Hip Hop n.-- An urban cultural phenomenon encompassing a distinctive fashion, music, dance, art and attitude.
Hip Hop Entrepreneur n.-- an entrepreneur who has turned his/her
Hip Hop passion into business profits!
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BONUS:
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Article Title: The Record Label of the Future.
Author: Walt FJ Goodridge
Category: Music Industry, Hip Hop, independent artists
Word Count: 3,600
Keywords: music industry,hip hop,independent record label,
recording artist contract,business plan
Author's Email Address: walt@passionprofit.com
Article Source: http://www.hiphopbusinessplan.com
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Walt Goodridge offers the following royalty-free article for
you to publish online or in print. Feel free to use this article
in your newsletter, website, ezine, blog, or forum.
------------------ ARTICLE START ------------------
THE RECORD LABEL OF THE FUTURE
& The Rules of the Pie for Surviving a Changing Paradigm
Where is the music industry heading? How will independent labels
survive and thrive in the new paradigm? Is the age of the major label
coming to a close? Does an artist even need a traditional label, or
even an independent label for that matter anymore? If you are involved in
the recording, manufacture, distribution and sale of recorded music, the answers
to these questions, and your responses are vital to your continued survival in some shape or form.
Luckily, these are exactly some of the questions that I will attempt to
answer in this brief article. And while I don't intend to offer
any earth shattering revelations that you couldn't arrive at on your own,
I do hope that if you are an artist, producer or owner of an independent record label
that some of the thoughts herein encourage you to make a few pro-active decisions, and
take a few definite actions rather than a wait-and-see approach. The race is still always
to he who can endure. Your ability to foresee and prepare for the coming changes, as well
as the end result of current changes may make the difference between business
success and failure. But how can you know what's ahead? You'll need to predict the future.
HOW TO PREDICT THE FUTURE
It's a basic law of this dynamic, ever-changing universe
that there's no such thing as something "staying the same."
Things are either expanding or contracting, increasing or decreasing,
getting better or getting worse. Even the metal or hard plastic computer
or sheet of paper on which you are reading these words, as solid and
as stable as they appear are all slowly decaying and deteriorating. Come back in
a few dozen years, and you'll see the effects of decay over time. If you know this, then you
can look at everything from business phenomena to romantic relationships
a little bit differently, and can perform what some might consider
fortune-telling simply by asking, "where is this heading?"
Every business, every situation, every relationship is either getting
better or getting worse, growing or shrinking, going up or heading downhill.
Therefore, as long as you can honestly assess what you observe
or experience over a given time frame, you can "predict" where something is heading
and take any evasive or remedial actions as necessary. There are even specific formulas(1)
you can use to reverse or stabilize a declining trend, improve a flat trend, improve
a rising trend, or greatly improve an already stellar trend for any observable statistic
like "sales" for instance.
Now having said that, let's examine some observable facts and trends within the music
industry that you can use to predict the future, or at least prepare and
position yourself for success regardless of what specifically happens.
FACTS, TRENDS AND OBSERVATIONS
Among the hundreds, perhaps thousands of facts, stats, and trends
that one could develop to analyze this thing we call the music industry, there are four
that clearly demand our attention. I'm going to circumvent the debate over the accuracy of specific
figures involved, or whether they are facts or just subjective observation,
by referring to each simply as an "FTO" (Fact, Trend or Observation).
FTO #1: Sales of CDs are DOWN
FTO #2: Digital downloads are UP
FTO #3: There's a new generation of children who view music not as a vinyl disc,
or a CD, but as words on an MP3 player's LCD/LED screen accessible through
headphones and earpieces.
FTO #4. The purchasing experience has changed from browsing
the aisles of a retail store to downloading from computers or cell phones.
FTO #5: Technology is making it easier for artists to market, release, market
and distribute themselves, and even earn a decent living doing so.
Whether fact, trend or observation, these "demonstrables" indicate a new reality is upon us.
What it means for the artist, producer and independent record label of the future is this...
THE MUSIC INDUSTRY HAS ALREADY CHANGED!
Now, if you want the specifics for the broad sweeping FTOs above, here are a few.
(The actual numbers are less important than the trends--increasing or decreasing--
that they represent, so note whether the numbers are increasing or decreasing.
