How College Record Companies are Impacting the Industry
Jay M. Kramer
Senior Seminar
Dr. Derek Stanovsky
Interdisciplinary Studies Program
Appalachian State University
December 2009
New Music Biz:
How College Record Companies are Impacting the Industry
Jay M. Kramer
‘08-‘09 President, Split Rail Records
Appalachian State University
2009
Project Abstract
Access the Online Component for Additional Information
www. musicentrepreneurship.blogspot.com
I Thesis:
College record companies exemplify the impact of independent record companies on the new music industry through replication, innovation, foresight, and alliance.
II Essay Content:
A The Music Industry: The essay begins with a history and overview of the music industry including a timeline, a summary of the music industry’s business model, a spotlight on past and present leaders in the industry, and a description of distribution channels such as publishing, merchandising, recording, booking, touring, and commercial use music. An emphasis will be placed on technology’s role in changing the music industry over the past decades. Ending with a description of the proliferation of independent music companies will segway into the next portion of the essay.
B College Record Companies: This portion of the project will describe the history of college record companies and address the recent proliferation of them in the USA. The IRLA will be described and successes will be noted. The support system in place connecting the country’s record companies will be described and successes will be listed. The availability of mentors and guidance from teachers, and industry professionals will be noted. The simple replication of larger music industry companies will be noted as well. Split-Rail Records will be introduced as the case study for this project and a brief history of the company and past successes will be listed.
C The Impact of Independent Record Companies: As the main body of the project, independent record company’s impact on the greater music industry has been exemplified through college record companies through four mediums. Replication, Innovation, Foresight, and Alliance. Replication- through direct, smaller scale, imitation of business models and reaction to industry trends. Innovation- through new marketing, promotions, distribution channels, and maneuverable strategies. Foresight- through adopting essential technology, awareness of trends and being chief consumers of their very product. Alliance- through the IRLA, industry outreach, helpful contacts and university support. Split-Rail Records will be used as the case study for this portion of the project.
III Multimedia Supplement
By presenting a video of the planning and execution of an album release from Split-Rail Records, the successful marketing and event promotion abilities of a college record company will be witnessed. Combining a timeline from day one of the recording process to the actual launch of the album with pictures, audio and video documentation of the actual event, viewers will have a firsthand account of the album launch process. The video can be viewed online at www. musicentrepreneurship.blogspot.com
Music Business History Overview
The First Consumers: In the 1700s, aristocracies became the first consumers of music by employing composers and musicians for private enjoyment and as entertainers at private social events. Toward the end of the 18th century, composers such as Mozart, began hosting musical performances for public audiences, charging admission fees. The economics of music consisted of live performances. In the 1800s live concerts continued to proliferate throughout Europe and manuscripts of music could be purchased as ‘Sheet Music,’ helping popularize certain composers and arrangements. Sheet Music can therefore be considered the first physical product associated with music, besides instruments themselves. While sheet music and musical instruments continued becoming more accessible, institutions of music began to surface. These institutions were conservatories for music education, viewed as schools of art.
The Advent of Recording Technology: Music was becoming a vehicle of cultural identification, but only heard at live performances by the wealthiest members of society. Thomas Edison and Alexander Graham Bell would soon make music available to the masses conveniently. With their inventions of the Graphophone and Phonograph, music could be recorded and played anytime, this increased the presence of music throughout society and began the music distribution system. The early 1900s brought the Gramaphone that was produced by the Victrola Company, and “Victrola” soon became a household name. Consumers could now purchase the music of their favorite composers and artists, listening whenever they pleased. During the 1920s, radio became popular and threatened the recorded music industry, but ultimately consumers enjoyed owning copies of music they could listen to on demand. Colleges of contemporary music began to surface before the 1950s because of the growing demand for music. These institutions gave students the tools needed for successful music performance careers in the music industry. While still educating musicians on music theory and performance techniques, these colleges of music offered business advice to aspiring professional musicians, songwriters and producers.
Music in Popular Culture: During the 1960s, demand for live concerts from popular bands opened eyes to the potential profitability of this emerging “Music Industry.” “Record Companies” as we know them today began to develop as recording technology companies began to record and sell artists music. Record companies began developing and realizing profits from iconic musical acts such as The Beatles and the Rolling Stones. Record companies became the obvious choice for managing the business concerns of their artists by assigning managers, booking tours and television appearances to boost artists’ record sales.
