Singularity Law

A recent story on News.com indicates that record companies are investing in merchandising, artist management, touring and other companies to boost their slumping revenues from CD sales. Universal Music and Warner Music Group have announced investments in companies specializing in artist management and Web networking.

Whether they can successful do so is still an open question. Records companies have always have an adversarial relationship with their artists, who generally think the record companies are not giving them a fair share of revenues from CD sales. Artist management and other service companies require a close, supportive relationship between the company and the artist. It remains to be seen whether record companies can create such relationships.

It is interesting to see how the record companies are trying to recast their image by saying that they are “venture capitalists” that invest in unknown start-up artists and build their careers. That may have been true 20 years ago, but record companies today won’t even look at an artist until he/she/they have a boatload of original songs and have a significant following of fans. The fact is, record companies haven’t been in the artist development business for a long time.

And that is why I doubt whether this new ploy is going to work. Most artists today make virtually nothing from CD sales. The only way they make money is touring and selling merchandise. They are unlikely to want to share a large chunk of those revenue streams with the very companies they feel have screwed them out of royalties for their CD sales.

For a number of years during the Napster case I spoke at music industry conferences and advocated that record companies stop viewing their business as selling shiny discs, and go back to the business of developing artists. I suggested that record companies recast themselves as artist management and touring companies. But musicians said that was a terrible idea and they would never let the record companies control their entire careers. So I eventually came to believe that it WAS a bad idea. And now here it is — staring musicians in the face.

It is clear that the record companies are flailing around, not really knowing what to do, but knowing that they have to do something and soon — while their coffers are at least moderately full and they still have clout with at least some musicians. It will be interesting to see whether this ploy works any better than their last two great ideas — suing their customers for downloading music and jacking up the price of CDs to the point where it makes no sense to purchase a CD when you can download the one or two decent tracks from iTunes for a fraction of the CD’s cost.