The future for record companies

Max Hole at Universal Music Group International looks at myth and reality

June 2007

So have the Arctic Monkeys shown that record labels are redundant?

What people always forget about the Arctic Monkeys is that they’re very good and that’s the main reason they’re successful.

You’ve got millions of groups thinking they can go straight to consumers on the internet but the question is, does anybody care? I could go and busk outside an underground station and people would walk past me because I’m not very striking as a singer! The internet’s similar to that. The Arctic Monkeys however, are very talented and their lyrics connect with people. There was a skilful job done around promoting them on the internet that made it look as if they were doing it all themselves but they weren’t.

Record companies spot talented artists, sign them and then help them realise their potential with expertise in A&R, promotion, marketing, sales and they provide money; record companies have always done this and I think they always will. People who work in labels, large or small, are both enthusiasts and experts.

They can do things that artists on their own can’t. That’s not to say that a band having a presence on the internet doesn’t help to get them noticed. Years ago the only way for a band to get noticed was either to play a gig or send out demo tapes, but now the internet is a very important part of discovering and promoting talent.

What do record companies offer artists?

Artists want encouragement, help, support and money. My son’s in a group and what does he want? He wants someone to love his group, create opportunities for him and give him a cheque so that he can stop having to be a part-time waiter and be able to do his music full-time. That’s what most artists want.

They want to play, to have better equipment, more studio time and/or be able to buy some home recording equipment and, if they play live - they want a van so they can go and play in Nottingham or Manchester. Artists still want the same things they always did and they need someone to supply these things. They want somebody who shares and matches their vision, energy and enthusiasm. Someone who can open a door to the producer/recording engineer/song-writer that they love. All this hasn’t changed; it’s still the same and generally it’s the record company who steps up.

So nothing has changed then?

What has changed is the kind of services we offer artists once they’ve signed. In the past we helped them access photographers, designers, producers, engineers, studios. We still do that, but we also offer a whole array of services that are internet-based which include promotion, marketing, eCRM services and building websites.

To an extent, artists can do this themselves, but it’s often more expensive, difficult and time consuming than if they tap into an organisation that specialises. We offer this different set of services once an artist’s signed, because it’s the nature of the business now and we have had to learn to talk more directly to the consumer than we did in the past. Most of the basics however, haven’t changed. Artists still come in the door and say ‘make me a star’, but now it’s ‘make me a star the way I want you to make me a star’. Of course, the issue is that if you take a big cheque off anybody, the bigger the size of the cheque, then the more concern over the investment.

But artists still need record companies?

Snow Patrol is a good example of a band that made independent albums and then signed to Universal. We provided all the services I’ve been talking about after consultation with their management and the group. This allowed them to go and do what they do best, writing great songs, producing music and playing concerts. So far they have had two very, very successful albums. Universal took Snow Patrol who were struggling in the independent sector and gave them a platform to succeed all around the world including America.

The era of the “do-it-yourself artist” presumes artists are capable and want to deal with the business and promotion/marketing themselves. Many of them are not equipped with the necessary specialist skills to take care of ‘business’. We are experts in providing these services and skills which allows the artist to create and make music.

Is the relationship between artists and record labels changing?

Up to now, record companies have provided most of the financial investment to break an artist but have not shared in the revenue created from concerts, merchandising, sponsorship, song-writing etc. once success is achieved. The record company’s piece of the pie is declining whereas all the other segments are growing so we need to adapt. It’s interesting to look at Japan. The artist management/production company model there used to be viewed by the West as old fashioned but in fact, it is a forward looking 360 degree model.

Why are record companies not doing so well then?

Most of our woes are due to piracy, physical and digital. Having said this, we live in a creative business and some countries creative cycles’ are up and some are down. The UK and Japan are up at the moment but I think the US is going through one of its less creative times. We need ground-breaking new music and stars to drive a healthy industry. The more successful you are as a record company in creating hits, the more artists want to come to you.

Does this mean that labels need to change the way they sell music?

We are, and will continue, to develop different ways of delivering and selling music but at the moment no-one knows what ‘the killer application’ will be. We need to be open minded, flexible and unafraid to experiment. These are exciting times but the most important thing for record companies is to sign and encourage great music by great artists. This will never change.