Indie Labels: Trailblazers, Guinea Pigs or Both?
The majors are sitting this one out, either because they’d rather the indies play the guinea pig role or because they don’t want to be caught being nice to P2P before the matter is heard by the Supreme Court. Altnet, reports Digital Music News, has a new ad revenue-sharing model for P2P applications such as Kazaa. “The concept will split contextually-relevant advertising revenue,” it explains.
Can such a model work well enough to encourage more labels to hop on board? The involvement of such labels as V2, Epitaph/Anti, Palm and Koch Entertainment is encouraging. These are heavy hitters in the indie music field. Their successful participation could open the floodgates for more involvement by labels. They don’t, however, have as much to lose from embracing P2P. Major labels, because of their reliance on radio to drive music purchases, have more to lose.
Nothing impacts CD sales like radio play, and CD sales are what currently keeps major labels afloat—not one-at-a-time downloads at online music stores. Promoting a song at radio promotes a single song—that can be downloaded for free. By embracing P2P, these labels trade some album sales for the ad revenue related to a few downloads. It’s not a model that looks attractive to a label that has invested millions in an album and has a break-even mark in the platinum-to double-platinum range. (And while many like the thought of such big-business albums being rendered irrelevant, the demise of the mega-album would send shockwaves through every layer of the industry. For better or worse, the mega-album is the lifeblood of most of music retail.)
Of course, one could argue that many people were going to download only one song with no intentions of ever buying the album. In those cases, record labels basically have found a new revenue stream. Is that how it plays out? I don’t think anybody knows for sure, hence the idea that indies are playing the guinea pig role here.
In a perfect world, a major label could survive by pushing one single after another, and they wouldn’t be so tied to the album format. For those who want the album, it would be made available in physical or digital form. Those who don’t want the entire album would be free to acquire it through online stores or P2P networks. Each market segment is served according to its desires, no one segment cannibalizes another, and rights-holders and songwriters receive their compensation no matter the method of acquisition.
Will it ever happen? Not this year, nor the next, nor the next. The next one? Probably not. What are the alternatives? Stop pushing singles at radio? Stop lobbying MTV to show their videos? Stop streaming videos online? Stop licensing hit songs to commercials? None are likely outcomes, though they’re all strategies that would allow labels to rely less on the single and thus be more receptive to P2P.
Guarded Optimism at Sony BMG
Sony BMG CEO Andrew Lack talked to the AP about Sony BMG and the tough times facing the music industry. ( Article ). He was optimistic, but not too optimistic.
“The industry has tough years in front of it. I don’t think it’s going to get suddenly much better. The industry has really been hurt, and it isn’t because there isn’t great music. This year is strong, and yes we got a little uptick. But the strength of the music was not reflected in the real sales that we should have had.”
About the Supreme Court’s upcoming hearing on P2P, he said, “They’re going to be looking at whether in fact, these services have really undermined basic principles in this country that have for 200 years protected artists, writers, producers.” His prediction? “I think they’re going to see it our way.”
Corporate Bonuses Irk Many
Sometimes there’s more in an income statement than just the bottom line number. Mere numerals don’t capture all the blood, sweat, and tears that went into that number. An SEC filing revealed that the major music group paid out $21 million in executive bonuses when it reaped a mere $7 million operating profit, meaning that there must have been some serious BS&T hidden somewhere in those extremely modest numbers. Hits Magazine has covered the incident with a raised eyebrow, and has hinted that some in the company were less than thrilled about the payouts. One former employee wrote a “straw that broke the camel’s back” email to CEO Edgar Bronfman on his way out the door. The whole affair has, naturally, done wonders for the music industry’s image problem.
Glenn works in the music industry in New York City. He writes about the industry and music in general at his blog, Coolfer.
Note: When you purchase something after clicking links in our articles, we may earn a small commission. Read our affiliate link policy for more details.