Technology’s Stronghold on the Industry: Plastic technology, recording technology, and speaker technology improved over the decades, and Vinyl Records, 8-Track Tapes, then Cassette Tapes became popular. Big Record Companies began investing in this ever changing recording technology while building sonically pleasing recording facilities and increasing overall quality of their recordings. The recording industry was dominated by a few key players because of the capital necessary to build recording facilities. As the quality of recordings continued to increase, devices for playing music became smaller and higher quality as Phillips and Sony came out with music in the Compact Disk format in the early 1980s. The CD brought great innovation in portability, and could hold much more music than any other form of music medium. Building on the growing popularity of music in the 1970s and 1980s, a music television station was founded called MTV. Through MTV, popular artists could air the ‘Music Videos” that accompanied their latest hit songs. Bands in the 1980s and 1990s embarked on massive tours to promote their music, gain fans and sell various merchandise.
The Digital Revolution: During the 1990s, music became increasingly digital. Not only as CDs became increasingly popular because of their storage space, but through the invention of the digital music file. Music in the mp3, wav, aif, and aac format could be stored on personal computers and transferred through the internet. The proliferation of the internet spawned the simple transfer of music files between computer users, helping emerging bands gain popularity, but the legality of this music sharing was challenged by big record companies. Around the turn of the century “music piracy” or the illegal sharing or downloading of music, became a huge problem for recorded music companies. Apple Computer developed an all digital, portable music player, the iPod which ran with its iTunes software on personal computers across the world. Music recording technology became increasingly affordable for many bands and suddenly, investing 10K in recording equipment, artists could have the sound quality of multimillion dollar facilities without the overhead.
Music Market Share World-Wide
Source: IFPI
Uniting Music and Business
Why Music and Business are Interdependent [artists-need + consumers-need = satisfied]
Industries are great satisfiers. They combine producers and consumers of like goods and offer an economic framework for exchange. Consumers have a need to listen to music and musicians have a desire to make music. The music industry provides a stable medium for the distribution and purchase of music. Musicians enjoy performing and recording music and can choose to make a career of music only if they are compensated for their playing. Musicians specialize in various types of music and develop many skills that represent years of formal music study. In this, musicians differentiate themselves from those who choose music as a hobby, creating substantial value in their playing. Music consumers enjoy music, have developed keen listening skills, and continually seek out professional musicians to whom they listen. Music consumers enjoy music so much, they will often purchase recorded music or pay to attend a live concert. Many music lovers play an instrument as a hobby, but loyally purchase the recording of renowned professional musicians. The interdependence of musicians and music lovers is quite apparent in the music industry. Without the musician, the consumer would lack music, and without the consumer the musician is without compensation.
Music Education: Adapting for success in this new industry.
Colleges of music education such as Berkeley, Julliard, the University of Miami and Appalachian State University have adopted contemporary music curriculums that include a focus on helping musicians find gainful employment upon graduation. Students learn the value of networking and finding new opportunities in music so they are sure to have respectable careers in this new music industry. Students of music are taught various business skills and are equipped with appropriate industry knowledge before graduation to ensure career success. Specific course schedules and majors have recently begun to include degrees in Music Business, Music Management, and Music Industry Studies.
Competition for employment in the music industry is very fierce and students hoping to enter the music industry often take grunt work jobs with record companies or production firms just to get their foot in the door. Some entry level workers will roll cables their first two years in hopes of their lucky break to manage a project. Some graduates will bring coffee to sound engineers and work as minions in hopes of future advancement. William Morris, the oldest booking agency in the world, starts al employees in their mailroom. No matter what previous experience new employees have had, every employee begins their career sorting mail.
A new type of music business education is being pioneered by DeVyne Stephens, CEO of Upfront Megatainment, in Atlanta GA. Upfront Megatainment is the premiere business in finding and developing new talent for toady’s music industry. Artists, producers, managers, stylists, photographers and engineers are consistently developed through Upfront’s unique blend of training for success in today’s music industry. Upfront has been acclaimed to be a producer of top international acts and had worked with countless artists and musicians such as Eminem, Akon, Lil Wayne, Lady Gaga, and many more. Upfront Megatainment offers style consulting, physical fitness and diet help, performance skills, interview skills, and access to the nation’s top recording facilities. Upfront Megatainment may be on the cutting edge of tomorrow’s music business and may continue to be the industry leader in developing international superstars. (upfrontmmegatainment.com)
The Music Industry Snapshot & Business Model Past and Present
The proliferation of music across the globe in the last decade has notably affected the profitability of the music industry through a basic supply and demand analysis.
