Are Record Labels Dinosaurs?



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With the rise of social networking and direct to fan advertising, most people seem to think so.  But former EMI CEO Tony Wadsworth at an address at the Great Escape Conference seems to think the opposite:

"Record labels are unrecognisable compared to the 90s," he said. "They are smaller, more efficient and they have diversified and taken on many more functions."

Although there were an increasing number of ways for artists to release music without record labels – in recent years bands from McFly to Public Enemy have gone down the DIY route – this often worked only for established artists with years of record-label support behind them, said Wadsworth.

Prince, who has released albums through newspapers, and Simply Red, who released their last album exclusively through Tesco, had some success. But former Girls Aloud star Nadine Coyle, who also relased her debut solo single through Tesco, sold only 117 CD copies on its first day in the charts. "People outside the music industry think you can invest in music and cut out the record label," he said. "But investment without skills rings pretty hollow, record labels still give artists the skills and contacts they need."

(From the Guardian) But digital technology, which allowed artists like Lady Gaga to communicate and promote herself directly to her fans through tools like Twitter, were making the labels raise their game, said Wadsworth. "Artists are beginning to say, 'I could do this myself, how can you add value?'," he said. "But many artists who have attempted to do things themselves have come to the realisation that labels still have a lot to offer."

The report, which takes a comprehensive look at how record labels have changed in the past decade, states:

* The artist/label relationship has changed – artists demand more from labels, and in return labels take a share of profits made from merchandise, touring and sponsorship and not just the number of CDs sold in 360º record deals. These can "spread the risk for the record label and increase the participation in success for the artist," says the report.

* Label marketing of music has gone from a scattergun approach to highly targeted digital campaigns, like Cheryl Cole who answered questions online from fans as well as doing deals with online retailers.

* Sponsorship deals are more important than ever. The Black Eyed Peas have done deals with dozens of brands including, Pepsi, Blackberry and Honda while bands like Girls Aloud have endorsed everything from Sunsilk hair products to Kit Kats.

* Investment is under strain and some bands are looking for alternative funding sources. Madness signed a deal with Power Amp who took a share of profits while the band maintained their copyright. But labels remained the primary investors.

* Some in the industry fear that with less money "investment is pushed towards the safer end of the spectrum […] there is a danger that safe investment brings with it safe music", states the report.

But some think that Record labels haven't gone far enough:

Mark Mulligan, analyst at Forrester Research said record labels had taken big steps to transform how they worked in order to survive, but they hadn't gone far enough. The digital market was slowing down he said, while physical music sales continued to drop. A report from the international music industry body, the IFPI, revealed earlier this year that the global growth in digital music halved in 2010, with only "single digit" percentage growth in the more mature US digital music sector.

"Each of the major digital music players, Apple, Amazon and Google have made it clear that they think labels are being unflexible and Spotify still cannot launch in the US because of wrangling over licensing," he said. "The record labels are at the start of a very long journey, but they have only taken a couple of steps and they are not walking quickly enough," he said.

By Jez with 1 comment