MUSIC|MEDIA|DESIGN

Just because there are no modern media labels, doesn’t mean we don’t know what one looks like. In this column, we’ll look at the big picture. Today a successful label requires expertise in selling music, and some objective means of connecting artists to fans. To this end, the label must be expert in every aspect of retail sales, including unconventional channels. Just as important, labels must have some expertise in recognizing demand across many markets, including niches. Demand is distinct from talent, just as retail awareness is different from distribution. Lets explore how a major media label might leverage their expertise in a world without hits.

Forget “recording contracts” and “A&R” (artists and repertoire) reps. Today artists no longer need a contract to pay for recording, and fans no longer need middle men to predigest scads of music. Long-tail models are driven by quantities and time or presence. The labels job is to simply exist until the fan discovers songs in their catalog, at which point their role is to deliver the music as seamlessly as possible. In all sales, efforts are aimed at “closing” the deal as rapidly as possible. Any delay in closing and/or delivery can cost sales, or give the buyer time to reconsider or even forget about the purchase entirely. This problem is especially severe in music: As an impulse entertainment purchase, we don’t really need it at all! How many songs or albums do we decide we “have to have”, but forget about once we hear the next song, or pick up another shiny disc? Closing sales has never been easier than the iTunes Music Store, and the variety of products, as well as margins, make it attractive. Specialty retailers provide a similar environment, promoting impulse buys with signage, pricing, and placement. Finding and filling these niches are the job of the modern label.

When we visit places like the iTunes Music Store or CD Baby, not to mention successful bricks-and-mortar retailers like Shake It records, one is immediately struck by the range of music-related products being sold. Shirts, knick-knacks, magazines, greeting cards, and all manner of swag surround the hottest selling CDs. No surprise there: merchandise has been a big part of the bottom line for decades. Traditionally these products have been sold directly by artists, outside the record label’s chain. Artists and their management kept all profits, but sales were limited to venue and web site sales, with some ad hoc retail distribution on the side. While it’s unlikely artists would give up a large chunk of those profits, a savvy label would see opportunity in it’s retail sales chains. Expanding the catalog to include that merchandise, albeit with considerably lower mark-up, could be a valuable service that attracts new artists to the catalog, while simplifying purchasing for retailers.

Low margins are not a problem in many industries. The consumer credit card business is built on making a few pennies on every sale, surrendering the real money (and risk!) to individual banks. In a global economy, these pennies can add up to be quite significant. So the real key, aside from keeping sales volumes high, having a broad enough catalog to attract fans. Quantity matters at least as much as quality. Further, since music is a fashion-like business, where quality’s a temporal concern, it’s almost impossible to prospectively pick hits. We can’t really know what’s going to be hot next year, next month, or even next week. By adopting a long-tail perspective, our imaginary Media Label doesn’t have to. Simply avoiding the real stinkers, and attracting the most forward-thinking artists with an attractive model is sufficient over time.

Time is a critical variable. The value of media is not unlike stock prices: it goes up and down as a function of popularity and success over time. Todays shit-hot record is tomorrows shite. And vice versa. By constantly signing more artists, and carefully limiting inventories, the catalog can grow faster than costs. On-demand or at least fast-turn manufacturing is the norm today, so labels have no need to physically stock every title. In time, there will be no reason to stock ANY title! All our label needs is the long-term license to profit whenever it’s titles sell in any format.

The final element of a modern media label is the most complex. Marketing the catalog and artists is what contemporary record labels think they’re really good at doing. In the next installment, we’ll look at that assumption alongside new demands and methods.

Dave Davis