From Consolidated to Fragmented
From the 1960s through the 1980s a few key companies made up the bulk of the music industry. The industry was well consolidated. Big record companies handled ever aspect of an artist’s career from development to promotion. Today, hundreds of independent companies are cutting into the market share of these big companies and successfully increasing profits of their own. The industry has become quite fragmented with small regional players capable of anything from booking, to recording, to online media marketing. The rise and availability of technology has singlehandedly brought about this significant change. Companies around the globe can specialize in certain services for independent artists and offer increasingly comprehensive marketing and management assistance for musicians. While there are many companies offering services to bands and musicians, the overall cost of these independent services has decreased drastically over the past decade. Musicians and bands have so many options for music industry assistance and can avoid signing huge contracts with major record companies (McClure 2008).
Past Music Business Model- From the beginning of the big record companies dominance of the music industry (early1960s-late 1990s) the business model operated as so. 1 Record companies located musicians and bands with loyal fans and decent potential to become major stars. 2 Recording contracts were signed and the artists’ album was recorded by the record company because recording technology cost millions of dollars and only select recording facilities had access to quality studios. 3 The band went on tour to support the album, boost sales and gain fans. 4 The artist appeared on television specials to perform and further boost record sales. 5 If the album was a profitable success, the record company may decide to formulate another record deal with the artist and continue the profitability. Revenues were driven mainly by album sales and a more modest profit was made on performances and various merchandise such as shirts. Record companies targeted artists with talent, musical innovation and popular appeal and captured much of the revenue their bands generated.
Present Business Model- Since the mid 1990s, many artists have begun to break away from dependence on traditional record companies for support and have been successful in recording and launching their own albums independently. A divide has begun between bands who sign major record contracts and bands who choose to stay independent. Independent bands now have the opportunity for quality recordings because of the increasing availability of recording gear and have begun to take some market share from more popular bands. The current business model is operated as so. 1 The band has built a regional fan base and is distributing their self recorded music online, selling in at concerts and is promoting themselves through fan clubs and street teams. 2 The rising band may be offered a recording deal with a major record label and may or may not accept the offering. 3 If the band accepts the offering, they will be developed into a pop sensation, toured around the country, asked to endorse products and given ample radio play. In turn, sales of their singles will increase and popularity may last up to five years. If the band remains unsigned they will continually tour and build dedicated fans in a supportive infrastructure while continuing to sell music and various merchandise. Huge money makers for bands today are live performances, licensing royalties from music used on television, video games or movies. Increased music piracy has lead to the decline of album sales over the past eight years and bands are now profiting mainly from ticket sales, licensing, and merchandise sales. Many various companies handle the booking, management, recording, and promotion of bands these days and profits must be split between them all. The industry is very fragmented and profits are thin (McClure 2008).
Future Business Model- Looking to the future of the music industry, where margins are squeezed, music piracy is rampant artists may continue to give their music away to any interested listener, in return for increased attendance at shows, purchased merchandise and sponsorships/endorsements from companies. Consumers are intrigued with free things and bands may continue to lure listeners to their music by offering it to them without cost. By driving listeners to live concerts and events that cannot be illegally downloaded, musicians may remain profitable. Companies such as LiveNation! May continue offering complete contracts for bands and handle all of their needs from management, booking, tour support and recording. The industry may undergo extreme consolidation with a shakeout of a few key profitable players once again. AN example of a leading edge musician with progressive music marketing in mind is Mike Skinner, “he’s giving away new songs using Twitter because, he writes, ‘all this trying to sell you music … wastes valuable time.’ A new study out of Norway suggests Mike’s business model may be a good one, for it shows that people who download music for free (legally or not) are 10 times more likely to pay for music than people who don’t (Freakonomics). While musicians seek recognition among today’s pop stars, many musicians are keeping more of their hard earned money by avoiding record companies all together. “Musicians, from Radiohead to Jonathan Coulton and many others, are striking out on their own, distributing music themselves online, without having to give up any of their earnings to a label” (Freakonomics) .
