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Sunday, January 13, 2008

Guy Hands, EMI, Robbie Williams and Monty Python

The classic record company began as a distribution business. It had a pressing plant, lots of employees in white coats and a fleet of vans to get the product to the point of sale. The charts were devised and perfected because they gave the business a way to decide which record to distribute more of and which not to bother with.

Then it discovered that big talent properly handled could make a lot of money. To increase their chances of attracting that talent they needed money. Hence they became banks. Their main function in the career of a Led Zeppelin or Spice Girls was to pay enough money to sign or re-sign them.

One of the main problems facing Guy Hands, the new owner of EMI, is that he's bought a big record company just as the virtues of bigness are in question. The manufacture is contracted out. The distribution gets less important as tangible product declines in importance. It's no longer about having the promotional muscle to get your act on the TV. Being big is in fact nothing but pain. You have large corporate overheads which mean that you must release a huge number of records you know will never pay back purely in order to give your staff something to do.

I'm sure that there have already been lots of interesting meetings between Hands' people, who know about business, and the inumbents, who know about the record business, meetings at which the underlying business model - to wit, for every hundred Erin Mckeowns you might get one Norah Jones - has been called into question. This must have had something about it of the Monty Python merchant banker sketch during which Hands presumably took the John Cleese role - "I don't want to seem stupid but it looks to me as though I'm a pound down on the whole deal."

Maybe Guy Hands has decided that he no longer needs the structure of a large record company. Maybe he's going to contract out all the record company services - from those things that are mission critical to the "fruit and flowers" - to independents and just put his energies into the one function of the record company that he really knows all about. That's banking.

But the problem for Hands then is who do you lend your money to? Robbie Williams who's sulking in his tent and whose days as a recording artist are probably behind him? Radiohead, who give the impression of slowly turning into the Grateful Dead, and are probably not going to sell any more records than they do at present? Not Paul McCartney. He's got more than you.

You could always invest in untried talent. Now just imagine this for a second. You tear off a cheque totalling a fifth of this year's development money on a kid who is to all intents and purposes off the street in the hope that one of those demos that the a&r man comes and plays so loud in your office could in a year's time turn out to be Robbie Williams's "Angels".

I don't know if I'd have the nerve. Imagine it were your money. It's the longest long shot available in any kind of business anywhere. You get no security. You have nothing you can sell on. You cannot even promise that the product will be ready in time. Or on budget. You cannot even promise that there will be a product of any kind.

The air is thick with artists talking about how clueless the record companies are. Let's see them putting their money where their mouth is and not only financing their own recordings but also taking the next step and signing up the next generation. Of course, they won't. In the history of the music business no artist has ever used their own money to sign up another artist. Why not? Because in ninety-nine cases out of one hundred you may as well go and draw £250,000 out of the bank and set light to it in the street. That's the economics of the record business. And if the traditional record companies are losing their stomach for it, who else has the nerve? I don't see anyone.

14 comments:

  1. Eric McKeown? Erin McKeown, surely.
    Obviously I'd forgotten all about her and thought she'd be probably working in a Massachusetts coffee shop, but no, she's come out as a lesbian (loyal following), playing with Michelle Shocked (a performer who's managed to make a living out of it on similar terms for over 20 years)and found a pleasantly lucrative and fulfilling furrow to plough. Vast amounts of lucre aside, it probably beats being Norah Jones. It's the way forward for niche acts.

    But hasn't the blockbuster model been doomed for ages? The last global mega hit of say 40m+ was in 1999 for -and I don't know anyone who owns this album- Millennium by the Backstreet Boys. The last to ship 20m+ was Norah Jones's debut, released over five years ago. That they've had half a decade to turn their tankers round, yet have carried on blithely up the Styx suggests that collectively, some very bright record company execs have lemming like tendencies that have bubbled up to the surface, to the calamitous detriment to the industry.

    In the same way that 'ver kids can't see the point of terrestrial TV as they've been weaned on multichannel for the last 15 years*, so it is with the album over the past decade or so vs the fragmented nature of new media. Touring and merchandising is where the money is, as the Stones, who haven't made a cent on a new release since you were editing Smash Hits, realised at about the same time and are now obscenely wealthy from it.

    *20 years from now, the BBC license fee will be almost indefensible to the public.

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  2. "Eric"? That's what comes of concentrating on spelling her surname properly. Corrected now.

