Major label model going way of vinyl, eight-track

When “American Idol” contestant Eliott Yamin released his eponymous debut disc last March, it sold more than 92,000 copies in its first week. It also was the third-bestselling album in the U.S. that same seven days.

But what makes the feat unique is Yamin did it without being signed to a major label, and he wasn’t even an “American Idol” finalist; he had been eliminated 10 months earlier after reaching the top three.

To help market his disc, Yamin used the services of Rocket Science Inc., one of a growing number of companies that offer all the functions of a record label, but whose services are paid for by the artist. The growth of such firms could portend the future of the record business, as an increasing number of artists are favoring the do-it-yourself business model.

“We’re seeing more artists leave the major labels to go it on their own,” says Kevin Day, industry vet and principal of Encino, Calif.-based Rocket Science. “With our lower overhead, an artist can be profitable with sales of 20,000 units. For a major, they’re not even profitable with 300,000 units,” he says. The Yamin disc has topped 600,000 units sold since its release.

Execs like Day, many of whom have been downsized from major labels, are starting firms that attract artists who have either fallen from favor with their label or are baby bands willing to forgo a hefty advance from a label in exchange for some control over their destiny and a bigger slice of revenues.

They note that with all the different platforms — whether it be websites like MySpace, YouTube, Facebook, iMeem, Rhapsody, eMusic and LimeWire, to name just a few, or via niche net radio outlets Live365 or the CBS-owned LastFM — there have never been more opportunities for artists to find an audience.

And artists can use firms like Day’s to marry traditional label functions — with digital distribution avenues, social networking opportunities and tour sponsorships under one roof — without every marketing move constituting a deductible expense from the band’s sales, as would be the case with a major label deal.

“There is no one single way of doing business these days,” Talking Heads frontman David Byrne recently wrote in Wired. “That variety is good for artists; and good for audiences, too, who will have more, and more interesting, music to listen to.”

Even conglom EMI has recognized the importance of niche marketing by recently establishing a music services arm designed to maximize the artists’ potential and coordinate how their music is sold.

“EMI needs to develop a new partnership with artists to help them monetize the value of their work by opening new income streams such as enhanced digital services and corporate sponsorship,” says EMI chief Guy Hands, who also simultaneously announced the jettisoning of 2,000 jobs. EMI partnered with the New York Daily News to offer free downloads of a trio of songs through the paper’s website during the first two consecutive Sundays in February.

“Our agreement with the Daily News will help us expose new audiences to the ease and quality of digital music while ensuring our artists are compensated for the music they create,” says RonnWerre, exec VP of global sales for EMI Music.

While talk of so-called “360” deals — where every aspect of an artist’s revenue stream is commissioned, such as those inked by Madonna, the Pussycat Dolls, Korn and Robbie Williams — dominate headlines, and interest is waning in the typical deal where the label bankrolls all aspects and the artist seemingly forever owes the label money, unsigned artists can still tap into licensing deals or manufacturing and distribution deals to get their product into fans’ hands. Some well-known free agents can even make exclusive deals with retailers, such as the Eagles, whose album “Long Road Out of Eden” recently joined Garth Brooks’ “Ultimate Hits” by only being available at Wal-Mart.

And the accepted digital distribution model recently made new headlines when free agent Radiohead offered its first self-released album, “In Rainbows,” as a download through the band’s website. It also let fans choose the price they wanted to pay for it. Or pay nothing at all.

“Radiohead took three arguments against why downloading won’t work off the table,” says industry consultant and former EMI digital czar Ted Cohen. “Format: They offered it in MP3. Cost: They made it affordable by not declaring a price. And for consumers who might have previously said that they would’ve paid for it but believe the label always screws the artist, this time Radiohead was the label, so fans knew the band would be paid.”

But Cohen notes that despite the band’s egalitarian move, fewer than “40% of the people who downloaded it actually paid for it.”

Cohen suggests the magic bullet for the record business could be as simple as Apple’s Steve Jobs announcing an iPod subscription service. “If you get consumers into the habit of paying a flat monthly fee — say $10-$15 — to put music on their Apple devices, something like that becomes cool and people want to have that experience.”

Industry leader Universal Music Group has been developing Total Music service, wherein consumers would buy a device with a preinstalled subscription to downloadable music. But record biz insiders note that this attempt to crack the iPod stranglehold would likely involve using Digital Rights Management to prevent unauthorized sharing.

As a result, the more limits on the music files, the more likely consumers will seek out illegal file-sharing sites to obtain the tracks.

“Locking things up is actually good for piracy,” David Packman, CEO of eMusic, said last year when the Total Music plan was first floated.

Steve Backer, principal in niche marketing and sales outfit Rent a Label, notes that in the current paradigm “the artists that flourish will be those who use old-school artist development theories with modern tools.”

To build a better marketing mousetrap while recognizing the increasing number of advertisers who seek to become active partners, marketers and financiers of entertainment, United Talent Agency and branding pioneer Jarrod Moses recently formed United Entertainment Group, a new stand-alone company devoted to building entertainment-based marketing solutions.

Moses says it’s a propitious time for both artists and the new breed of label-marketing company hybrid. “At UEG, we’ll be working with artists to create businesses with brands,” says Moses. “As music is created, simultaneous conversations will be happening with brands to help market, distribute, foster and incubate music.”

“What we’ve learned in this decade is the major labels are becoming ever more irrelevant,” says former record exec Bob Lefsetz, author of the Lefsetz Letter. “Not only do they not create what so many are listening to, they’ve lost their power to dictate the future, and progress in the marketplace has been wrested from them. I doubt these companies will be in charge of the game in the future.”

TIP SHEET:

What: 50th annual Grammy Awards

When: Sunday, 8 p.m.

Where: L.A.’s Staples Center

Wattage: Beyonce, Mary J. Blige, Foo Fighters, Feist, Josh Groban, Alicia Keys and John Legend, among others

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