Past and Present Leaders in the Music Industry
The Big Five Over the past five decades, many music companies have been founded with dreams of producing mega stars. While the music industry evolved into primarily being controlled by five big companies known as “The Big Five.” The “Big Five” is comprised of entertainment conglomerates that, as of the year 2001, controlled over 80% of the market for music consumption. These five major companies were Warner Music, EMI Group, Universal Music Group (UMG), Bertelsmann Music Group (BMG), and Sony. Until recently, these five companies enjoyed large margins, and structured organizations that continually churned out new hit musicians. These companies had massive contracts with their artists and provided artists with quality recordings and a support system unattainable by an unsigned band. Included are brief snapshots of each of the ”Big Five” music companies.
The Big Five
Source: Oligopoly Watch Web 2009
Company AOL-Time-Warner
Recording Group Warner Music Group (WMG)
Market Share (2001) 12%
Labels (select) Atlantic, Atco, Elektra, Asylum, Reprise, Maverick, Rhino, Sire, Warner Brothers
Publishing division Warner/Chappell Music
Distribution division
Manufacturing division WEA
Retail Columbia House (part, 50%)
Artists under contract (select) Faith Hill, Linkin Park, Madonna, Red Hot Chili Peppers, Seal
Other media holdings (select) Warner Brothers (film), WB Network, Time Warner Cable(television), Time-Life (magazines) Warner Books (books)
AOL-Time-Warner says that this piece of their empire is not on the table, though so many others are. Warner/Chappell, with over a million titles, is a major money-maker.
Company EMI
Recording Group EMI
Market Share (2001) 13%
Labels (select) Capitol, EMI, Blue Note, Parlophone, Angel, Chrysalis, Virgin
Publishing division Capitol EMI Music Publishing
Distribution division EMD
Manufacturing division
Retail HMV Group, Columbia House (record club, 50%)
Artists under contract (select) Sarah Brightman, Garth Brooks, Janet Jackson, Liz Phair, Rolling Stones
Other media holdings (select) WEMI Television (television)
EMI is the only major music company that is not part of a conglomerate. For that reason, its declining sales and profits must hurt all the more. The bright point is the music publishing division, which is the largest in the world, with over a million song titles.
Company Sony
Recording Group Sony Music
Market Share (2001) 15%
Labels (select) Columbia, Epic, Sony, Arc of Light, Vivarte, Soho Square, Mambo, Dragnet, Harmony Records, Legacy Records, Loud Records
Publishing division Sony/ATV Music Publishing
Distribution division Sony Distribution
Manufacturing division Sony Disk
Retail Columbia House (part)
Artists under contract (select) Aerosmith, Tori Amos, Placido Domingo, Ricky Martin, Pearl Jam
Other media holdings (select) Columbia, Sony Studios (film)
Sony is the number two music company, but its growth has stagnated. Sony's ownership is a product of its foray into the media world, a decision from which Sony never derived the hoped-for synergy.
Company Vivendi Universal
Recording Group Universal Music Group (UMG)
Market Share (2001) 24%
Labels (select) MCA, Geffen, DGC, Mercury, Polydor, London, Vertigo, Verve, Wing, A&M, Island, Motown, Decca, Interscope, Deutsche Gramophone, Phillips, DefJam
Publishing division
Distribution division Polygram Distribution
Manufacturing division
Retail
Artists under contract (select) Andrea Bocelli, Warren G., Nelly, Willie Nelson, Shania Twain
Other media holdings (select) Universal Studios (film) Canal Plus, USA Networks (television)
UMG is the world' largest music company, and its growth over the past year has far outstripped its rivals'. Yet it's parent company is in trouble, and it may yet be sold, if anyone wnats it enough.
