industry,Record Labels,Record Label,New Release,Live Nation,New Model

Squeeze: “Whatever Worked”

The saying used to be “whatever works,” but in the 21st century music industry it is more like, “whatever worked.”

Squeeze, a band that you probably don’t realize you know, played Radio City Music Hall on Tuesday as part of a big comeback tour of 2010. To refresh you memory on who the heck Squeeze is, here’s a Youtube of their classic, “Tempted” from 1980.

Pretty cool stuff huh? Yes, there is certainly nothing wrong with Squeeze. They have style, talent, and creative songs. But buried below the headline there’s a story that gives major insight into the state of the music industry today.

You’d think that with a big new tour in 2010 Squeeze would have a big new album to go with it right? Well…sort of. Actually, they have been spending their time in the studio re-recording their hits from the early 80s. Universal owns the originals of these recordings and won’t give them up, forcing Squeeze to re-record them if they want to sell them on tour. So you have a 30 year old band selling 30 year old music in NYC this week. It’s as if the whole industry is just stuck.

When Mp3s took over, and the industry tanked, the money for record deals and development of artists tanked with it. Apparently it is more profitable for Universal to engage in legal battles over the fate of 30 year old recordings than it is for them to help develop and promote a new album for Squeeze. And the flip side is, Squeeze knew that if they wanted to make any money this tour they were better off re-recording the hits than pushing something new. Without big record contracts and marketing budgets, its very hard to make new trends for listeners. So for the time being, I guess the mantra will be “whatever worked” for musicians and labels.

I hope we can one day get back to “whatever works!”


Squeeze Tempted

Technorati Tags: Squeeze,Music,Music Industry,Radio City Music Hall,Tempted,Labels,Universal,Music Labels,Record Contract,Listener,NYC,2010,Tour