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Bands and artists still need record labels
By CMU Editorial | Published on Wednesday 10 March 2010
All artists need a record company says, erm, the global trade body for record companies. Coming soon, a report from CMU that says all music business people need the CMU Daily.
Yes, the International Federation Of The Phonographic Industry – or the Worldwide Record Labels Club to give them a name more than seventeen people will understand – yesterday published a report showing just how important record companies remain in this here digital age. The aim of the document, of course, was to hit back at all those people in the wider music community who like to say things like “you know, record companies are pretty redundant these days”.
To be fair to the IFPI, the point of their report was that when it comes to new bands you need to spend money to make money and, if you want mainstream success, you have to spend rather a lot of money. And, the trade body argues, when it comes to spending rather large sums of money on new talent, it’s still really the record companies who are writing the cheques. And in many ways that is true, for now at least.
The report says that breaking a new band costs at least a million dollars, with a slightly simplified budget claiming $200,000 is paid out in an advance, $200,000 is spent on recording, $200,000 is needed for three promotional videos, $100,000 goes on tour support and $300,000 is pumped into marketing and promotion.
Some might say it looks a bit like the IFPI consulted a beginners guide to the record industry published in 1998 to come up with that budget breakdown, but I take their point that it still costs more than most people would expect to break a new band, and that much of the upfront capital still often comes from a record company’s wallet. So much so, the trade body reckons record labels worldwide invest up to $5 billion a year into launching artists and albums, which works out at about 30% of their overall sales revenue.
The record label chiefs on hand at the IFPI briefing added that the million dollar budget was in many cases rather conservative, while adding that even when that investment paid off and a band was successfully launched, it didn’t mean said talent were immediately profitable for the record company. Sony UK’s Mike Smith said you are looking for a band to surpass 600,000 albums sales before they can really be treated as a profit centre for a label. Which is rather a lot.
It wasn’t overly clear what the motive was for the trade body telling us all this now. Unusually for an IFPI event, it didn’t conclude with a big rallying cry for a tougher crack down on piracy (though there was a brief mention that illegal file-sharing was having a direct impact on the amount of money available for investment), and it didn’t seem to be especially aimed at artists and managers in a “give us a bigger share of your non-recording revenues you bastards” sort of way.
But, as I said at the outset, it actually seemed like the record industry was mainly stating its reasons for existing in an era where people talk more and more about fan-funding, the DIY route, profitable band-brand alliances, alternative investment and how jolly well the live sector is doing just know.
As some of the label execs present correctly pointed out, it’s hard to identify many or any bands who have managed to launch themselves as mainstream acts (certainly globally) without the help of a traditional record company. But those other launch routes are very much in their infancy, and I think it’s too soon to say which will work for new and existing talent long term, or whether any can or will replace the record label in some cases.
I happen to think record companies aren’t all doomed, and mainly for the reasons IFPI list in their new report, though I’m not sure a record company (major certainly) in 2020 will look much like what a record company looks like now; though just like those newer business models competing with the traditional label system, I think it’s too soon to say how labels will work with artists, old and new, in the decades to come.