Company Bertelsmann
Recording Group Bertelsmann Music Group (BMG)
Market Share (2001) 10%
Labels (select) RCA, Arista, Wyndham Hill, New Talents, Arte Nova, Zomba, Bluebird, Jive, Bad Boy
Publishing division BMG Music Publishing
Distribution division
Manufacturing division Sonopress
Retail BMG Music Services (record club)
Artists under contract (select) Denyce Graves, Jennifer Love Hewitt, Avril Lavigne, R. Kelly, Britney Spears
Other media holdings (select) RTL (radio), magazines, newspapers, Random House and many others (books)
The New Players
A significant effort over the past ten years has begun to erode market share for the “Big Five.” Independent music companies, defined as a company not affiliated with any of the “Big Five,” have been making great footsteps toward success through exploring new business models and new avenues of distribution using technology. Technology’s influence on the developing music industry has helped independent music companies undercut the “Big Five” in their ability to operating relatively flat organizations without huge employee expenses. Following, is a small list and brief description of new industry players that are impacting the changing music industry.
Taxi: Taxi is an independent A&R company in the business of pairing artists with record companies looking for a specific type or genre of music for their next project. Taxi “Works with top Music Publishers, Independent Labels, Producers, Managers, Film and TV Music Supervisors, and Instrumental Music Libraries on a very regular basis. TAXI has been phenomenally successful placing music in films and TV shows” (Taxi).
Pandora: This ever popular internet radio website has been successful in delivering personalized radio stations to listeners across the United States. While terrestrial radio has suffered over the past decade, internet radio has increased in popularity and advertising dollars are up as well. Pandora is the industry leader in delivering personalized radio stations across the internet and has inspired many other internet radio stations to start up over the past few years. “52 percent of teens said they listened to online radio in 2008, up from 34 percent from 2007. Almost half of teens, 46 percent, used social-networking sites to download or stream music, an increase from 26 percent in 2007” (Bloomberg.com 2009)
iTunes: itunes has impacted the music industry greatly throughout the past five years, and has helped musicians distribute their music across the world relatively cheaply. itunes does earn a percentage of each sale from it’s website. Itunes has proved there is still a market for online music sales despite rampant piracy and illegal downloading.
MySpace Music: As the premiere searchable entity to stream artists music over the internet, MySpace Music has become a standard of music fans across the globe. At one time, “Recording labels were hoping to generate revenue and balance out on their recent losses due to reduction in sales of CDs. Apart from Warner Music Group Inc., three other prominent labels have opened library with MySpace. These include EMI Music, Sony BMG Music Entertainment and the Universal Music Group” (wiredprnews 2008). The actual performance of these partnerships has performed under original forecasts.
Other Examples of Independent Music Companies…
Fuzz Grooveshark Deezer Live365 iLike Last.fm MeeMix Music Genome Project Musicovery play.it Radiolicious Slacker Spotify Stitcher Radio
Top 10 Independent Pop Record Labels (Source: About.com 2009)
1. Epitaph
Epitaph Records was founded in the 1980's by Bad Religion guitarist Brett Gurewitz to put together a record label that was artist-friendly. The label helped propel the punk revitalization of the 1990's with releases from bands such as The Offspring and Rancid. Key artists on the label today are: The Distillers, Dropkick Murphys, From First To Last, Matchbook Romance
2. TVT
TVT was formed by Steve Gottlieb in 1985 as Tee Vee Toons, a vehicle for releasing collections of television theme songs. The label has since grown into a powerful force in the development of rap and hip hop. Among TVT's key artists today are: Lil' Jon and the Eastside Boyz, Sevendust, Ying Yang Twins
3. Victory
Victory is a Chicago-based label founded by Tony Brummel. They are one of the most prominent labels in the world of pop punk. A significant number of Victory artists take part in the annual Taste of Chaos and Warped concert tours. Current key artists include: A Perfect Murder, Atreyu, Hawthorne Heights
4. Matador
Matador was founded by Chris Lombardi in 1989 in New York City. The label's first major success was the 1990 release of the album A Catholic Education by Teenage Fanclub. The label is part of the Beggars Group of independent labels and maintains a very diverse roster of artists. Current key artists include: Belle and Sebastian, Cat Power, New Pornographers, Pavement
5. Koch
Koch is the fastest growing indpendent record label. It is a division of the Koch Entertainment Company. Koch was founded in the late 1990's and maintains a varied and diverse artist roster including a number of artists who formerly recorded for major labels. Key current artists: Joan Baez, Howard Jones, Lil Romeo, Ringo Starr
