When in New York last week I had an interesting lunch conversation with an acquaintance that works with online marketing within a totally different business than the music industry. A topic that came up was the existence of record labels (as we know them). One of many questions was why they still exist and if they even have a basis for existence in the new music economy? One argument for why record labels should cease to exist was in relation to how the Internet (now) provides an efficient means of music distribution where a major label investment is not necessary to facilitate the distribution (David, M. 2010: 136).

Photo: CC: Shutrbug72 / Flickr

I definitely agree on the fact that the Internet provides an efficient means of music distribution. I also agree on the fact that a lot of bands and artists don’t need to sign with a record label to build a career. I do however still think that record labels has an important role to play in the new music economy. This new role does however not (only) involve hiring a concert booker and implement a 360 deal to their business plan as well as talking about themselves as “music companies” rather than “record labels”. In my opinion the most important role of traditional record labels today is the role of “value adding content providers”. Here’s why:

Wikström (2009) argues that the characteristics of the new music economy (high connectivity and little control, music provided as a service and increased amateur creativity) are driven by the digital media technologies (p. 85). These main characteristics are also highlighted in the “Opbrud” report created by the Danish consulting agency Kontrabande (2011). In this report Kontrabande (2011) points out that the development of the digital market for the media industries (film, tv, books, music, games, journalism) is characterized by little control due to fragmentation (unbundling) and individualization of traditional media content, as well as increased amateur creativity and social relevance (sharing within communities). The report also highlights the demand for trustworthy filtering of content. This due to all amateur creativity and information overload for many users (p. 4). Wikström (2009) refers to Negus (1992) when he elaborates on the fact that “the music industry is about ‘developing musical content and personalities’ and to be able to license the use of that content and those personalities to consumers (…)” (p. 17). An important point on user-generated content made by Clay Shirky (2008) is that “much of what gets posted on any given day is in the public but not for the public” (p. 90). The same goes for musical content. As already pointed out the Internet provides an efficient means of music distribution and a major label investment is not necessary to facilitate such distribution (David, M. 2010: 136).  However, more music are produced and available online than what actually reach the consumer. Wikström (2009) refers to Hirsch (1970) and theory on “preselection systems” when describing characteristics of the copyright industries’ marketing challenges. The point is that music listeners only experience a fraction of new music released. What people end up listening to (as in what ends up becoming popular) is what passes trough the gatekeepers filtering system (p. 22). The music consumers’ now need to easily be able to navigate all the music in the Cloud (Wikström, P. 2009: 175).

It’s no secret that the music industry has been and still is hit driven. Industry success on a major label level is most often measured by looking at the music charts (who’s number one). Traditionally what has reached the top of the charts and the audience is what music labels have invested a lot of money in (TV-advertising etc). However the increase in music production and songs available online has made it necessary for the music labels to pay for exposure in more outlets in order to keep the audience on a constant level. And as we know, the decrease in CD sales has lead to an additional reduction in income. This way it is without doubt that the traditional way of music marketing and receiving attention for certain artists and musical projects will have a negative impact on profitability. It is therefore crucial for the music companies to lower investments, spend the marketing money more wisely and rely on music fans “to create a good buzz”. (Wikström, P. 2009: 91-92)

But as the music companies now has to rely on fans to create a good buzz and with an increasing demand for trustworthy filtering of content, there’s no doubt in my mind that record labels should play their role as “content providers” more serious. As the music industry is about ‘developing musical content and personalities’ as well as making sure that the musical content and those personalities reach consumers, it is highly important that all the music produced are of high quality and that it stands out of the mass creation of “amateur” content. A traditional music label should already have the staff to make sure this happens. I am certain this sounds a bit obvious, but every teenager during the 1990s probably remembers some of the disappointment they sometimes experienced after purchasing an album based on a radio hit. The hit single was good, but the rest of the album wasn’t. In the new music economy consumers no longer have to deal with this type of problems. Today music fans are able to buy access to “all the music in the world” through streaming services such as Spotify, WiMP and Rdio etc. This means that music consumption and eventually revenue streams will be based on what people actually listen to and not on the amount of albums and singles bought in record stores. This speaks out for the importance for record labels to make sure that all the content they represent are of high quality (the filter role of a gatekeeper). Hits are of course still important, but all the music made public by the music company is highly significant. In the new music economy, music companies simply achieve market share based on how much of their entire catalogue music consumers listen to. People still tend to listen to the most popular artists, and that will never change, but it has never been more important to ensure high quality of the entire catalogue. As more music is being produced than ever before (I have been talking about “cultural inflation” for about five years now) and easily distributed online, the music companies mainly needs to make sure that what they release is “better than the rest of what is out there”. The record labels therefore needs to make sure all of their music available in the Cloud is not just in the public, but also for the public. Simply put: Anyone can distribute music online. Not everyone can be on a label. In a world of cultural inflation, this is part of how the filtering of musical content might work.

