Wed 12 Jul 2006
Last week EMI and The Firm announced an innovative artist-empowering record label. I read this first in the Financial Times so the serious press is taking an interest.
As I am no expert it is not absolutely clear what this structure will be but it seems to be based around a profit-sharing deal between the artist, the Firm and (presumably) EMI. Also by implication in reference to another deal this could include sharing of profits accrued from all artist ventures including touring. This particular excerpt, I think, highlights how this new venture could be structured:
In another recent deal with EMI, Firm client Ice Cube self-financed a new album and The Firm handled such record company functions as A&R, marketing, promotion and publicity for the newly created Lench Mob Records, while EMI handled distribution. The album, “Laugh Now, Cry Later,” debuted top 5 in the U.S. three weeks ago.
This sounds very cool and may be analogous to a company mash-up where instead of EMI (say) controlling investment in the artist, the recording, the distribution, the PR and all other activities, different companies (including the artist) contribute their core competence to the venture. Where this works for Ice Cube is that he is already (no doubt) a wealthy man and as long as he trusts in his continuing talent financing the album himself makes perfect sense. Where this works for EMI is that they take on a low-risk venture and if it doesn’t work they haven’t financed the thing so lose only their time spent on their part of the deal.
Where it doesn’t work for EMI (I suspect) is that EMi and other record labels run a portfolio of artists (or assets as they would look at them). They invest in individual assets and some will return an income stream, some will fail and some will be hugely successful. The record company makes their money therefore at a portfolio level and in some way the hugely successful bands are funding investment in new risky assets (artists) through a re-distribution of the profits they contribute. If this new model (as it stands) gains traction then it is not clear where funding for new artists will come from.
The only artists mentioned in the press releases that I have seen are successful artists who by definition can and should be self-financing recording. It will be interesting to see if The Firm extend their current model to help new artists.
As I have mentioned before I think the future of the industry as well as obviously being digital in nature is in the collaborative and personal spaces around such as last.fm and myspace. I think this particular future inexorably leads to new artists being initially funded by members of the collaborative communities who will, for their funding, be returned a share in future profit streams. This particular vision of the future is clearly not in the best interests of EMI: distribution will be handled by these spaces and the online music stores (distribution becomes essentially free as does the cost of production of each unit) and PR is also free as it is handled by the members of these communities and will be handled in their own interests.
What will not be for free is PR for really shit artists.
July 12th, 2006 at 7:57 am
The current business model for EMI et al - “.. the hugely successful bands are funding investment in new risky assets..” can be viewed differently if the cost (and therefore risk) to EMI is considerably less. With a newer band, it doesn’t have to be the full-blown production - web/myspace release may be sufficient to build enough interest for EMI to invest a smaller amount in a band/artist, without requiring the artist to be already wealthy. With lower barriers to entry, there will probably be more competition, and even more likely completely different business models.
July 12th, 2006 at 10:19 am
I think you’re right in that EMI could fund recording (basic level) and release into MySpace to gauge the market and gain some initial traction. The risk they would have to take in funding a fuller recording cycle would thus be mitigated because they knew a market would be there. They must be thinking about this kind of model. I would argue, though, that as the costs decrease there becomes less and less of a reason for EMI to exist as a funding vehicle for new artists. What does one need these days? An Apple Mac and Logic Pro? Funding is needed maybe more for touring and living and also should not be a lot - certainly funding could be syndicated amonst the members of MySpace, last.fm whatever.
July 12th, 2006 at 11:45 pm
[...] I’m not even going to bother debating it. Pfui. Instead, I’m going to point you towards some more worthwhile developments, as reported by Malc. As the business model for digital music disaggregates and reaggregates, with some market participants leaving and others joining, some very interesting possibilities emerge. [...]