6. Rap-a-Lot
Rap-a-Lot is a Houston-based r&b label founded in Houston in 1986. They have played a key role in the development of Houston's rap scene which has exploded nationally. Key current artists include: Geto Boys, Pimp C, Scarface
7. Saddle Creek
Saddle Creek was founded as Lumberjack Records in Omaha, Nebraska in 1993 by Rob Nansel and Mike Mogis. The label was catapulted into national awareness through the success of Conor Oberst, aka Bright Eyes. His music is a blend of folk and indie rock now referred to as the Omaha sound. Key label artists include: Bright Eyes, Broken Spindles, Cursive
8. Fueled By Ramen
Fueled By Ramen was started as a label by Less Than Jake guitarist Vinnie Fiorello and John Janick in 1996. The label is a key player in the development of pop punk and released early recordings by Fall Out Boy, Jimmy Eat World and Yellowcard. Among the key artists currently on the label are: Less Than Jake, Panic! At the Disco
9. Sub Pop
Sub Pop will forever be tied to the emergence of grunge in the early 1990's out of Seattle, Washington. The label grew out of a fanzine also called Sub Pop and began to sign recording artists in 1986. They were the first label to sign Nirvana and Soundgarden to recording contracts. Sub Pop has survived the demise of grunge and continues to be a force in the development of independent recorded music. Key artists today include: The Postal Service, The Shins, Sleater-Kinney
10. Rykodisc
Rykodisc began in 1984 as the first cd-only record label. In their early years they became known for releasing much of Frank Zappa's vast catalogue on compact disc. Through the years they have become known for stellar re-issues of classic pop and rock music as well as promoting new artists. Brian Eno, My Life With the Thrill Kill Kult, Josh Rouse
Past and Present Distribution Channels
Past distribution channels
Distribution channels from the 1950s until the digital age of the 2000s were fairly simple and controlled by few. After music was recorded, it was played on the radio, and often included in television shows. Music could be purchased in a physical medium and listened to at the consumers house. Fans of bands could attend a live performance if the band happened to be touring nearby.
Current distribution channels
As westernized cultures have embraced the popularity of music, various distribution channels have been forged. The demand for music is obvious, people will spend money to hear the music they enjoy. Price points vary for person to person, but these are common current distribution channels for commercialized music…
Live concerts are a popular and profitable way for musicians to get their music heard and generate sales of albums and complimenting merchandise.
Purchasing music via compact disk or digital download is another way for consumers to access and claim ownership of music. Interestingly, consumers are embracing music videos because of their digital format. “The rising demand for music videos is contributing to the growth in the digital music market. In-Stat expects that by 2011, online sales of digital music will represent 26% of all music purchased worldwide” (InStat).
“Free” distribution channels such as terrestrial radio, and now, internet radio have brought about substantial marketing and advertising opportunities for sponsoring companies to be associated with various forms of music and popular culture.
Satellite radio has broadened the amount of music customers may hear and eliminated commercials by offering monthly subscriptions to their service.
The most commercialized and widely distributed genre of music is called “Pop.” This music can be heard on many television shows and radio stations and is geared toward the teenage consumer. “Pop” refers to this music’s relevance to popular culture and mainstream attitude and association with current trends from language to fashion and attitudes. Pop music is easy for many people in the teenage demographic to identify with and can greatly influence this group’s consumption habits. Massive advertising dollars are spent by companies aiming association with this popular culture that is cooperatively developed by music and television. Week by week, pop music is becoming less melodic, more synthetic, marketable and more digital and rhythm oriented. Companies such as Wrigley’s have even partnered with artists such as Chris Brown, to write songs with references to their products in hopes to boost sales. While pop music is often scorned by true audiophiles, there are realizable economic returns for companies that associate themselves with this music. Pop music may also be consumed through the purchase of video games such as Rock Band. “The Who’s greatest hits were released for Rock Band, and in two weeks, fans purchased over 715,000 tracks. During the same two-week period, all twelve tracks experienced a 159 percent increase in SoundScan sales. (SoundScan measures physical CD sales, as well as digital music sales.)” (Freakonomics Blog).
