I got myself into a bit of trouble wit a reader this week when, in an effort to make a point, I compared music business executives to used car salesmen. In that post, I'd been talking about some landmark, press making statement from Terry McBride about cut rate digital downloads and, I can easily see how I was misunderstood. I didn't have the intention of lumping McBride, who's a bit of an industry anti-hero, and the rest of the industry, into one bit melting pot. Coincidentally, the current issue of Wired has an excellent feature on McBride. In it, contributing editor Jeff Howe talks about McBride's maverick style, and enumerates a few of Nettwerk's successes in the face of industry failure. You may or may not be familiar with McBride, but you certainly know the artists in his stable (The Barenaked Ladies, Sarah McLachlan, Avril Levine, Dido)
"For decades, people in music have used the number of albums sold as a measuring stick for success [...] We're trying to get people to see beyond that. It's about revenue from music, however you make it – selling concert tickets, licensing to TV, or selling packed USB drives."
And that's just it, isn't it? The industry is undergoing a massive transformation from one antiquated revenue model to a new enlightened one. The lawsuits, the wrangling, the attacks on new technology, the lobbying; These are all just symptoms of a massive paradigm shift happening right beneath the industry's feet.
McBride shows just what an enterprising mind, willing to think and act outside the box, can accomplish. His insights may just offer a glimpse into the music industry revenue models of the future.
[Image credit: Vancouver Magazine]
1. Is McBride finding new revenue models? I don't think so. What he's doing is proposing a different way to manage the existing revenue streams. Recorded music sales, ticket sales, revenues from music publishing and performance royalties...these are established streams of revenue. Ringtone revenues is the only one that's terribly new. (There are, of course, a few changes within some streams, such as royalties from online streams and increased revenues from digital downloads.) And Nettwerk gets a cut for management and touring, which is being done elsewhere (see EMI's profit-sharing deal with Korn) and is sure to be done more in the future.
His most substantial proposal relates to the business structure that affects those streams: He encourages his artists to assume ownership of their recordings and to assume the risk formerly taken on by their record labels. This is something that could have a profound effect on the industry, but, again, this is nothing new. United Artists (formed by Aimee Mann, Michael Penn and their manager, Michael Hausman) set what I consider the standard for independent artists. UA's first album was six years ago. Bob Mould owns his music and publishing. Prince did it (though he went back to the majors). Tommy Lee did it. Collective Soul did it. Hootie and the Blowfish did it. They all have their own labels and have assumed the risk that was formerly assumed by their labels. (Of course, it helps to have the money to fund the whole operation. Not everybody does.) Look at what Todd Rundgren has done with selling his music from his website.
Also, Nettwerk has a few huge successes, but maybe Wired can dig deeper and see how the McBride Model is doing for The Be-Good Tanyas, or The Pipettes, or some other artist not named Sarah McLachlan. It's easier to suggest a paradigm shift to one of the most successful artists of the last ten or so years.
Is it working for Nettwerk's sub-superstars? Is MC Lars any better off than if he wasn’t with Nettwerk? If that answer is yes then McBride is on the right track. I have a feeling he's on the right track, and I've felt for years that labels' future roles will be more management that it was in the past. If management can help perform the many roles that a label has traditionally performed, then the role of the middleman can change from label to manager. Of course, somebody has to lay out the cash, that's always going to be the big issue.
So if management is the middleman, isn't the big paradigm shift in the music industry going to be the artists' greater control of their music? Management is a middleman and takes a cut. Lables are a middleman and take a cut and assume the financial risk. Other than ownership, the difference between the two scenarios is mainly one of semantics.
Posted at 11:18PM on Aug 27th 2006 by Glenn