Reinventing Record Companies- Adopting a New Business Model

More than 1/2 the music in the U.S. is downloaded illegally. On the otherhand, sales for Record companies increased 14% for legal digital downloads.

Record companies don't have as much power now that marketing artist, which was a large portion of their power in contracts, can be done independently via the Internet?

Record companies have lost control of artists and their distribution channels since digital music hit the Internet. Napster started this trend some years ago. That rumble with the record companies was about distribution and legal issues related to royalties and license fees. However, record companies thought that they still had enough power to control their artists - NOT!

Our youth view online music like water coming out of a free-flowing tap paid by someone else. Their attitude is that they will listen and share their music. If they like the artist- then they will pay the artist via a concert ticket. That's their justification for not paying per reports.

Artist are also having a change of heart. Artists can distribute their music on their own and via sites like Myspace and Facebook. So many are not keen on going with a label.

One example is the group Bare Naked Ladies. They left Warner to go-it-alone They sell fewer CDs but they are making more money. With Warner they made $2 per CD and now they make around $6. CDs are quickly becoming obselete and payment structures will need to be per song or a variety of "user-compiled" CD-like packages.

Another Record company defecter is Madonna. She jumped ship also opting to go it alone as she does have great marketing power on her own brand. However, she just formed a more beneficial partnership in the form of a $120 Million partnership with a concert promotional company.

Now that self-promoting artists don't have a large marketing arm behind them-they will need to build or maintain a strong following with their fans. They do this with daily fan blog updates, cruises with their fans, special ringtones, fan gear and more. Its a more touchy-feely relationship -opposed to fans using binoculars to see their heroes sweat drip on stage.

The fact is - there is a power-shift occurring away from the labels and on to the artist. They will need to adopt a new more valuable business model that supports the artists. They can offer better services such as business development, financial and creative services. One example in business services is to assist artists in placing their music onto major user platforms and hardware in the mobile sectors like AT&T, iPhones, iTunes and more.

Record companies need to be more of a partner with artists to transition into a new business model. This is not all bad news for Record labels. They actually can have mo opportunities with larger volume globally if they get out-of-the bow and get some vision into the future.

The music game has changed and they don't have the artist by the throat like in the past. It won't be business as usual- that's for sure!