Music sales worldwide (including physical and digital; decreasing)
2005 = $20.6 billion
2006 = $20.0 billion
CD albums sold (decreasing)
2001 = 762.8 million CD albums
2005 = 618.9 milllion CD albums
Digital tracks sold
2004 = 140 million digital music tracks
2005 = 352.7 million digital music tracks
Digital sales worldwide (increasing)
2004 = $380 million
2005 = $1.1 billion
2006 = $2.0 billion
Users of MP3 digital music players US (increasing)
2006 = 37 million users
2011 = 100 million users (projected)
MP3 players manufactured (increasing)
2003 = 14.3 million
2004 = 40.3 million
2005 = 74.4 million
I'll throw in a few FTOs that hint at opportunities
99-cent singles, file sharing, adults and teens
16% of adults enjoy downloading 99-cent singles
17% of adults sign up to subscription services
19% of 13-17 year-olds use subscription services
31% of 18-24 year olds use subscription services
41% of 18-24 year-olds burn CDs
31% of 18-24 year-olds use file sharing
"Of 30 thousand CD titles that were released in 2004,
only 400 titles sold more than 100 thousand units,
and 25 thousand titles sold fewer than 1,000 CDs.
The big recording companies lose money 98.7% of the time."(2)
"In a recent Parks Associates study of 4,000 Internet users in the US,
56% of respondents listen to Internet radio on their PCs and 56% download
music files."
"The 37-year-old artist recently moved from Los Angeles to North Carolina, where he
plans to raise his family on the "decent living" Internet sales generate. Since August,
he's sold about 5,000 records over CD Baby. He earned $10 for each album, generating the
same amount of money he earned from his first record contract."
[Sources: itfacts.biz, IFPI, Nielsen, InStat, RIAA, Parks Associates, CDbaby Talkback...]
As I said, there are thousands of statistics you can find. And the exact figures
are less important than the trends they indicate. Our goal, here, is to focus on trends.
And what we can deduce from these and other facts, trends and observations,
is that today in 2009, the Music Industry is not what it used to be, and as trends
continue, will never be the same again, and in fact, will be different tomorrow.
We as forward-thinking entrepreneurs hoping to capitalize on the value of music
must change with the flow. Therefore, the questions we ask must inherently be different.
The key question that pro-active thinkers ask is not "what's going to happen?" but
"what am I going to do given in light this trend, and in response to this continuing?"
There are always responses you can make to any situation despite what prevailing
wisdom says, and regardless of what others do.
What is it that we are responding to? What is it that we are actually witnessing?
I propose to you that it is nothing less than....(drum roll, please)..the deconstruction of
the major label system!
THE DECONSTRUCTION OF THE MAJOR LABEL SYSTEM
Yes, as these trends continue, what we are witnessing is the end of the major
label era, as well as the reconstruction of related and connected professions, industries and modes
of doing business. In this new era, an artist can become self-sustaining by selling on CDbaby, so
labels are less vital. CDs are becoming defunct, which means tradition retail outlets are becoming defunct.
Word of mouth replaces the need for an A&R executive to go out and find good new talent. Also in this
new post-label era,
ipods replace CD players and stereos
MP3s replace physical CDs
sites like CDBaby become a farm/store for indie labels and their music
Websites, itunes and cell phones replace retail stores as means of accessing music
Youtube replaces videos as a means of marketing
Myspace make developing a fan club/base through networking, and word of mouth much easier, and
Blogs enable constant contact and deeper connection with an artist,
and to repeat in terms of traditional label/retailer functions
Selling can now take place at the artist/label level
Promotion is now, to a greater degree than before, more effectively done by the public.
A&R (finding new artists) takes place in the public domain with word of mouth demand driving the artist's exposure
Distribution can occur digitally without need for warehouses
HOW INDEPENDENT LABELS WILL BE AFFECTED BY THIS NEW PARADIGM
So what's going to happen to the independent label in all of this?
First of all, the number of independent "labels" will continue to increase. However,
it's important to note that in this new paradigm, the word "label" doesn't quite mean the same thing anymore.
Indeed, thanks to services like Discmakers, and CDBaby, and the relative ease with which an artist
can start selling her music, the artist herself is essentially already her own label from
the day she records her first track in a professional recording studio or basement.
The artist in this new age has the potential to be a label whether or not he realizes it, accepts it
or acts on it. With a computer, a cd-burner, and access to the internet, every artist
has the beginnings of a viable indie label. (and in fact, to be accurate, because of
ease of web access via cafes and libraries, you don't even need your own computer,
or your own cd-burner). So the number of self-released, self-distributing artist/labels will rise.
Consequently, there will be less of a need for traditional independent labels.
If that weren't bad enough, independent labels will be affected in another significant way.