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  3. The music industry is perhaps not as unique as it thinks it is. If you look at the literature on 'disruptive technology' you'll find business models where you finance the development of 20 ideas in the expectation that 19 will be expensive failures, and the 20th is successful enough to make up for the others and make plenty of profit too.

    Just as with music, if you knew which one would be a success ahead of time, you wouldn't need to bother with the rest.

    I think most consumers of music are too lazy to track down stuff to listen to without a marketing machine forcing it down their necks. It's all a matter of balance. If there are 100 failures to every success, then just make sure a failure costs less than a hundredth of what a success will earn. The benefit of being big is that you can do this. If you're small you can hardly afford any failures.

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  4. Mike Gray7:10 pm

    I think it possible for the artist to do it - Ani DiFranco is the most shining example of the artist who has gone out and done it - done everything on their own, formed a label, and financed others.

    I suppose the other option is the Pop Idol / X-Factor route - make sure you can't lose because you've got a built in audience.

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  5. The only good to come out of all of this is that Robbie Williams is witholding his album. We should all e-mail Mr Hands and tell him to stiffen his resolve and stand firm!

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  6. "In the history of the music business no artist has ever used their own money to sign up another artist."

    I realise I'm probably setting myself up for a QI style klaxon to go off and have my ridiculous comment flash up behind me on a big screen, but didn't the Beatles finance other artists through Apple Corps? Or was that just a front for EMI loot?

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  7. Good question. Swansong signed Bad Company too, but I don't know to what extent that was just a paper label serving as a vanity numberplate for The Zeppelin.

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  8. I have been in bands for 20 years on and off and have had no success whatsoever. It has been our self-financing hobby and we have very occasionally contributed to recording costs (albeit by a tiny fraction) by playing gigs and selling the odd CD. Established bands want to be in my position now don't they?

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  9. To be fair, established artists do sometimes sign up other artists. Pete Wentz hung his shingle for the express purpose of taking a chance on Panic at the Disco. Yes, artists usually help other artists by forming a vanity label under some corporate umbrella, but it's not just about writing a check. Labels have distribution channels, marketing contacts. I could support a band, but no one can buy their CD if its not in stores.

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  10. Mike Gray6:57 pm

    It's increasingly inaccurate given MP3s and online stores to say that no-one can buy their CD if it's not in stores, more likely that nobody can buy their CD if they haven't heard of them.

    In the US, they have the good fortune to have CD Baby for example, which seems to me to be doing a good turn for independent music, in that the share they pass back to the artist seems more than fair (and indeed they don't seem to want to rob me blind for international shipping, even offering a case free option for cheaper shipping) - works for me.

    A few artists seem to have adopted 'development' type deals with labels rather than traditional deals, or release through their own label, but via a distributor... will this model work?

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  11. The banking/ financing comments are spot on. Music lovers (as opposed to music consumers - you know who you are) realise the multinational corporate part of the music industry is actualy all about money and not about music (and certainly not about music as art) and look beyond the big labels and their lapdog of mainstream media to find new music. The paradox is that, on one hand, audiences have never been more accessible to musicians, but on the other hand, there is so much "noise" it is difficult to be found.

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  12. I can think of one very successful label set up by a musician that remained independent for more than a quarter of a century and enjoyed much success during that time: A&M.

    As for EMI, perhaps it's best the venture capitalists take over. If they succeed, the company will undoubtedly be taken to the bare bones, but at least it'll have something solid to build on - something a damn sight more solid than the £80m the previous management wasted on Robbie Williams, not to mention the scandalous amounts paid to Mariah Carey to join Virgin (then an EMI subsidiary), deliver one terrible album (as opposed to all her other ground-breaking albums), and leave again. If you want catalysts for the current cull of staff and artists (as well as the previous two culls since 2002), there they are.

    One thing's for certain: those often-rumoured Beatles mono / stereo 24-bit remasters are going to be pushed forward in the release schedule to get the most revenue out of the assets before the sound recording rights start to run out in 2012.

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  13. Expect more EMI acts songs in TV commercials, bands faces in advertising, brands splashed all over music videos, album sleeves and concert venues.
    Brand Mashing or Sell-Out? You decide.

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  14. music is no longer a "marketable" business as it was in the past. it's a culture and a community. i have no solid information to back this up, but more people are listening to more music, and more people are making money off of music than ever before.

    but it's no longer emi or universal or warner or sony bmg. yeah, those guys are fucked.

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