October 30, 2014

New Business Model Evolves for Music Artists

Default-Image-27

Editor’s note: we’ve been following the dramatic changes in certain industries and what they mean for entrepreneurs, including music-entrepreneurs. An increasing trend is for music artists to choose to stay independent and market their own works, instead of signing with major record companies. So it is with great interest that we present this guest column by Jason Feinberg on the new business model for music artists.

By Jason Feinberg

A trend is often most fascinating when it is counterintuitive to an industry’s traditional ways of thinking.

In the music industry, up and coming artists are finding great success by doing the exact opposite of traditional practices. Instead of selling their music, they are giving it away — completely free — on the Internet.

The music industry has been looking for ways to deal with music being distributed via the Internet for almost a decade. During the majority of this time, most of the bigger record labels held a strong stance against placing music on the Internet for any purpose — be it sales, marketing, or promotions.

All efforts put forth by these companies were focused on shutting down websites and software companies that were making music available. Most of their efforts ultimately proved to be in vain, as they could simply not keep up with the rapid pace of Internet growth and expansion.

Smaller record labels had varied strategies in managing their music online. Some attempted to embrace emerging Internet technology by making their music available, while others shied away from using the Internet for anything more than simple web pages.

As more and more companies began assessing the opportunities the Internet provided, many players in the industry began to realize that combating the issue of music being distributed online was a futile fight. Music fans were storing, sharing, and buying music online at an exponentially growing rate. There was no way to avoid it — the industry simply had to devise a way to control it.

At this point, it was quite clear that consumers wanted their music on their computer and portable devices; it was also becoming evident they were quickly adopting new technology and distribution methods. From this arose a tremendous opportunity for musicians that were not yet under contract with any of these record companies.

Instead of forcing consumers to pay for the rights to own and listen to an artist’s music (the traditional practice), independent musicians began giving their music away for free with the hopes of creating awareness of their art and increasing exposure for themselves.

Websites such as MySpace and MP3.com began offering a centralized location for artists to distribute their music for free. These sites have proven wildly successful. MySpace has over 12 million users and is growing rapidly. Sites such as these have provided independent artists an avenue to reach potential fans that was previously only available to those signed to a record company that had a marketing and promotions budget.

The ultimate benefit to these self-financed artists is that CD sales created by this business practice have a significantly higher profit margin than a structured record label would make. Labels spend tremendous amounts of money marketing, promoting, and distributing their product, all of which eats away at their profits.

Typically an artist signed to a record label might net one dollar (US) per CD sold — and that is only after the label has recouped its expenses. An independent artist using free promotion techniques can see as much as twelve dollars (US) profit per CD.

It is this simple math that has inspired many musicians to completely ignore the traditional route of signing with a record company in favor of doing everything on their own.

As record labels rush to develop new ways to both fight and embrace the Internet as a music distribution tool, independent artists continue to capitalize on the new trend of free self-promotion. As more and more Internet sites devote themselves to creating exposure for these artists, an entirely new business model for the entire industry is being developed.

* * * * *

Jason Feinberg is President and CEO of On Target Media Group, a music industry marketing firm specializing in Internet and New Media promotion. He is also the author of the Music Business Blog, an online journal focusing on current trends and topics in the music industry.

4 Comments ▼

Jason Feinberg




4 Reactions

  1. This is a great article and example on how technology can creat a new paradigm in an industry. I personally am involved with selling a client’s website business , isound.com , that caters to 125,000 independent musicians who can upload more of their music than myspace, and can allow fans to download a widget on their own sites so they can listen to the music there. In addition, the artist get to use their own download script and collect 100% of the money – $.99 per download as opposed to itunes where they only get $.25-$.50 per depending on their deal with their record company and if they are ‘mainstream! There are many other sites of this kind sprouting across the net including famecast.com , and nimbit.com – all of which place powerful marketing tools and freedom back into the hands of the musicians. Poer to the people and down with the “man”

    Internet Business Broker

  2. I think we’re witnessing the continual and natural evolution of “what is” in the music biz. Any attempt to fight the change is based on fear and scarcity on the part of the big box labels.

    The democratizing effects of the internet have flattened the world, lengthened the long tail, and created new opportunities abound. There is new efficiency and transparency as the traditional, corporate-centricity of the entertainment industry morphs right before our eyes into a new landscape of entrepreneurial-artist and niches.

  3. Music is something that is beyond human characteristic likings and dislikings. It is liked by every one though its genre can be different. Some may like the classical music style or to some hip hop and rock style would be worth making a choice. Besides these there are several genres & different artist are available.

Leave a Reply

Your email address will not be published. Required fields are marked *

*

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>



Compare your business to the industry - Try our new tool