Mike McCready: The Future of the Music Industry – Part II

“It’s not show friends. It’s show business. ” – Bob Sugar (Jay Moore): Jerry McGuire (1996)

What will happen to the major labels?

The labels were only ever going to survive as long as they remained the powerful gatekeepers between the artists and a mass audience. To the artists, they are like bouncers at an exclusive nightclub on a January night in Manhattan; you suck up to them while you seethe at them for making you stand out in the cold. The longer you wait, the more resentful you get (yeah, been there).

As I discussed here before, technology is making it possible for an artist to post their song on the Web and immediately make it available to everyone. However, there are still no great solutions for making “everyone” aware of your song and motivating them to go get it — even if you’re giving it away. The labels are still much better than anyone else at mass marketing music because they still have the necessary money, relationships and other resources to do it. Music consumption is on the rise but music “sales” are faltering, so over time the labels are draining their coffers and soon won’t be able to even mass market effectively. They will be relegated to making money on the value of their legacy catalog of music — licensing The Rolling Stones and U2 to film and other similar opportunities.

The label groups aren’t resting on their laurels however. They see the inevitable endgame approaching and they have decided to address the situation with a multi-pronged strategy in hopes of delaying the end of their traditional business model as long as possible.

1. They extract multi-million dollar fees from music start-up companies that want to license their catalog.

Over the past few years a lot of venture capital firms and angel investors…

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