As digital downloads, and ostensibly, illegal downloads increase, the share of the pie
that indies are sharing will seem to be decrease.
LABELS THEN AND NOW
"Although self-distributing artists may make more money per album sold,
labels can help sell more albums by getting them on the shelves of big retailers,
generating more income for the artists in the long run. Labels also are usually
crucial in developing bands into successful touring acts."--from CDBaby Talkback [Latimes article]
In the past, the artist needed a major record label for the deep pockets and contacts necessary to
find the artist (A&R)
provide an advance
finance the music production
finance big budget videos
get the music played on radio
get the music in the stores
get the video played on television and cable
promote the music
pay the artist royalties
Indies were seen as a place that artists could start their careers all the while
positioning themselves to garner the attention of a major label scout who would rescue
them for indie-label obscurity and buy out their contract or in a win-win for everyone,
sign a distribution or marketing deal with the indie label.
It's still the dream of many struggling artists, even though statistically the percentage of artists who
actually live that dream and get signed to the million-dollar major label contract is woefully
small.
If everyone on the lower end is playing on the same level field (i.e. a basement band
with a CDBaby "deal" now being roughly equivalent to and able to achieve the same success as
if it were signed to an indie label "deal"), it would appear that
the gap between "majors with money" and "indies/artists with heart" is widening.
Some would argue that this seeming disparity will make it harder for indie labels to
compete with majors. I believe otherwise.
But before I share with you the basis of my belief, and a philosophy for dealing with the
situation, I'll say that whatever strategy you ultimately implement must be executed on two fronts
simultaneously: the consumer front, and the artist front.
In other words, as an independent label, not only must you make the music you sell accessible to
the consumer in new and innovative ways, you must also make your label attractive to the independent artist.
As an independent label, you will of course be using all your creativity and skills to provide
what's expected of a any label whether large or small
artist advances if possible
funding for manufacturing
funding for video production
marketing/promotion strategies
promotion expertise
press release writing and dissemination
contacts for getting airplay and video play
marketing to a wider audience
And while you as a label will provide these basics, I believe
that profitability in the new era requires additional strategies,
and a few radical new ideas.
Perhaps, as a thought, the record label of the future may focus additionally on
- coordination of the artist's career using the new technology available
WHAT THE ARTIST REALLY WANTS
For the label seeking to market other artists and actually grow a business
based around helping artists realize their dreams, how can you compete with the labels
in a game that usually requires deep pockets? To answer that question, you first must understand
what the artist really wants.
1. Purpose
I'll quote you from a new book entitled The Spirit's Business Plan:
[begin quote] "There are only two important questions that everyone asks every day
of their lives:
1. Why am I here?
2. How will I survive?
These are not mutually exclusive questions. They are actually one in the same.
The challenge of the business plan of the spirit is to tie one's spiritual esoteric
search for life's meaning and purpose to the practical economic viability, survival and prosperity
that life on this plane necessitates.
The earth is moving into a new reality. Those who are here on the planet
at this time have responsibilities that no generation prior had to be
quite as concerned with. In addition, this generation has opportunities
which no previous generation had access to. It must encourage those on the earth at
this time to live by a new set of values." [end quote]
Perhaps there is a truth here that people are more ready for
than we are being led to believe. Perhaps the record label of the future must
position itself to be a catalyst for the development of these new value
in order to ease the earth's transition into this new paradigm.
2. Payment
Related to want #1, there is the more earthly desire for attention and money.
Beyond the search for purpose, the artist wants to focus on making music, become known
for their creativity, while being afforded a comfortable lifestyle
based on the financial reward for their creations. They want to get paid.
There is a basic human need, (or perhaps a little more pronounced than most)
for attention, recognition, exposure, acclaim and approval.
3. Protection
Few artists may admit it, but it's my experience that the creative soul that inhabits
the artist personality shuns the responsibility and structure of self guidance in favor of the bliss
and freedom of creative pursuits. In some ways, artists like to be shepherded, guided
and protected by those offering the structure that they realize is necessary in this world,
but for which they have no inclination to set up for themselves. As artists, they naturally
wired to see the world differently than non-artists. That's what makes them artists.
(It's also why many artists end up being taken advantage of in this game).
Given these 3 basic needs for Purpose, Payment and Protection the question is what
can YOU, as the independent label of the future, offer the artist that she cannot get by doing things herself
or with a major label? What and how can you offer something that speaks to these needs in a way that labels
cannot match. The game will always go to the more creative.
