DIY Record Industry: Models for Millionaires, Models for the Obscure

By Richard Menta 6/13/09

For over a decade the major record labels have litigated, legislated, and shouted down that subset of Internet activity called file sharing. Unfortunately for them, their attempts to shut down this consumer communal obsession took way too much of their attention. So much so that it distracted them from focusing on that which was considerably more critical to their business.

What the record labels should have been doing this past decade was spend their main efforts experimenting with new business models for this most efficient of distribution and communications media. New models are critical because the Internet made obsolete many parts of their existing business. The problem is the industry let those older models - models based on traditional land-based distribution and models based on scarcity - get in the way of developing the new.

Music is not scarce anymore. It stopped being scarce when Napster appeared on the scene ten years ago. The major labels may still control access to the record stores, but it's a weakening structure. The future, as shown by the likes of Trent Reznor and Radiohead, is a Do it Yourself model where the artist can eventually eschew large and expensive middleman like a major label.

That bodes badly for record industry execs who continue to cling to the old way of doing business. They wasted over a decade that could have been spent finding models that would prove more enticing to an artist than a DIY strategy. Most pundits saw this coming a mile away. I personally mused about the potentials of DIY activities way back in 1999 when They Might Be Giants released one of the first online only albums, so the potential for artists to take matters into their own hands should not come as a surprise.

Still, these DIY models are only just evolving. The secret sauce for success has yet to appear. Furthermore, we can see that right off the bat there is a class structure that has appeared within the early models. The rules are very different between those artists who already have fame and a large following of fans and those artists who have yet to build any widespread recognition for themselves or their music.

What the major labels supply best is marketing muscle. The type of muscle that utilizes all other media to vault the unknown waitress into a superstar recording artist. It's the same old story of fame and fortune, but one that actually acknowledges the massive mechanism behind it. The industry uses it's connections in television, it uses radio, it uses film, and it uses magazines and newsprint to do for an artist what they could not do for themselves before the Internet; overcome the white noise of obscurity. This was, and for the most part still is, the biggest reason why any artist would want to sign with a label, a big middleman with a big appetite for cash to support its efforts.

Not every artist that signs gets to be famous, let alone get the full attention of their label. That's why the DIY approach utilizing the Internet has such appeal for many. But those models are still in an evolutionary stage where it's the artist who already has a name who has the greatest opportunities.

The successes of Reznor and Radiohead are the models for millionaires. Those artists who became superstars under the aegis of the old big label system. A star power that endowed them with familiar branding, a huge fan base, and continued radio airplay of their back catalog. Superstars have other advantages. They have more cash to self-finance experimental ventures and have a higher tolerance for failure.

But experimentation in new models offers benefits to the unknown artists too. Mostly it's the ability to reach more ears with their music and generate that all so valuable word-of-mouth that will extend their existing audience. These artists may never rise above the white noise, but they can still improve their fortunes while enmeshed within it. If the average person has several thousand songs on his or her iPod it means that they are listening to a greater variety of artists than just a decade ago.

When asked a few years back about how he would feel if his own novels were pirated former EFF rep Corey Doctorow responded that his biggest fear is not piracy, but obscurity. This was a sentiment repeated by Canadian law professor Michael Geist when asked a similar question about his writing on a recent TV panel show. Big artists like Prince who partake in imaginative DIY experiments are not hindered by the badge of obscurity. For them DIY makes a lot of sense - it's at least a viable option - and offers a compelling future for the big artist once the label contract expires.

But when we speak about the other class of artist - what Paul Resnikoff of Digital Music News calls the the DIY, middle-class artist - then the issue of self-sufficiency through technology become a cloudier issue. In a commentary a month back Paul wrote:

The utopian version is that anyone with enough talent and dedication can support themselves, however modestly. That the fans will respond, and support quality. Instead of blown-out groups, the DIY vision calls for a bigger number of smaller artists, each empowered by their direct-to-fan databases.

Sounds lovely, though the reality will probably be something less romantic. Quitting the day job is one thing, though slaving away for a modest music wage is another. Is the life of a middle-class artist like an early-stage entrepreneur - huge vision, endless work, major quality-of-life challenges, serious burnout potential? So far, being middle class with a guitar means working tirelessly, and juggling fan-building, touring, and creativity while trying to get enough sleep

Paul wonders how many middle-class artists can sustain a middle-class living for an extended period even with all of the tools brought forth by the Internet. It's a sobering question.

The middle-class artist can now sell their music through iTunes and Amazon without a label affiliation, but the tracks easily get lost among the millions. For all the laurels thrust upon the likes of MySpace, Twitter and YouTube, these devices are less starmakers than they are a source of initiation for those who already may have heard of an artist, but not yet sampled their music.

Ultimately, it seems that the best answer so far for the obscure artist is a combination of talent, adroit use of multiple mechanisms....and time. There are clear success stories; Drake and Kid Cudi are two of the more recent examples of artists without a label finding online fame. Still, if the models for the famous are starting to evolve into repeatable profitable ventures the models for the obscure artist are much farther from maturity. Right now existing strategies require a far more complex series of actions to generate meaningful attention. Furthermore, when a new model appears and everyone rushes to apply it that model's power to brand has a tendency to weaken. Despite the limitations, the potential reach of any artist has already grown from regional to global and that alone is a step in the right direction.

As for models on the record label side - models that might try to entice artists to bypass DIY - well, that's in a far more problematic state. Internally, they have done a poor job over the past ten years with few ideas in the pipeline that one might call inspired. Their work with external partners is no better. Big up front payment demands and onerous restrictions demanded by major labels sharply increase the risks for any online music startup that tries to work in harmony with the industry. Many have failed after writing the big check to the labels. Here we are a decade after Napster and outside of iTunes the labels have little to offer in terms of a compelling digital strategy. Worse yet, they are proving to be bad partners for those capable of building it for them.

This does not mean the record label is going away, but the power is clearly shifting in an era when an artist can top the charts with fewer than 80,000 CDs sold in a week. If the major label is on life support it's simply because it is getting harder for them to pay for the big corporate infrastructure as the perceived value of the music download shrinks closer to zero.

The future seems to favor the rise of many small and mid-sized labels that will run leaner, but take a piece of all of an artist's revenues including touring and concessions, while managing all of the necessary daily business activities. These labels will attempt to sell their ability to market the young artist with a modern digital vision that's savvy and aggressive, while arguing that while DIY is enticing it is not always pragmatic, particularly for an artist less compelled by the business side of their vocation. Throw in the intimidating storm posed by the pending Ticketmaster/Live Nation monopoly and the "new" label seems like a safer bet.

Of course, the opportunities for abuse in the above scenario would make the late Colonel Tom Parker giggle with glee. Which brings us right back to the DIY model again.

Richard Menta


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