Death of The Major Record Labels, Myth Or Fact?

Are the major record labels dead? And by "major record labels" I mean the "Big Four" of Sony/BMG, EMI, Warner Music Group, and Universal Music Group.

Well, since they are in business to make money, and have been accused by music fans of only caring about money (which is apparently bad), then judging by sales figures the major record labels are dead, or at the very least, on their death beds.

In 2010, music fans all over the world bought 326.2 million albums. That's the lowest annual total on record (no pun intended). Only one album, Eminem's "Recovery," reached the 3 million sales plateau and only 13 albums exceeded 1 million in sales. Compare that to the year 2000 when Eminen's "The Marshall Mathers LP" sold 7.9 million copies and every album in the top ten sold at least 3.8 million units.

Overall music sales in 2010 were down 2.4 percent while digital purchases were up by only one percent. Neither old nor new music sold very well. New CD sales (e.g. Justin Bieber, Usher, Rihanna) plummeted 16 percent while previously released music (e.g. The Beatles, Michael Jackson, Elvis Presley) saw their sales figures drop by 23 percent. This is the second year in a row that those two categories experienced double-digit drops in sales.

The bad news continues in 2011. Already this year the music biz has broken its record for the lowest sales for a number one album… twice. The Warner Music Group has hired Goldman Sachs to find a potential buyer and Sony Corporation of America announced that it's closing a long-running CD manufacturing plant located in Pitman, New Jersey.

If the major record labels were grandma they would have pulled the plugged yesterday. Without question, the business model the "Big Four" used forty, thirty, twenty, even ten years ago is dead as a doornail. But does that mean the entire industry is pushing up daises?

Not quite.

The four main record companies are too big and too powerful to allow themselves to be buried six feet under by some cheap audio recording software and free social networking sites. So don't think of them as dead or dying but rather undergoing a metamorphosis, like a caterpillar turns into a butterfly. Only it's a butterfly that has a heck of a time selling albums.

"I don't envy the people at major labels," said Danny Goldberg, former executive for Warner Bros. Records, Mercury Records, and Atlantic Records. "They're narrowing their business right now, and that's what they might have to do. Their business is becoming a combination of catalog licensing—because they all have amazing catalogs—and the pop business. And there's less and less room for anything in between."

Nowadays, anyone with a computer can record a professionally sounding album and with an internet connection they can market that album to millions of potential fans. Therefore, the knee-jerk reaction is to write record companies off as unnecessary and antiquated.

However, the music industry is a bit more complicated than that. The PC and the internet has made a lot of things cheaper, but there are still costs to writing, publishing, recording, and touring that can't be erased by technology. That's where the major record labels come in; they can, and do, help artists pay for the costs associated with making music for a living.

Still, not every artist needs the kind of help the major record labels provide. Nonetheless, there are two types of performers that need them more than others. Those two groups are pop artists and new bands.

One thing major record labels do really well is create a mainstream. This mainstream is crucial for pop artists. Think about it, by its very definition pop music (the "pop" stands for "popular") is for music fans that want to know what everyone else is listening too. On the other hand, rock music and its myriad of subgenres generally appeal to people who DON'T want to listen to what everyone else is listening to.

"Major labels were built for pop music, and they really work," explains Jonathan Daniel, co-founder of Crush Music Media Management. "I don't think Beyoncé could make records with the same great success without a major label. For a pure pop thing that doesn't build its fans by touring or word of mouth, labels are great. But for bands, major labels become less important until you want to cross into the pop realm."

Established artists like U2, Pearl Jam, Radiohead, and Dave Matthews Band (read a live DMB concert review) don't really need a major record label. They can afford to bankroll their own studio time and concert tours. They are so well-known that they don't even need the major record labels' marketing machines. Their enormous fan base already follows their every move on social networking sites and every one of their record releases and tour announcements makes headlines.

For instance, earlier today I saw a news story on a popular music industry Web site about Phish's upcoming summer tour. Of course, I have yet to find a story about the band "Regis Philbin's Inseam" playing at The Rialto next weekend (RPI is my friend's band and their show at the Rialto is their first ever gig).

What I'm trying to say is before established artists can eschew major record labels, they have to become established. Major record labels can help the emerging bands of today become the established artists of tomorrow with their massive resources and connections.

For artists that do stick with the major record labels, they can forget about making tons of money selling tons albums. Instead, look for artists to land "360 deals." These business deals include a partnership in not only album sales but publishing, merchandising and touring revenue as well.

The most famous example of this type of business covenant, although it's not with a major record label, is Madonna's "360 deal" with Live Nation. These all encompassing pacts help both parties recoup lost revenue from declining recorded music sales.

Unfortunately for the industry, recorded music sales will only continue to decline. As the numbers told us earlier in this article, legal internet downloads aren't replacing CD sales. People just aren't buying as much music as they once did. Part of the reason is illegal downloads but another factor is a lack of quality music. There are just not enough good tunes out there that people are willing to pay for.

As recorded music becomes less and less valuable, concerts will become more and more valuable. That's good news for music fans. It takes talent to put on a great rock concert or a great pop concert, but any two-bit musician can fake it long enough to record an album with one hit single and a bunch of filler. As we all know, that business model—the one major record labels had used for decades—has gone the way of the dodo.

Copyright 2011 mind-funk-music.com