Sorry, I'm not giving you specific answers here. But the things YOU can come up with
given YOUR unique purpose, passion and talents are ten times more creative and
effective than any I could come up with on your behalf. Besides, I'd much rather pique your
interest, spark your creativity, and be a catalyst for
the brainstorming session you will conduct in search of solutions than give you
any of my answers as "the answer." The truth is, the answer does not yet exist.
The landscape is still too fresh.
THE RECORD LABEL OF THE FUTURE
As independent record labels adapt themselves based, perhaps on these
questions and many others, the nature of what differentiates
a true "indie label of the future" from a self-released, self-distributed artist venture
and the gap between them, will have to change and widen. In other words, if you want to
really offer something of value to the indie artist, you have
to offer something that majors and money cannot buy. The key, I believe, lies in offering
a uniquely different experience based on a value system and lifestyle that
the industry as a whole is too far removed from to see growing at the roots level.
As trends continue, CD sales decline, digital media expands, the record label
of the future must adapt. To help you philosophically with how you need to think in order
to weather these changes, and with the underlying assumption that we want to keep everyone living
in the manner to which they've grown accustomed, I offer you....
RULES OF THE PIE
Rule of the Pie #1:
"As your slice of the pie decreases, bake a bigger pie."
This applies to going global in marketing efforts. If the trend locally is
limiting the amount of money you can make, then expand nationally and
internationally. Bake a bigger pie.
But of course, it isn't always possible to bake a bigger pie, which brings us to
The Rule of the Pie #2
"If the pie is getting irreversibly smaller, bake more pies."
This applies to facilitating success for more artists. If you have to sell
digital downloads for $1 to make them attractive to consumers, then do what itunes does,
and sell the products of more artists so you can profit on volume.
The Rule of the Pie #3
"If the pie is no longer tasty, bake a different pie."
If the music industry as a stand-alone
source of revenue is declining, then expand to gaming for example. Sell what people are buying
and where they are buying. Incorporate music into the products that people
are purchasing in huge numbers and generate your income there.
Other solutions:
The rules of the pie are by no means the only way that creative entrepreneurs can
adapt to the changing pie scene. In fact, I predict that a whole new set of rules
will be developed. Who knows, some creative label owner may come with
rule of the pie #4: "screw the pie, feed them cake," or
rule of the pie #5: "make money teaching them how to bake pies & sell them baking tins"
rule of the pie #6: "change the game: add a different desert to the menu"
MY TOP SECRET PREDICTION:
I suspect, based on some reliable sources deep within the industry,
that something along the lines of rule of the pie #6 is going to appear
that will change the whole nature of the game and make millionaires
out of the early adapters. Of course, I can't reveal everything in
this article, but stay tuned. (hint: It may involve radio and a brand new
technology.) But, having said all that, let's wrap things up so you can
get going on your own solution.
SUMMARY IN REAL TERMS
So here's where we are. The music industry is changing. While there will always be a segment of the
population (albeit a shrinking one) which will want high quality music on CDs with jewel cases,
pretty packaging, liner notes, created by artists who themselves desire the status of an association
with a major label, the growing majority of consumers and artists will be adapting to the new
paradigm of digital downloads and self-distribution.
You're mission, therefore, as a record label of the future,
if you've read between the lines of this short article, is to
embrace the new trends and technologies
offer the intangible
enable the self-distributed artist trend in such a way as to make the prospect of
being signed by your label a more desirable options
expand to global, underserved markets
form relationships and synergies in booming industries, and
add your own list of creative responses here, rather than waiting-to-see
Now, what this will all look like when all is said and done, no one can perhaps
predict with any degree of specificity. But one thing is clear. Change is upon us. It is inevitable.
You must be the enablers not the enemies of the new era; facilitators not foes of the future.
It is only in this way that you will survive the shake-up and shake-out that
will occur as the change--inevitable as it is--comes upon the music industry.
You and your record label of the future, if it is to live, must live and exist in the now.
###
[For more detailed strategies for becoming a record label of the future, check out
the Hip Hop Record Label Business Plan available at www.hiphopbusinessplan.com]
Walt Goodridge is the author of 12 books including Change the Game: How to Launch, Grow
and Really Make Money with Your Independent Hip Hop Record Label. He is
also founder of over 2 dozen business sites including hiphopentrepreneur.com
*notes:
(1) Visit http://www.saipantribune.com/newsstory.aspx?cat=3&newsID=64304
for my article on how to respond to steady or declining sales, visit
(2)from information in The Future of music by D. Kusak
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