Major Labels

Why Record Labels Have Killed Their Digital Future

image from Wayne Rosso, a columnist at The Music Void, has written a highly insightful and almost cryptic item about the irony of the digital future of the record industry.

Basically, the major labels have made it so difficult for music startups to sustain themselves that no one wants to get into the field or invest in the few companies that are trying to. The very ventures that desire to get into the music business and create new ways for fans to consume, interact, and share music are crawling through licensing hell. Other startups forgo that process entirely; they bring their service to market, get sued, and attempt to negotiate their livelihood through lawyers.

The result is a payment structure to the labels that forces them out of business sooner than later. Then, after the labels promised they would never let another tech company like Apple throw them around and sell the world more iPods than music. They are now getting deeper in bed with Amazon and Google. But those companies aren’t in the music business either. Both make their real money elsewhere. To them, music is a Giga Pet. Something to store in their back pocket and feed once and while, but not their focus. If ignored and music dies, they’ll get another one. Rosso argues that the very people who would’ve profited the most from a digital future have killed it. Despite the best hopes of the labels, Google isn’t going to save them from Apple’s death grip, perhaps not at all.

"There will be no new players of significance to enter the business. Investors don’t want to entertain the remotest possibility of funding any start-up that deals with music… What’s most ironic is that the record labels have now put themselves in the position of having to depend on… companies that actually couldn’t care less about selling music. They think that [Google] this is going to be a game changer. It won’t be. What the industry has accomplished is exactly what they didn’t need." (Read on.)

Share on:


  1. c’mon… no ROI means no deal. music start ups can’t show an ROI… the new models are built upon devaluing music to the point of uselessness and having to compete with illegally free… starting any business that is competing with a reported 20:1 piracy to paid business is going to be a very hard sell… post Spotify, people are looking a lot closer at reality and the numbers and they don’t add up.
    so the truth is piracy has killed the record labels digital future… this is nice spin, but I’ll stick to the facts, thanks.

  2. Rosso makes some good points, but a statement like “there will be no new players of significance” in the music business is WAY too fatalistic, and (I believe) totally incorrect.
    First off, let’s make a clear distinction between the “music business” and the “market for recorded music”. Now, recorded music as a commodity has been severely devalued. It’s in limitless supply, can be easily obtained for free and amassed in mindblowing quantity, and has less entertainment value* than a DVD (several hours of visual & aural content) or a video game (dozens of hours of interactive play). The market for music-as-a-good is extremely small, and nobody can build a business on it by itself.
    However, music’s value is not contained in its physical (or digital) media. Cultural impact, emotional resonance, people’s personal relationship to art and how it connects them to each other – in those less-concrete realms, music still has GREAT value, as much as it ever did before. People LOVE music, and they always will. The challenge is to offer them goods they value and are willing to pay for, like an experience (i.e. live shows or meet-and-greets), a rare/unique item (i.e. autographed setlist), or something they can use to display their fandom (i.e. t-shirt or poster). Every artist can craft something unique to their fan-base, and with modern tools like Topspin, they can sell and market directly to those fans, establishing a channel of consistent revenue and loyal customers.
    There will ABSOLUTELY be new players in the music business, because its place at the nexus of passion, art, and technology is too interesting for smart young tech-heads to pass up. Innovation will continue, and that engine will drive some major players to success. I don’t know who they are yet, but I know they’re coming.
    @snfubar: ROI takes time to build up to, and just like with TV, the market is migrating to web-based streaming slowly but surely. An ad-supported model will be viable eventually, it’s just not happening fast enough to placate today’s impatient investors. But that’s a problem with the investors, not the services. Patience, intelligence, and a great product will win in the end.
    *purely in terms of quantity, not quality — many of my favorite albums are far more enriching & enjoyable than a movie or videogame

  3. new players = labels with fewer artists working in partnership (true business partnership) where the label is fully vested in the creative process, not just as employer
    when you talk about ROI, a fairer assessment of time lines needs to be incorporated, i.e. ROI over longer periods, major’s don’t like this (quick buck, hence the lowest common denominator)
    major’s also don’t like the idea of net neutrality, because they are going to have to share distribution channels and when it comes to developing new talent, they do not have a clue, they’ll lose. so they will never allow this to happen, hence the article
    astute article, and quickly becoming a reality
    tired, my 2 cents

  4. I think that the investment market will have to turn around because current players will drop off. As long as the New Kids on the block watch their heads as well as their overhead, they could beat a path to the VCs doors if that the way they want to travel. Good Luck to all.

  5. I mostly agree with Jason, though I’m not convinced that ad supported music will be really viable; there have been many failed experiments in this area. Getting ad supported anything is hard. Google might make it work. I also disagree with the major labels are entirely at fault for killing music startups. Writers and musicians deserve to be compensated and not just software developers. The model of these startup music sites has been to capture all of the market in order to attract traffic; it has made price and not product the differentiating factor and so you get a race to the bottom in terms of price. Perhaps that should change.
    The digital music retail business has matured and the best (i.e. paying) prospects are already paying for music through existing channels. Ad supported music business models target advertisers for revenue, not consumers, and the ad revenue typically doesn’t keep up with consumer demand for files and streams. Exclusivity might raise the value for advertisers, and earn better returns for the artists affected, but most business models go for capturing most of the market instead. Again, how do you differentiate here? Honestly, if ad supported music worked, it would work on band sites too and we’d all be doing it.
    I really think that we need to understand that we compete with youtube, dvds, movies, apps and other forms of paid entertainment. People pay for apps and games and can get music and videos for free at YouTube as well as file sharing sites. We need to capture market share back from these other forms of entertainment by getting away from selling files and going towards selling experiences.

Comments are closed.