Manage for Success: What's a Record Label?, Newsletter #64, August 2006

"Manage for Success" is a free monthly newsletter for record label executives who want to operate their companies efficiently and successfully. 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 2006 by Keith Holzman, Solutions Unlimited. All rights reserved.


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A colleague and I recently had a discussion about whether selling exclusively downloadable music constituted being a record label. Which got me to thinking about the subject.


For example, say you've signed an artist or group and are selling individual tracks, or groups of tracks, from your web site, or perhaps additional music sites such as iTunes, eMusic, Rhapsody, Napster, etc. Can you really call yourself a record label if there's no actual physical product such as a CD available? Is it the selling of CDs that nowadays legitimizes your existence?


In the many years before downloading capability became possible, the only music you could sell was actual, physical product -- 78s, LPs, 45s, 4-tracks, 8-tracks, cassettes, and CDs, and in the case of songwriters and composers -- printed sheet music or scores.


The advent of the Internet has changed the situation in various ways. Not only has it given us many new techniques to inform the public about new music and new artists, but it has also provided lots of methods to market and sell music. Who a few years ago would have thought how helpful and meaningful a site such as MySpace might be for promoting music of heretofore unknown acts? Who would have thought that you could buy just about any book or record in print from an Amazon.com at just the click of a mouse. Who would have thought you could market your music to fans by merely putting up a really good web site in what's essentially a non-existent, or at least, non-physical space?


I, for one, think that if you've got two or more artists whose music is available for purchase -- either as bits (downloads) or atoms (CDs), then you're probably a record label. Or, if you're an artist with more than just a handful or tracks available for sale, why then you, too, are probably a record label -- especially if you think you are.


Part of this is mind-set. You're a record label if you think you are.


On the other hand, there's no real question that if you have physical product available, if only at performances, then you're a record label, or very close to it. And if you offer CDs for sale from your website, or CD Baby, or Amazon.com, then I would think you're a record label.


The time has come when making CDs or other physical product available for sale at retail outlets such as Tower (what's left of it,) Borders, BestBuy, or local mom and pop record stores no longer determines the status of being a label.


To a great extent, what constitutes a record label is very much in the mind of the begetter, and/or beholder.


In short, I believe the function and responsibility of a record label is to promote and foster the music and careers of its artists. If a company is actively getting its music disseminated -- either online, or at retail, but ideally both -- and is bringing attention to its artists on, at minimum, a regional if not national or international basis, then it's probably doing at least a part of its job, and can rightly be called a record label. Furthermore, if both you and the artist are making money through your efforts, there's no question you're a record label.


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This Fall I'm again teaching "The Independent Record Label: From Startup to Mainstream," Course #X448.73, at UCLA Extension. Those interested should get their Fall catalog, or go to <http://www.uclaextension.edu/index.cfm?href=/courseListings/course_display/CourseDetails.cfm?reg=S3305> or contact me (see email address below) for more information. The text, not surprisingly is my own "The Complete Guide To Starting A Record Company" available as an eBook in PDF form, and as a printed, spiral-bound volume. Read the complete Table of Contents and download the Introduction at

<http://www.recordcompanystartup.com/index.html >. You can obtain your very own copy at the same site.


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Take advantage of my forty-plus years in the record industry if you need help starting a label or solving business or administrative problems that your label may be experiencing. As a trusted advisor to many record companies over the years, I treat all clients and all assignments confidentially. I look forward to hearing from you.


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A sidebar to the above: is it the owning of recorded masters that defines a record label? I don't think so. Owning masters and establishing a deep catalog is certainly desirable and beneficial to a label's financial status. (See my comments on "The Long Tail" <http://www.holzmansolutions.com/articles/59-mar06.html >, and <http://www.holzmansolutions.com/articles/63-july06.html >.)

But I've known of labels that owned few if any masters, preferring to license tracks or releases from others. That's not a notion to subscribe to for long-range health, but it is legitimate and can help fill out an otherwise sparse release schedule.


It's becoming a frequent occurrence that artists prefer to own their masters outright (a lesson learned perhaps from Ray Charles) and either license them for specified terms to a label, or create their own label and finance their recordings, and then pay to promote and market them, allying themselves with another label -- usually one of the majors -- for distribution purposes only.


In fact, an article by Devin Leonard in the current Fortune describes varying approaches to this subject.

<http://money.cnn.com/magazines/fortune/fortune_archive/2006/08/21/8383597/index.htm >


He sites Ice Cube's management, The Firm, doing just that with his recent "Laugh Now, Cry Later" album. The rapper paid for the recording and marketing, and got Virgin (EMI) to distribute it. It sold over 500,000 copies worldwide, and the artist got to reap the profits, plus income from ring-tones and film and TV licensing. Virgin merely got distribution fees and overseas licensing rights.


Another major artist, Garth Brooks, went even further, making his CDs available exclusively in Wal-Mart stores and on the retailer's website, totally bypassing record labels and traditional music retailers.


Mr. Leonard writes about Jeff Kwatinetz, CEO of The Firm, the talent management company that represents Ice Cube. "Kwatinetz argues that now these same companies are so focused on making their quarterly results from album sales that they can no longer build long-term careers for their artists. 'They are in a death spiral,' Kwatinetz says. 'The record business will shortly be extinct. But the music business, the business of creating music, will not be -- because people love music.'


That's certainly provocative, and food for thought, and might make you think more about what you, if you call yourself a record label, might do about it.


Until next month,

Keith Holzman -- Solutions Unlimited

Helping Record Labels Manage for Success.

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Copyright 2006 by Keith Holzman, Solutions Unlimited. All rights reserved.