Subject: Manage for Success: Some Solutions for Record Business Perils,
Newsletter #23, March 2003

As principals in predominantly independent labels, how can you go about dealing with the many industry problems discussed in last month’s newsletter? <http://www.holzmansolutions.com/articles/22-feb03.html>

Let me preface my comments by mentioning that many of the independent labels I've spoken to in the last few months have told me that they're actually getting by in reasonably good fashion. In fact as a group, according to SoundScan, independent labels maintained a five-year growth pattern through the end of 2002, the only industry segment (not UMD, BMG, WEA, Sony, or EMI) to do so. How have these indie labels held on in an otherwise downward music business spiral, despite a decrease in deep-catalog carrying retailers?

Read on.

First, they've been extremely careful choosing the music they record, and they promote and sell it with great purpose.

Today's music market tends to be hit-driven for the majors -- less so for indies. Therefore indy labels need to find a particular niche that they're comfortable with, and then stick to it. Many labels are thriving because they've found a genre of music they know and like and they market very skillfully to its constituency. They know that there's an audience for their artists and their music -- limited though it may be.

They also don't flood the stores with "product," but release only those records that they think have a reasonable chance of success. To an indy, each release must be significant, or there's no point in shipping it. I wish the majors followed that philosophy.

They're also extremely careful about the artists they sign and record. They tend to sign artists who perform regularly -- if only in their hometown -- and who are not merely willing, but motivated, to tour and perform.

Savvy label owners sign artists who can make very good recordings of very good songs, and who are eager to perform in front of audiences. Remember, it's good music that people want to hear and might be willing to buy.

Smart owners of indies run the numbers and know that there's a more than likely chance that they'll not only recoup their investment, but even make a little money. Most of these people are in the business because they love music, with financial considerations being a nice bonus. They hold down the costs of a recording through whatever means they can. Very careful budgeting is one of the keys to their success.

The majors have made marketing so costly that indy labels have had to be ever more creative to get the attention of their audience. Thus they spend a lot of effort on their marketing, being careful to get the maximum result with their limited finances resources.

They market to their artists' strengths, concentrating their initial efforts on the artist's home territory, and expand out from there.

Many good artists with good music will never get airplay on commercial radio due to tight play lists and limited genres of music. Therefore labels should try instead to get their recordings to the attention of community and public radio stations who are inclined to be much more adventurous and eclectic in what they play. A number of important records have gotten their start at such stations. You don't have to hire unreasonably expensive promoters to "work" commercial stations, since there are promoters specializing in music from independent labels charging reasonable fees, and getting results.

Many label owners have increased their effort in artist development (something the majors essentially ceased doing.) Some have even become artist managers in order to build their artists' careers and to get their acts regularly in front of audiences. They book them into the most pertinent venues for the artist.

In the case of soloists, duos, trios, and other small acoustic-based artists such as folk singers, jazz combos, and classical performers, they've even booked them into peoples' living rooms. Home concerts are becoming vital to these performers, and they also get to sell records to the attendees.

Once gigs are booked, the labels work hard to let local press and radio know about the performances. They try to get interviews with the artists and news about the shows onto the air and into papers prior to the performance date. Failing that, they at least try to get reviews printed afterwards.

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These suggestions will take some effort on your part, so please call me to see how I may be able to assist you in implementing them. I've had years of experience with labels of all sizes solving the kinds of problems that independent labels face. Phone me so we can discuss your particular situation.

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It's not unreasonable, and more and more common, for labels that actively manage their artists' careers to take a modest management fee, another source of revenue, which if handled carefully, need not be a conflict of interest.

Some labels have also gotten aggressively into merchandizing such "tchotchkes" as hats, t-shirts, and posters, making them available, along with CDs at all venues.

Savvy labels maintain very close ties with their distributors and their distributors' sales staffs, without relying on them for the heavy lifting. These labels contact retailers directly, letting them know about their music, supplying them with white-label copies for in-store play, and inviting them to local gigs.

A few labels have started going it alone by acting as their own distributor. They sell directly to a limited number of catalog & niche market retailers who they know will stock their records. They not only get paid quicker, but also earn more because there's no distributor taking a portion.

Other labels have been experimenting with pricing. It's a common perception that records are overpriced, particularly in the case of CDs with less than 40 minutes. In fact any record is overpriced if the music's lousy!

Therefore you might try pricing selected new releases at just under ten dollars for the first two or three thousand units -- or until your break even quantity -- you do know when you'll break even, I hope -- and then raise the price a few dollars as the release becomes successful. Be creative in your pricing to see if the experiment works, but be sure to try it on a release with good music and performances.

Don't neglect your Internet efforts. The web has become a key part of any successful label's marketing campaign. Be sure your web site is quick-loading (without fancy Flash animations) with tightly compressed graphics, and easy to navigate. Bear in mind that most people still use dial-up modems, so it's vital that your site load quickly. If it takes too long they're liable to lose interest, resulting in lost sales.

Be sure to offer at least three or four music samples for each release in some protected non-savable, streaming form such as RealAudio. Selections can be as short as 30 seconds up to the entire length of a song. But it's extremely important that you let an interested buyer hear at least some of the music.

Then make it easy for them to make a purchase, either through your own shopping cart (where you receive the entire retail price,) or via a re-direct to Amazon.com, CD Baby, or other on-line store.

Also make available to your customer inexpensive, legally purchasable downloads of individual songs in case she doesn't want to buy an entire album -- again from your web site or others: Amazon, Liquid Audio, etc.

Finally, be sure to ask satisfied customers for their email addresses and permission to send them news of new releases of artists and music they like. Occasional emails directed to their preferences are an extraordinarily cheap and effective way to market your music.

Summary:

Release fewer records.
Make cheaper but better records.
Good songs -- good music.
Be sure there's a potential audience for each release.
Concentrate on building artist careers.
Be sure the artist is willing to perform and tour.
Market carefully and thoroughly.
Market to your artists' strengths.
Have new solo or duet acoustic artists perform in living rooms.
Concentrate marketing and sales effort on catalog & niche market retailers.
Work closely with your distributors, their sales staff, & retailers.
Experiment with pricing.
Make available inexpensive, legally purchasable downloads.
Make each dollar count.
Email is a great marketing tool.

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Copyright 2003 by Keith Holzman, Solutions Unlimited. All rights reserved.