Posted by: danreich | June 3, 2008

Today’s Music Label

If Sony BMG, Universal Music, Def Jam, Motown, Warner Brothers, or any of the big music labels were to create their business model today, what would it look like? First, a quick glance at their methodology:

The old model was simple:

  1. Provide the artist with resources to create an album (Studio, equipment, personnel)
  2. Manufacture the Album (CDs)
  3. Distribute the Album (Stores)

Clearly this model has failed while trying to apply it to todays marketplace. Here is why:

  1. Provide the artist with resources to create an album (Studio, equipment, personnel). Artists can download superior programs and can obtain quality hardware.
  2. Manufacture the Album (CDs) Everything is digital. No need for tangible items.
  3. Distribute the Album (Stores) Distribute the Song/Album (iTunes, MySpace, YouTube, etc).

Because these music labels have not completely adapted or changed with the times, they have been resorting to legal action. (Larry Lessig goes into great detail about the issues involving innovation, technology, and law…his blog is definitely worth reading)

If the music labels reinvented themselves or started from scratch, what would their business model look like? I’d first argue that the first three points need to happen. Resources to create the music, making music, distributing the music. With the advent of cheaper hardware, P2P file sharing, and social media, these points can be easily attained.

But where do you go from there?

Social Media Music Label – An organization that can most efficiently and effectively market and distribute songs. An organization that can generate a brand that encompasses a group of artists, while sharing revenue to some capacity. An organization that leverages the brand to obtain revenues outside of direct music sales. A brand that engages the listeners/users on every level from audio, video, blogging and networking.

I don’t know exactly what that model looks like, but we can just take a look a Chamillionaire‘s success and realize the rules have changed. (Below is Pete Cashmore’s interview with Chamillionaire)

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