Archive for June, 2009

Where Do We Go Now (Part 3)

Monday, June 8th, 2009

From time to time it is beneficial for me to step back from the day to day rat race and ask myself why I do things that I do the way that I do them. I try to be honest with myself and more often than not the real answer is simply I do things a certain way because I have always done them that way. But times have changed and no one is exempt from having to re-invent themselves – not even the mammoth General Motors. For some time now I have been asking the same question of the music biz, and sure enough I always get the exact same answer – things have always been done a certain way. So step back one more time with me and let’s first acknowledge that people do still want to hear music – they just don’t want to buy it anymore. With this in mind I began thinking about what I would do if I were in charge of running a major label. I am going to make this the last of my Where Do We Go Now series. As always, remember that this is just my 2 cents. Here goes.

The Big Strad steps would be two-fold.

    Step 1 – Re-invent

  • I would make my entire staff realize that we are going to re-invent the wheel and come up with a new business model. This means work folks – lots of it. And anybody that is not down for the work of a company-wide do-over can exit stage left. For those that are up to the challenge, the resulting compensation and org chart on the other side would be directly proportional to the size of your contribution and its importance to the new business model. So, interns may end up Directors – and vice versa. You get the point.
    Step 2 – Do what we do best and let the rest go

  • We begin making money by doing what we do best and let partners handle what we used to do best. This is one of the most fundamental of business rules, but it is one the record labels seem to be ignoring. I believe it is being ignored because record label executives are still thinking in terms of what record labels used to do best – which was sell music. It is pretty common knowledge that producing the type of sales numbers that used to be possible is no longer a reality for anyone in the digital age. Ok, so what do major labels do best now? They market music. The trick is to make money marketing music, instead of selling it. This is a paradigm shift in the music biz, but it means in the new business model record labels will transform into music marketing companies (MMC)!

This is synergy at its best.

For the most part, music is tough to sell in today’s market. But products still sell; clothing, toiletries, electronics, beverages, food, cars, etc. are all still viewed by the consumer as items that must be purchased, after all it is not yet possible to download a car with today’s technology. All of the companies that sell real-world products (RWPC) also have marketing budgets for them, but they are usually geared towards advertisements for TV, radio, etc. The key for the success of an MMC is that they have to still own the exclusive rights to market an artist, but they must give up any musical rights. But giving up these rights can be leveraged in finding a suitable RWPC with a marketing budget. Endorsements are not new to the RWPC, but having exclusivity to the artists’ brand name is! The popularity of the artist and / or their music will be they key to the success of the endorsement. So who is better at making artists popular? The MMC! This is synergy at its best.

…there is yet another partner in the new business model that can win – the artist!

The MMC can also use their A&R and scouting skills to help find hot artists for the RWPC to endorse and thus continue to solidify their exclusivity in marketing music for said artist. This gives the MMC a new revenue stream (marketing), foregoing an old one (music sales). But I always preach that a win/win solution for all parties is the key to a successfull partnership. So who else wins in this partnership. The RWPC can win as well as they can fully sponsor artist tours, and even give away music based on the purchase of their product, etc. And there is yet another partner in the new business model that can win – the artist! That’s right, the artist. The RWPC already have marketing budgets and that is where the artist will now get paid from. So the artist will now get paid based on the RWPC marketing budget, not based on sales of music from a record label. So an artist with a hot endorsement deal can still be a huge star, and can make big money without having to sell a single unit!

Is this is thinking out of the box? Hell yes! But how else are you going to succeed in today’s market? Is this going to take some work? Hell yes! I mentioned that in Step number 1. What it is going to take is re-invention (this is key) from the top down. There will have to be buy in from the shareholders, to the executives all the way to the mail clerk. So please soak my idea and let me know what you think. And if any of the major labels want to put Big Strad in a VP slot and give my MMC re-invention a try – get at me. And if you do it yourselves without me, the world will always point to my blog and know it was my idea that you stole! LOL

– Big Strad