Manage for Success: News of Note, Newsletter #78, October 2007


"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 2007 by Keith Holzman, Solutions Unlimited. All rights reserved.


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All manner of attention-grabbing events have happened in the last few weeks that bear discussion. And almost all of it relates to the swiftly changing nature of how our music business works -- or doesn’t. It also confirms a trend that has recording artists doing more to control their own careers and destinies.


At the beginning of the month, Radiohead, now free of its major label contract with EMI, announced that it would be going it alone, and would offer to the public its first album since 2003, "In Rainbows," as a direct download at any price someone was willing to pay. Since the band is very popular, Radiohead's website was swamped. When the music was made available about ten days later, it was estimated that the band had sold 1.2 million copies at an average price of 1 Pound Sterling (about $2.06) which is a little more than double the 45 pence transaction fee. At the time of writing no official statement has been made as to actual sales, and some buyers were disappointed with the sound quality of the MP3 files. The digital downloads will be followed in early December by release of a 2-CD plus 2-vinyl album plus booklet boxed set, expected to sell for about $82, on a yet-to-be-decided label.


Jon Pareles, writing in the New York Times on October 11th said "Radiohead’s do-it-yourself, price-it-yourself model recognizes the new digital facts of life. Bluntly, listeners don’t have to pay for recorded music: There are free versions online, as there are already of 'In Rainbows,' which was distributed without any attempt to thwart copying. The fact that fans have paid to get 'In Rainbows' is a measure of their eagerness to keep Radiohead writing songs. And the deeper underlying reality is that fans have always set the value of music. They are the ones to decide, yes or no, to buy an album, a single or a concert ticket at the available price. Radiohead’s digital-era flexibility allows more supporters to make themselves known."


"In some ways," Pareles writes, "Radiohead now resembles what the music business calls a baby band. The Internet has equated, though not equalized, the least-known bands with the best-known independent ones. Like a zillion hopefuls with MySpace pages, Radiohead records and tours on its own budget and timetable, plays new songs before they’re recorded, lets listeners hear its music with a click or two and sustains itself primarily through performing and direct sales. Of course, for a baby band, that generally means selling enough T-shirts to fill the gas tank in the van to get to the next club gig."


Later in the week, Andrew Edgecliff-Johnson of London's Financial Times wrote that apparently more than half of the downloaders paid more than the minimum transaction fee, and opined this was a great way to promote subsequent boxed-set sales.


Of course not every act has the clout to attempt this kind of "mass" sale, but it's an indication of where the business may be headed, particularly for foremost acts that are free of major label contracts. In fact, just about a week after the Radiohead announcement, Trent Reznor of Nine Inch Nails announced that it had parted ways with Interscope, its long-time label, and that the group was now a free agent and would be going it alone.


Reznor said "I have been under recording contracts for 18 years and have watched the business radically mutate from one thing to something inherently very different and it gives me great pleasure to be able to finally have a direct relationship with the audience as I see fit and appropriate." In fact, statements he made recently while on tour in Australia were scathing in regard to his former label.


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The 2nd edition of my book, "The Complete Guide To Starting A Record Company," is at the printers and will be obtainable any day now. It's revised and updated and will be available as a downloadable eBook in PDF form, or as a printed, spiral-bound volume. Download the Introduction and read the complete Table of Contents at <http://www.recordcompanystartup.com/>.


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More recently, news leaked that Madonna is expected to make an extended deal with Live Nation -- supposedly worth more than $120 million -- for exclusive rights to promote her concerts plus three albums in a 10-year period. This is a risky and expensive deal for the promoter seeing that the artist still owes Warner Records one more new album (expected in the first half of 2008) plus a greatest hits release. Like the rest of us, the almost 50-year old diva is not getting any younger, but she still puts on a great performance and it's likely that Live Nation will make back all, or at least most, of its advance from her high-grossing tours.


That advance is certainly more than what Warners would be likely to earn back just from CD and download sales, and is why labels, both major and independent, are negotiating for a portion of their artists' ancillary income from performance, merchandising, etc.


Note also that the new album from The Eagles "Long Road Our of Eden" will be sold only thru Wal-Mart and the Eagles' website, and not in other stores.


On Monday, Kinks frontman Ray Davies announced that their new "Working Man's Cafe" album will be included as a 10-track covermount with the October 21st edition of the Sunday Times in the U.K with expected circulation of about 1.2 million copies. The English commercial 12-track CD release on V2 is scheduled for October 29th.


Rumors have started floating that private investment firm Terra Firma, which recently acquired EMI, is considering selling off the label's considerable assets. Is it possible that its vast library is worth more than the label itself? Inquiring minds want to know!


Business Week reports that Universal Music Group is trying to get the other majors -- at least SonyBMG and Warner Music -- to help it launch a new music subscription service called Total Music and give the finger to Apple's iMusic.


One new and positive trend relates to the effect of online word-of-mouth. It shows that love of music is anything but anemic. A number of websites have adopted the idea of recommendations as a way to sell music. ILike, for example, a branch of GarageBand.com (the Indie company -- not the Macintosh music-creation program) offers tools that allow you to state your music tastes and let the program recommend similar artists.


Some of the music subscription services such as Rhapsody, Napster and Yahoo music have similar features, as do such sites as AOL's AIM Tunes, Pandora and Slacker.


Another small bit of positive news: Piper Jaffray announced the results of a survey indicating that illegal file-sharing among teenagers is decreasing -- from 72 percent to 64 percent in the last year, while their music purchases increased form 28 percent to 36 percent. Although it's a mere drop in the bucket, we have to take notice of every bit of positive news available!


Therefore, it remains imperative that independent labels offer music that excites and invigorates the public ear so they can generate sufficient revenue to pay their bills. And since radio has become progressively less effective as a selling tool, and with CD sales off about 14 percent so far this year, labels must make use of every tool they can muster in order to sell their music, while finding other ways to increase income.


Paul Resnikoff, Editor of Digital Music News, had another slant and put it very succinctly in his "Parting Shot" of October 8th: "If recordings become marginalized from the revenue picture, then debates over pricing are a waste of time. But if the recording industry is to survive in a meaningful way, labels and artists must find a better solution than 99-cent downloads and protected subscription services. That means different pricing, broader platforms and access, and openness towards innovative concepts like those being floated by Radiohead. Because in a transforming industry like this one, the most influential concepts are often the least expected, and most resisted."

I couldn't have said it better myself!


Until next month,

Keith Holzman -- Solutions Unlimited

Helping Record Labels Manage for Success.


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Copyright 2007 by Keith Holzman, Solutions Unlimited. All rights reserved.