In an interview with the Los Angeles based music blog Rollo & Grady, Seth Godin talks about the music industry in relation to his book “Tribes” (2008): “(…) music labels used to be in the business of grabbing shelf space, on the radio and in the record store. Now, the music industry needs to realign and be in the business of finding and connecting and leading groups of people who want to follow a musician and connect with the other people who want to do the same” (Rollo & Grady, 2009). The way I see it music companies should be about building strong brands and benefit from the artist career as a whole. The best way to build strong brands is definitely by making sure all the music released is of high quality (nobody wants to follow a crappy musician as well as nobody wants to be a crappy musician). This speaks out for the importance of highly skilled A&R people at record labels that not just search for the next number one hit. Today the artist and repertoire employee also needs the ability to lead and guide artists throughout their whole career. Marketing personnel at record labels has for a long time been the strongest argument why someone should sign with record labels. They still are. The marketing power of a record label might be crucial in order to break upcoming acts. However, as the return on investment is harder to reach the more money you spend on exposure in more outlets, the more important it is to make long strategic planning instead of plugging the next big hit or sensational story while paying large sums for exposure in tons of outlets music consumer doesn’t really care about (when was the last time you really noticed and acted upon an online advertisement?). It’s the entire content as a collection that is the most important asset at records labels. The focus therefore needs to be more on all content rather than just hits. At the same time it is crucial to spend marketing money more wisely as well as making sure the fans gets something besides a product wrapped together as a basic album. Today everyone can get their music on iTunes, but not everyone can create something special for their fans – something out of the ordinary. If you want people to recommend your music to others, make sure it is recommendable. The basic rule of content providers is simply that the service is available at little or no cost, to promote their primary business. Content providers are also referred to as “value added services” which on a conceptual level should add value to the standard service offering. In this case the standard service offering is the artist career as a whole, while the music (as in recorded content) of the artist is used to promote the entire business (although it is of course still possible to make money by selling recorded content).

A survey recently conducted by ReverbNation shows that 3 out of 4 unsigned artists still want a label deal (Digital Music News 2011). This is also the case with most artists I know, and for the most part this is because 1) artists wants to get acknowledged for their music and 2) they really want to find a home for their music. If an artist really looks up to another artist, he/she/they would in some cases kill to be on the same label or “discovered” by the same A&R as their idols. It is therefore important not to let artists down. After all, they provide the content providers with the actual content and that way function as the most important stakeholder for music companies – Next to the music fans of course. Without fans, music is dead and without good music there will be no fans. That’s why it is crucial to give fans something extra.

As any other stakeholder, such as a music journalist, or digital distributor, I would however love to know that whenever music labels release music, it is of high quality, and I would love it if I just knew it instead of having them convince me. I am however not saying that everyone should be on a label to be great (recent history has definitely proved that that’s not how it works). What I am saying is simply that if record labels are supposed to have a reason for existence, it is first and foremost to become a filter of mass production (instead of becoming the mass production). In other words record labels needs to be providers of great musical content (and then some) where they add value to the standard service offering. One thing is the marketing expertise; another thing is the ability to continuously release great musical content on a market where the consumer (and not the marketer) has most of the power and where amateur content strive for the same attention as “music with a marketing budget”.

Bibliography

• David, M. (2010) Peer to Peer and the Music Industry – The Criminalization of Sharing (First edition). London: Sage
• Digital Music News (2011). Survey: 3 Out of 4 Unsigned Artists Still Want a Label Deal. Digital Music News (28.03.2010) Online: http://www.digitalmusicnews.com/stories/032511unsigned [Accessed 03.04.2011]
• Godin, S. (2008). Tribes: We Need You to Lead Us, London: Piatkus
• Kontrabande (2011). Opbrud – Strømninger og bevægelser i markederne for film, tv, bøger, musik, spil og journalistic 2011. Kontrabande (March 2011).
• Rollo & Grady (2009). Rollo & Grady Interview // Seth Godin (February 5, 2009). Located: http://www.rollogrady.com/rollo-grady-interview-seth-godin/ [Accessed 20.12.2010]
• Shirky, C. (2008). Here Comes Everybody – How Change Happens When People Come Together, London: Penguin Books
• Wikström, P. (2009) The Music Industry: Digital Media And Society Series. Cambridge: Polity Press