Musicadium Blog

The first concrete figures confirming the triumph of “tracks over albums” was released but the Universal Music Group in 1996. The media research company Enders Analysis forecast a fall of $23 billion in 2009, a 16% decline from 2006.

With figures like that there is no wonder there is no love lost between Digital Music Companies and Major Labels. This rivalry dates back to the past deals that were made with Apple which saw Apple’s stock prices soaring while major label stocks declined due to early digital distribution and music piracy.

However, since that “mistake” there have been various peace talks between the digital distributors and the labels, such as the music-sharing deal agreed on by Sony and YouTube back in February. This agreement comprises of YouTube giving Sony large amounts of money in the form of “advances” as permission to upload Sony’s artists.

This is just one example of how major labels are changing their business models in an attempt offset the loss of physical CD sales and continue squeezing the money out of our pockets. Other changes include:

1.    Teaming up with social networks
Mid 2008 saw Warner Music Group, Sony BMG and Universal Music Group teaming up with popular social network Myspace. This joint music venture allows people to listen and watch music as well as buy concert tickets and merchandise.

The basic idea was to copy iTunes, but why did they wait so long to launch such a venture? This is a question that should be addressed, or at least made accountable. After all, music executives have seen the potential in social networks for a long time.

2.    iPhone apps
iPhone Apps is one area where Major Labels didn’t waste any time. Even those who believe Major Labels to be “the greed of the music industry,” should be able to appreciate the genius in exploiting iPhone Apps. This is a cost effective way of connecting fans to artists whilst tracking consumers, with the potential of making money.

Unlike The Presidents of the United States app, most other band apps do not give the user full tracks, just a sample with the option to buy the tracks. The sample tracks are used as a means to create a need for the track and just hopefully the user will purchase the tracks/CD rather than illegally downloading them.  UMG has released All-American Rejects, SouljaBoy, Pussycat Dolls, Lady Gaga and Keri Hilson apps.

3.    Merchandise clauses
When it comes to touring merchandise can be what generates the most profit for big and small bands. As CD sales continue to decline labels are forced to continue looking for more ways to get our money.  A basic merchandise clause is vital as venues may have different terms for merchandise sales.

However, the introduction of “multiple rights deals” (aka 360 deals) now allows labels to take a percentage of things that were originally off limits, such as merchandise, concert revenue and endorsement deals.

Even with the adaptation of new business models major labels are losing the fight to digital distribution. Some will say that justice is finally being served; I say that although I agree with that statement, it might be a bit early to write off the might of the major labels. Well, at least their abilities to make a profit wherever they see one.

This entry was posted on Friday, April 17th, 2009 at 2:28 pm and is filed under Guest Post. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.