While reading a recent Wired article by David Byrne on the brave new world of music and an artists new set of options for distributing and promoting their work, a quote from Brian Eno struck me.
“The only idea they have is that they can give you a big advance – which is still attractive to a lot of young bands just starting out. But that’s all they represent now: capital.”
- Brian Eno on record labels.
It’s a simple observation, but it felt incredibly perceptive and it got me thinking. For some time now, everyone has been talking about how the traditional music industry is totally changing. These discussions frequently include the predicted demise of the traditional music label.
So, if a label was really truly willing to completely rethink their business model, what might it look like? If the biggest thing they can add to the equation of growing a successful artist these days is capital, then why not focus on that? It’s your core competency.
Acknowledge that all the rest, much of which – I’ve read, I have no direct experience – is now subcontracted out, of the services a label provides are either seeing their costs go to zero (recording, distribution) or can be dealt with by the artist creating their own direct business relationship (marketing, promotion).
For those labels that feel they have solid in house offerings in these areas, spin them off. Make them stand alone businesses that will succeed/fail on their own. For the core label that’s left, now it’s just an investor in new artists. Said another way, the music labels become venture capitalists in the same way that they behave in the technology industry.
The relationship would be the exact same. Some tech companies get started by the founder’s life savings and credit cards. However, many still get funded “the old fashioned way” – venture funding. These folks want to have some semblance of pay while they’re building their product, and need to hire outsiders (engineers, PR agencies, marketing, whatever) to drive it to success. For these folks, up front funding is needed.
For music, some artists will scrape by on their own and do it all themselves and some will want up front cash to allow them to get new gear and eat while they create their music. The later will “pitch” their early work and creative vision, and the venture firm will decide if they want to provide them funds in exchange for partial ownership.
Like traditional VC’s, music VC’s can and would provide advice and have suggestions for vendors in music PR, or how to do a ringtone deal. However, that wouldn’t be something that they directly do. Again, they act as advisor (as they want to see their investments succeed) and they act as a “friend” that has connections in the industry when an artist needs them, but they no longer have all the in-house noise. The resulting company would be a lean and mean organization consisting of 10′s of employees, not 1000′s. They would take their investors money, and they would place bets on what music was going to do well.
Unfortunately, I doubt the traditional labels will really do such a thing, I am more a believer that they’ll continue to trend to extinction. However, that may mean that there might be an opportunity for someone else. Someone who has cash and who’s used to such a working relationship. Perhaps our Silicon Valley VC’s – with the cash they cannot figure out how to invest all of – might diversify further. What the heck, it doesn’t feel any crazier than seeing them fund new car companies.
