Consumer brands are the new record labels.
In the last decade or so, the Internet has made so many things pretty much obsolete. There’s simply no demand for them anymore. Travel agents, cashier checks, postal offices or any kind of middleman – all memories from a not so distant analogue past, made redundant by the explosive rise of digital. In the music market, it’s the record labels that have taken a severe beating by today’s unstoppable online developments. The traditional record company business model has proven impossible to maintain in the digital age and with the arrival of social platforms, they’re at risk of losing their purpose in the distribution & promotion chain entirely to an unlikely competitor: consumer
brands.
Back in the day, traditional record companies dominated and controlled the music market. As an artist, you simply could not do without representation by a record label. The musicians were the slaves doing all the work, the record companies the masters pocketing the cash. When the Internet took off – and with it peer to peer file sharing – the established companies saw their lucrative monopoly position crumble at an alarming rate. In response to the explosively increasing number of illegally downloaded tracks, they frantically tried to enforce copyright control on CD’s, but all too soon it became clear this wasn’t a war they were going to win. At least not like this. Instead, they shifted their strategy towards so-called 360-deals. They still invested in artists, but the focus of revenue changed from record sales alone to the total artist income, including ticket sales, merchandise and copyrights. But it wasn’t long after that the music market entered the DIY-phase.
With the emergence of social media, artists no longer needed record companies to get them exposure and sales. Through platforms like Facebook, Twitter and Youtube musicians could do their own promotion and marketing. Artists like Radiohead prove that you can indeed accomplish a lot on your own. But to be successful at doing your own promotion, you do need time, people and money. Clearly Radiohead had all three when they launched their album Rainbow in 2007 and The King of Limbs this year without the involvement of a record label. But what if you are not Radiohead? If you are the talented new kid on the block, trying to get gigs and sell demo’s to anyone listening? Self-promotion is time- and money consuming, so you still need that helping hand to go the extra mile – you need that benefactor. And since you and your innovative indie band don’t want to have anything to do with the dinosaurs of the record industry, you need to start looking around for other partners who can help you past the tipping point and into the charts.
This is where brands come into play. Brands have the potential to replace record companies in the distribution and promotion game. Brands live and breathe marketing, activation, promotion and branding. It’s their very essence. But the big difference with record labels is that brands are not focused on selling records. Instead, they employ it asa promotional tool to build brand equity. And when done right, associations and partnerships with music and bands do just that. Ultimately, higher brand equity leads to higher sales figures. A soda brand makes its profit by selling soda bottles – not mp3’s, so they don’t need to make money of selling music.
Therefore, brands can play the same role the record companies used to do on a promotional and distribution level, but without any interest in benefitting directly from record sales. In short: brands use the artist to boost their image, while the artist uses brands as financial and promotional partners, keeping the total 360 income on their music mostly for themselves. Everybody happy?!
http://futuremusicforumbarcelona.wordpress.com/2011/08/30/consumer-brands-are-the-new-record-labels/
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