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october 17, 2007:
defecting from music 1.0
what radiohead, madonna, prince, the charlatans, korn, jane sibery, ani de franco, and the eagles have in common

Idon’t buy a lot of printed newspapers. (Why? Well, you should see the inbox of my Google Reader. ;-) But something made me pick up a copy of the International Herald Tribune (IHT) today. The IHT is one of my favorite international newspapers, offering consistently great writing and sharp opinions.
I was delighted to find at least two major stories on the music industry in this edition: one on Radiohead and one on Madonna. I was happy to see that at least one of them is already available online in its entirety.

So what is happening here? Basically, faster, nimbler, less control-obsessed and less-con-flicted players are doing what the major record labels should have done five years ago: offering partnerships to artists and their managers, real profit (and responsibility) sharing, engaging with artists on all levels, not just on selling copies of plastic (or zeros and ones, for that matter). As the IHT puts it when talking about the Madonna-Live Nation deal: This is a “wideranging partnership,” not a midterm “plantation agreement” (the latter expression is mine, not theirs). And by and large, major record labels are just too-little-too-late and will not be welcome in this game, because:

• They have little expertise in it.
• They have none or few people who could run something like this.
• By and large, they have a monopolist’s mindset (which is not going to work here).
• They have aptly and with great dedication eradicated trust across the board – with the artists, the managers, the producers, and the users.
• They don’t like deals that create a level playing field.


Here are some favorite quotes from the IHT feature:

Radiohead couldn’t be in a better position to market itself online, without middlemen. It has a huge and loyal, if contentious, fan base that has sold out arena concerts for more than a decade. Unlike Prince, who chose to go independent at a much earlier, slower stage of the Internet, Radiohead can count on broadband access from much of the world.

My comment: indeed. If Todd Rundgren and Prince had had broadband-enabled fans instead of a dial-up crowd it would been all over for the major labels a few years ago.

Radiohead records and tours on its own budget and timetable, plays new songs before they’re recorded, lets listeners hear its music with a click or two and sustains itself primarily through performing and direct sales.

My comment: I like that thought, too, yet I think they will indeed need very strong managers, smart advisers, hot branding teams, and cutting-edge service providers to make this work because large financial success is still always a question of scale. That is, of course, what the major labels have indeed provided and maybe that is what they can provide in the future? But now, guess what, there are hundreds of companies gearing up to provide scale, and access to very large audiences. Another tough reality check for the majors: As far access to large numbers of people goes, they will be competing with the likes of MySpace, YouTube, Google, Facebook, AOL, Yahoo, and a gazillion startups such as Kyte, Blip.tv, iLike, Jamendo, Reverbnation…and other Music 2.0 companies.

Historically, middlemen are expensive. Under typical major-label contracts, musicians have paid handsomely for market access. The luckiest ones receive perhaps 15% of what their albums earn after a label’s expenses are recouped – as opposed to the 100% of revenues that Radiohead is getting from In Rainbows online….”

Below are some driving factors behind all of this: