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Record labels lose out as bands become brands in fierce market

New roles are emerging for those closest to artists in a fragmented media world

Owen Gibson and Katie Allen
Monday February 26, 2007
The Guardian

The following correction was printed in the Guardian's Corrections and clarifications column, Wednesday February 28 2007

In the original version of this article, we stated that Kanye West is signed to Sony BMG as a recording artist, not his actual label, Universal Music. This has now been amended in the version below.

The upheaval wrought on the music industry in recent years, of which EMI's latest travails are just the latest manifestation, have inspired a change in bedtime reading among senior executives. Their book of choice is now less likely to be a classic tale of rock industry excess such as Hammer of the Gods, but The Long Tail, a book about how the internet has brought about the death of shared culture.

The book, written by Chris Anderson of Wired magazine, sums up the challenges facing established media groups, including leading record labels: "At this point, the artists don't need the labels any more. The consumers don't need the labels any more and I think the labels, rather than trying to protect what business they have, need to ask themselves what is their relevance."

Although sales of CDs are falling sharply, British artists are riding the crest of a creative wave - live music has never been more popular, festivals are selling out in record time and brands are paying millions to associate themselves with up and coming acts. It is a new music marketplace where the artist's brand is becoming as valuable as their recorded output.

But for all the rhetoric about artists being able to build their own fan bases online, a guiding hand - not to mention substantial investment and knowhow - is still required to bring new artists to public attention in an increasingly fragmented media world. Many experts believe today's changes will result in individual artists emerging as "cottage industries" in their own right, much less dependent on labels to produce and market their music.

As the ancilliary revenues around each artist - from live appearances, merchandising, ringtones, advertising and licensing deals - become more important than dwindling recorded music royalties, new roles are emerging for those closest to artists. It is no coincidence that the likes of Island Records co-founder Tim Clark, who now manages Robbie Williams among others, and Creation Records founder Alan McGee now work in artist management.

Already, many majors rely on management companies to bring new artists to their attention. Now, some are starting to bypass them altogether. Mr Clark, who co-founded ie Music and was responsible for Robbie Williams' multi-faceted £80m contract with EMI, believes that deal could be the last of its kind. He likens the latest period of flux to the anything goes spirit of the 1960s before the major label consolidation of the late 1970s.

The company is pioneering a new form of investment in artists backed by Ingenious Media, the media-focused private equity fund launched last year by former Really Useful Group chief executive Patrick McKenna. Passenger, a new band who have been building local support in Brighton and release their first single today, are the guinea pigs for the new approach. Mr Clark is bypassing the big labels by going directly to Ingenious, which is putting up £1.3m to launch the band - investment matched by ie Music and external investors.

New model

Through the new financial model - dubbed Music Venture Capital Trusts - they claim that artists have more freedom and retain more of their own rights while their management are able to lavish care and attention on all aspects of an artist's career.

The artist retains ultimate control, they say, because managers tend to be employed on an annual contract.

"We work for our artists and we answer to our artists. At the end of the day, our artists can turn around and sack us," says Mr Clark. He says he "very nearly came to blows" with EMI over ie Music's determination to sign a global marketing deal with Sony Ericsson for Williams - a marriage that he says has been "incredibly successful". By being able to work with each part of an artist's "basket of rights", he claims to stand a better chance of building a long-term brand than a record label more concerned with short-term returns.

"That's why management is having more success in doing this because they recognise that basket of rights and they recognise the value of those rights," says Mr Clark.

Mr McKenna believes the majors should have cottoned on earlier: "I think it's one of life's great mysteries why record companies haven't embraced this 360 degree business model."

Bryan Calhoun, an Atlanta-based music consultant who works with Kanye West and Ludacris, is another who is thriving amid the music industry's shifting sands. He says artists are recognising how far they can leverage their brands and are going beyond what the major labels can offer them. Kanye West is signed to Universal Music but has been working with Mr Calhoun's StrategusPro company on creating a fan community.


"It's about builiding an entire digital strategy and the fan club is a part of it," says Mr Calhoun. "Ringtones and mastertones, those things are controlled by the major because that is who Kanye is signed to. But then he has also retained rights for exploiting his other content, voicetones, images, those kind of things," he says.

"A lot of people are looking to try to figure out exactly what they are going to do going forward and it doesn't necessarily have to do with the major labels."

Terry McBride, who runs Canadian music management group Nettwerk, also claims that bypassing major labels can allow artists to hold on to to more control. He helped Barenaked Ladies make $3m from 500,000 album sales, much more than they would have done if they had gone through a major label.

As major labels struggle to adapt to this new world, cutting costs and restructuring their business models, it is important to retain some perspective. Many employed by them retain enough faith to believe they will emerge from this transitory period stronger.

But the majority of those who stand to benefit from their potential demise, including Mr McKenna, believe the days of the major labels as we know them are numbered.

"I've always thought record companies believed they financed the music industry, manufactured and distributed pieces of plastic and did the marketing. The reality, in my view, is that I don't see them doing any marketing. And if manufacturing and distribution no longer count, then it's just the financing - and we can do that," he says.

Off the record

With the music market in decline, artists and their managers are increasing their focus on building brands that can deliver revenue streams beyond traditional record sales. Notable examples are rapper 50 Cent buying a stake in Glaceau Vitamin Water as part of his new super-healthy image. More recently, style-conscious Lily Allen announced she was teaming up with fashion chain New Look. London-based music consultancy Entertainment Media Research has tapped into the trend with a new tool called PopScores that tracks the awareness and popularity of 200 artists. So who's up and who's down? The Beatles bagged the highest score this month while Peter Andre got the lowest. Amy Winehouse was the biggest winner, according to the latest survey of 4,500 music consumers aged 13-59.

The PopScores tool can also show up changes in popularity following specific events in a star's life. Madonna's score dropped after her controversial adoption of a Malawian boy. More recently, Robbie Williams - who has checked himself into rehab - has been losing PopScore points, despite some offsetting effect from growing support among 40 to 59-year-old women. The service can also pick up longer-term consumer trends and PopScore's most recent analysis explores the rarity of female artists among top favourites lists. For male consumers there is only one female artist, Kylie, in their top 20. There are six in the equivalent list for female music fans: Pink, Kylie, Christina Aguilera, Gwen Stefani, Anastacia and Sugarbabes.

Katie Allen

1.3.07 17:55

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