Record Industry's Survival In The Digital Age
By Geoff Taylor, BPI Chief Executive
By Geoff Taylor, BPI Chief Executive
Given some recent media headlines, casual industry observers could be forgiven for thinking that the recording industry could be about to be swept aside, left redundant in a multi-channel media age. But the recent moves by the Charlatans, Radiohead, Madonna, Prince and others represent evolution, not revolution, reflecting how the music industry - one of the UK's most dynamic and successful creative industries - is adapting in a time of rapid change.

Getting airplay or selling CDs in shops is no longer the only way for a recording artist to reach their fanbase. Covermounts, free downloads, excusive retail partnerships, CDs bundled with concert tickets and more give artists and record companies many more distribution models, but what these new distribution models have in common is that they generate revenue streams that are not vulnerable to copyright theft: concert tickets in the case of Madonna, or a share of newspaper income, in the case of Prince. But these distribution models are only practical for well-known artists such as these, who have built up large fanbases after years of marketing and investment by record labels.

There is in fact nothing new in established artists setting up their own record label - Prince, Simply Red, Oasis, The Beatles, and Led Zeppelin have done the same thing in the past. But what do the recent developments mean for emerging talent? The last time the record industry's future came into question conventional wisdom had it that as Arctic Monkeys and Lily Allen broke through mySpace record labels no longer had a place in the digital age.

Yet both artists are signed to long-established, successful record labels and in reality became household names through traditional marketing. In the case of Arctic Monkeys, heavy airplay and massive media coverage gave them the fastest selling debut CD of all time, while Lily Allen's mySpace blog - set up some time after she penned her record deal – showed how a direct relationship with fans can support a successful marketing campaign.

Record labels are changing but remain the most highly skilled at identifying, investing in, nurturing, marketing and promoting new musical talent. Technology provides new channels for promotion but does not replace it.

This isn't to say the recording industry doesn't face real challenges. Generating sales through marketing is an uphill battle when your product is available for free in the shop next door, legally or otherwise. Giveaways are symptomatic of how copyright theft has devalued the commercial value of recordings, which has a knock-on effect for everyone in music, as recordings still form the basis for most artist investment, which then helps to drive other sectors of the business.

But while a giveaways business model may make sense for established acts, the bottom line is that no-one is offering an alternative to the core business model of a record label - investing in unknown artists on the basis that they will generate income in the future.

The real change is that to cover their investments in new music, record labels are now seeking to earn income from a wider range of artists' revenue streams.

Lines are blurring between the traditional record label and other music companies; while opportunities arise for other companies to enter the recordings part of the music business, record labels are developing 360-degree music business models and diversifying to generate greater income from revenue steams outside those arising from recorded music.

The many services that a record label offers to an artist are becoming more important, not less important, as media channels proliferate. In addition to their traditional expertise in international physical distribution, labels have networks of relationships to collect licensing income around the world, to account to artists, music publishers and other rightsholders, to generate new income from brand partnerships and synchronisation, as well as having the skill and resources to promote an act across a multiplicity of online channels. These capabilities are essential for artists trying to build a long-term career.

The back catalogues and broad portfolios of larger record companies give them negotiating power in striking deals that can benefit all the artists on their roster, while digital channels are opening up many new opportunities to exploit catalogue more effectively than has been possible through physical retail.

There is no doubt that the recording industry is going through a period of unprecedented change, and while the transition has been difficult, the public's appetite for new music is stronger than ever. The challenge for the industry is turning more of the growing number of streams, copies and downloads into pounds and pence to share across the value chain.

The BPI is at the forefront of the industry's efforts to ensure that there is a fair financial return for artists and those who invest in creating new music. We are confident that the prevalent culture of online copyright theft will be curbed through a combination of consumer education, stricter enforcement by industry and government, new business models and more robust action by ISPs against online copyright theft. Simply put, we have too much to lose as a society, economy and culture if we do not ensure that creators' efforts are rewarded, and we believe that the internet will become an environment in which creativity can be effectively monetised.

We do not need to convince anyone of the emotional value of the music they love – our mission is to convince new industry partners, policy makers and consumers that an online and mobile ecosystem in which music is respected and valued is in the interest of everyone – most importantly, British consumers, who are the greatest music fans in the world.
http://www.mi2n.com/press.php3?ej=md&press_nb=104391

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