Manage for Success: The Record Company of the Future, Newsletter #38, June 2004

 

"Manage for Success" is a free monthly newsletter for record label executives who want to operate their companies efficiently and successfully, and who have indicated their desire to receive it. It's published by Keith Holzman of Solutions Unlimited, a management consultant, troubleshooter, and trusted advisor, and is based on his many years as a senior executive in the music industry.

 

Copyright 2004 by Keith Holzman, Solutions Unlimited. All rights reserved.

 

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To begin, a brief comment. My suggestion some time ago that labels consider reducing their prices seems to have become a reality, at least in some cases. UMG's attempt was not well thought-out and was a dismal failure. Despite that, the actual average price of a CD fell to $13.29 during the first four months of this year, according to the NPD Group's Music Watch PriceLab. It's a 4 percent drop from the same period a year ago.

 

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This past weekend I participated in a panel at the Global Entertainment and Media Summit. The topic was "Redesigning the Music Business: The Record Company of the Future." Committed as I am to the subject, it was necessary to spend some time pondering it. What came to mind, not surprisingly, were ideas I've been promulgating for some time now, many of which have been in previous newsletters.

 

First, the Record Company of the Future (hereafter, RCoF) should be lean and mean. It will have a small core staff, dedicated to the notion that when all is said and done, it's the music that counts. If anyone is in this industry for the money, forget it. Money is great, and we'd all like to be wealthy. But the music must be primary. And it should be good music that people will want to listen to -- and ultimately purchase.

 

No successful label should be bloated with excess staff, something the majors had forgotten for many years. That's why there's been layoff after layoff at just about every one of the big companies.

 

Employees at small labels are usually highly enthusiastic about the music that they're involved with. And they'll work as hard as they can, so long as they continue to enjoy what they're doing, are paid decently, and are treated fairly.

 

If, from time to time, such a small label needs additional people to get the work done, it can call on independent professionals to supplement in-house work. Such pros can be utilized in practically every aspect of a label's operations: legal and business affairs, accounting, producing and A&R, design of albums and supplementary materials, marketing, sales, radio promotion, and publicity. Such professionals can be supplemented with paid, part-time employees, and also with interns.

 

With the implementation of this kind of additional support you can operate a successful label with just a nucleus of full-time employees. I've seen it work very well in a number of situations during the last ten years.

 

What will emerge will be something some of us have termed a "virtual" record label.

 

The RCoF should be A&R, artist development, and marketing oriented. This isn't to the exclusion of all other aspects of running a label, but these three areas should be primary. Without an exciting and vital A&R music output, and artists whose craft has been nurtured and developed, there's no need for marketing or for any of the other elements of a record label. Once again, it's the music that counts. Involve yourself with fresh, forward-looking artists and music for which you can eventually build a devoted audience. Thus, when you've recorded lots of stimulating music, you'll have something worth marketing.

 

 

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If you'd like guidance for turning your label into a record company of the future, give me a call. We can discuss your unique circumstances and shape your label to be a potential powerhouse of music for decades to come.

 

I also recommend my new book, "The Complete Guide To Starting A Record Company."

 

Here's what people are writing about it.

 

Carl Caprioglio, President of Oglio Entertainment: "The Complete Guide To Starting A Record Company" is absolutely the best place to start when considering the plunge into the music business. Keith's style is fun, friendly and informative making the book an easy read. I only wish Keith had published this book 10 years ago when I started my label!"

 

Chris Morris of Billboard: "Holzman's 235-page tome is a crisply written and comprehensive look at label basics, from creating a business plan to putting records on the street."

 

Bob Feldman, President of Red House Records: "Keith has been an invaluable mentor to my label and me for over twenty years. He has finally put that knowledge and integrity into a book that I still find to be indispensable as a road map through the intricacies and complexity of the business of music. This is a common sense guide that could only be written by a true veteran. I'll refer to mine often."

 

Justin Goldberg, CEO, Indie 911, and author of "The Ultimate Survival Guide to the New Music Industry: A Handbook to Hell": I LOVE Keith Holzman's new book, ěThe Complete Guide to Starting a Record Companyî! I only wish that I had the book BEFORE I started our indie label in the late 90's. Keith's book skips past the hype, smoke and mirrors of most music industry books and arms you with the real information you need to set up a real label that will work and last; the kind that pays royalties, keeps books and sustains careers. Don't just buy it though, put it to use!

 

Clay Pasternack, Consultant and former Co-Executive Director, AFIM: This book is essential for anyone starting a new record company, and is a very well-worded refresher course for the experienced industry person.   I highly recommend it!

 

John Michel, American Composers Forum Sounding Board: Holzman's book offers some of the best and most detailed explications of the   "conventional wisdom" of planning, financing, recording, producing, marketing and distributing your own discs. His Guide is more thorough than many similar publications on the market at this moment.

 

"The Complete Guide To Starting A Record Company" can be ordered as a downloadable eBook (in Adobe AcrobatĆ PDF form) at $29.95, or as a printed, spiral-bound book at $44.95. You can read the complete Table of Contents and download the Introduction for free at               <http://www.recordcompanystartup.com/>.

 

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Building artists and nurturing their careers is a vital part of running the successful record company of the future. Many labels seem to have forgotten this or have eliminated such departments as part of their attempts at downsizing. But no matter how small your label may be, or how limited the number of staffers, someone must be tasked to handle this key role. Artists need to be encouraged to hone their craft, especially if they're songwriters, and to tighten their stage act so that they're giving thoroughly professional performances. An A.D. person can help create effective set lists, suggest what to wear on stage, and guide as to what works best to create a stirring concert. Most important, the A.D. person must see that his artists have professional management that keeps them working and that helps build thriving, long-lasting careers.

 

In order to survive and be profitable with a small staff it'll be necessary to rely on efficient computers and software that's easy to operate, with business systems tailored to your specific requirements. None of this is rocket science, and many small labels have been successful at it for years. If necessary, call on me for assistance.

 

Additionally, the RCoF will be relying less on sales of manufactured CDs but increasingly on electronic transmission sales. Apple's iTunes currently leads the pack, but after a lengthy delay, many other companies are getting on the bandwagon and will shortly be nipping at Apple's heels, most notably Microsoft and Sony.

 

Be certain that any deals you might make for electronic sales are absolutely non-exclusive, since you'll want to make your music available through as many online locations as possible. Any don't neglect the effectiveness of your own web site. That's where you'll earn the most per sale, and more important, you'll generate loyal customers who may return to your site frequently to buy your music.

 

To use a metaphor from Nicholas Negroponte's "Being Digital," rely more on "bytes" (electronic transfer) than on "bits" (CDs, DVDs, etc.)

 

Thus the RCoF will be able to rely less on a vast inventory of printed and manufactured materials, which will result in freeing up much-needed cash for other regular operations. An additional and beneficial byproduct is that this also reduces some of the workload on accounting, and whichever person has to keep track of inventory.

 

Another aspect of this world of the RCoF is that, as more and more electronic systems for music dissemination are developed, it's likely that you'll see a reduction in the number of conventional distributors of manufactured "product". Only the fittest will survive.

 

Thus I believe that the future will see many, many small but very successful independent labels, operating in their own special spheres and niches. There's lots of room for all, so jump in and join the fun.

 

Until next month,

Keith Holzman -- Solutions Unlimited

Helping Record Labels Manage for Success.

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Copyright 2004 by Keith Holzman, Solutions Unlimited. All rights reserved.