Media Wonk

A world without rock stars - December 18, 2006

What would a record company look like without records?
For decades, record companies have fulfilled three critical economic functions: 1) they fronted the cost of recording; 2) assumed the capital risk of manufacturing and distributing records; and 3) they shouldered the (sometimes shady) costs of promoting a record and getting in heard.
In returns for taking those capital risks, the labels expected artists to accept egregiously one-sided recording contracts, in which the company assumed effective ownership of the artist’s output.
Tempted by the lures of stardom—and generally lacking their own access to capital—most artists signed.
Though long regarded by the industry as the natural order of things, the foundations of the basic economic relationship between artist and label were, in fact, technologically dependant—as digital technology is now making clear.
Professional analog recording used to require a professional recording studio, with lots of expensive equipment. Today, thanks to digital technology, you can make a pretty professional sounding record in your bedroom with an iMac and some editing software.
The shift to digital distribution, meanwhile, is gradually eroding the need to manufacture physical discs, or to truck them around and warehouse them.
Two of the three pillars of the record company’s traditional economic role, in other words, are crumbling into a powder of ones and zeros.
That leaves only the promotion function to give the labels leverage with artists.
Over time, that’s going to require a renegotiation of the industry’s basic economic relationships—which is definitely a good thing.
One hint of how that might develop came last week with CBS Corp.’s announcement that it is resurrecting CBS Records, a venerable name in the music business but one that hasn’t been used to release records since the early 1990s.
A main goal for the new label, the company said in its press release, will be “to build awareness for CBS Records’ artists and songs by integrating music into CBS television series.”
The label will specialize in “self-contained” artists, who can write, perform and record their own music, so as not to burden CBS with those costs.
The label will sell CBS artists’ tracks online, through Apple’s iTunes store, and some may be licensed to other labels for CD. But clearly, CBS is looking to build a new kind of post-iPod record company.
The most striking thing about the project, though, is its financial goals.
A major factor in launching the new label, CBS officials made clear, is the network’s desire to cut the rapidly rising costs of clearing music rights for distributing CBS prime time shows online.
As Video Business reported here, the high fees demanded by music publishers for rights to include songs in the downloadable versions of movies and TV shows have become a major impediment to releasing many titles and network series online.
“Saving music costs alone will be success,” CBS network television entertainment group president Nancy Tellen told the Wall Street Journal. “Whatever additional revenue we generate is a bonus.”
That’s a perfectly legitimate way to “monetize” music “content.” But it’s a very different business model than the record industry has lived off for close to 100 years.
And it’s not one that requires a lot of “label executives.”
Oh, my.

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