Major Record Labels are dead. Long live Major Record Labels! Many have decried the Internet for its negative effect on physical record sales citing file sharing, unofficial downloading and the technological ease of piracy etc as the death penalty of the music industry. However, there’s a bigger storm arising that is to change the face of the industry forever.
The signs are all there if we just look a little deeper than the surface. Perhaps a better way to do this is to ask the following questions: What do Records Companies do? How do labels promote and sell music? What are the key leverage tools – experience: size: finance: contacts?
What do Records Companies do?
They look for Stars or hit makers, sign them to a contract, create product either by pulling together a create team or licensing or buying a completed product; develop promotional tools such as Music Videos, Websites etc; promote the product through various mediums i.e. Radio, TV, Clubs, Stores, Internet etc using Create sales opportunities; organise tours and merchandising; source secondary income streams such as licensing and synchronisation deals, etc.
How do they promote and sell music?
One of the primary tools record companies still use today is the Radio. Video, Street Teams and Internet promotions, (including the use of social network sites) also form part of their repertoire. They might also work with an independent plugger or promotions company to create a media tour for their artist lidl.
What are the key leverage tools?
In the main, major labels have amassed a great deal of experience and expertise over the years coupled with the image they have created which attracts people to them with a little effort necessary to go chasing after deals. The other advantage that majors have is their branches across the world in strategic cities which makes it easier for the simultaneous release of successful products.
Why do I think Asda and Tesco etc. will rival Major Record Labels?
In the same way that Cadbury’s Trident campaign is plugging Beyonce’s tour, Live Nation can be linked with Madonna and Bacardi sponsors live acts, these companies are nationally recognised, have the infrastructure, marketing and promotional expertise and the MONEY to effectively compete with the Major Labels.
If we cast our minds back to the 80’s, they were the first businesses to ensure you could buy a CD album for £10. Whenever bulk buying takes place the economies of scale will kick in and the value could be passed on to the customers. Major supermarkets have this strategy down to a fine art. And the multinational supermarkets are masters of self-promotion and marketing! They are constantly in our faces!
Think about this – the chain of events for an artist on a record label
1. Get signed
2. Record Product
3. Market Product
4. Get Product sold.
(I am aware that many other events take place within this 4point model, but for simplicity sake let’s see it this way.)
The only two aspects the current multinational stores do not have experience of or are not yet involved in are signing artists and recording product… but watch this space!
This truth is that this can be circumvented through licensing products. The influx of so many products available on the internet today tells us that the most significant part of the chain today is the marketing and product selling.
Asda and Tesco et al have the floor and shelves space and the internet store capability to blitz the UK market and sell music products effectively. In a sense they are in an even stronger position than many record companies who do not have these outlets available but have to rely on these same stores to sell their music!
Since many businesses get involved in Horizontal and Vertical Integration sooner or later, it’s only a matter of time before these multinationals will be involved in the Vertical Integration of the Music Business.
What does this mean to Artist/Independent Record Companies?
It may mean rebranding; taking advantage of new opportunities. Majors always mine independent label marketing ideas such as Street Level promotions. Indies must do the same as far as multinational companies are concerned.
One might argue, how is Tesco going to sync up an international release since they do not have branches of the store across the world yet? Answer? Creative links with product suppliers; sponsoring events that are viewed abroad; the use of internet etc. In addition to this, we must remember that music is only a small percentage of their product range – they do not have to create new infrastructure or be saddled with debt labels have been carrying over the years, perhaps they do not even need to sell as many units to breakeven because they are working a different business model.