II Independent Music Companies:
College Record Labels
History and Function of College Record Companies
One of the first college record companies was formed in 1993 at the University of Miami by an influential group of graduates and undergraduates studying Music Business (Canerecords.com). Subsequent college record companies started developing around the nation in the immediate years following. A few other colleges and universities formed their own labels, and there was much sharing of business plans, financial forecasts, new marketing ideas and organization structure ideas. Since the early 2000s, college record companies upwards of fifteen more college record labels have been founded. An interesting cooperation can be found between these college record companies although they compete in the same industry. The bond is understanding the common goal of educating students on the operational intricacies of managing a record company as a true hands on learning experience. This bond eventually morphed into the Intercollegiate Record Label Association formed by Professor Serona Elton of the University of Miami.
College record companies exist to operate as a platform for students to gain experience in functionally managing a record company, while under supervision of music industry professionals. Most college record companies are lead by a dedicated faculty advisor, traditionally someone with substantial music industry knowledge and experience, whom oversees day to day activities and acts as a mentor to the company. Typically, college record companies operate as smaller versions of big name record companies, signing artists, recording them, then marketing their music. Other college record companies may act as managers, agents, tour support, or even merchandisers for their artists. Record companies, small and large are beginning to assist their artists in building more revenue streams such as booking, managing, and merchandising, because consolidating these support roles, means more income to a select group of individuals. Ten years ago, there were different support personnel for most aspect of a bands income, there has been a trend toward consolidation in the past three years. By Brian Cullinan, former VP of SONY Digital Music, this is considered the wagon wheel effect that can be considered a re-consolidation of music companies.
IRLA and its Functions
The Intercollegiate Record Label Association is intended to bring all student-run music companies together and “to establish a mechanism for music industry entities to communicate with all student-run record labels easily” (IRLA). Established in the spring of 2008, the IRLA has begun to act as a liaison and facilitator between college record companies and has won much favor across the country. Currently the IRLA has forged relationships with ESPN-U and DiskMakers, and promises to offer assistance with tour support, and further industry connections.
1 The IRLA has begun to form a relationship with ESPN-U, the college sports channel. This relationship was initiated by ESPN-U, in hopes of broadcasting various music from college bands as background music during it’s shows. This is a wonderful opportunity for college record companies to have their music heard and their names seen as credits at the bottom of the screen as their music plays.
2 The IRLA has formed a relationship with DiskMakers, the industry standard in manufacturing CD’s. Disk makers also offers access to key distribution channels for digital and physical sales. The IRLA may be able to encourage DiskMakers to offer discounts to any company that is a member of the IRLA that needs CD manufacturing. Currently, disk manufacturing is the most expensive part of releasing an album so any discount would help.
3 The IRLA acts as a great connection for record labels interested in helping their bands tour around the country. When artists seek to play shows in new areas of the country, then seek to partner up and ‘trade shows’ with bands from their area of interest. Bands must contact each other, and check legitimacy before the show. The IRLA acts as a great facilitator for these connections.
Although the IRLA has only existed for just over a year, it has been very successful in acting as a great representative and connector between college record companies and various music industry companies. As a voice of college record companies, the IRLA acts in the best interest of whom it represents, entrepreneurial students of music around the country.
Success Stories
Throughout the first sixteen years that college record companies have existed, a few great success stories can be shared.
Philmont, a North Carolina band, once signed to Split Rail Records, has been picked up by EMI, a music industry giant. Philmont now tours the country and has released a full length album under their new record label. The band now is very profitable and hopes to continue making music and living the dream.
Veritas Records, of Harvard University, recently partnered with Rolling Stone magazine to release a compilation album of local bands concluding with a grand battle of the bands. This brought much publicity to these bands as well as $25,ooo to Veritas Records. (boston.com)
The Vans Warped Tour has constantly sought out college bands to perform on various legs of it’s national tour. Many college record labels have been able to place their bands in front of thousands of new fans at these events. Split Rail Records of Appalachian State University was fortunate enough to place Defending Brooklyn at the Charlotte Warped tour in 2007.
III How Independent Music Companies, specifically College Music Companies Impact the music industry.
Overall impact Independent music companies have noticeably begun eating away at “The Big Five’s” profits over the past decade. The overall impact can be estimated upwards of hundreds of millions of dollars. The rise of independent music companies has been facilitated by the proliferation of technology, the ability for independent music companies to replicate traditional business models, offering great innovations, predicting future trends, and building strategic alliances throughout the music industry. While spending on the consumption of music has decreased due to the availability of streaming music and internet piracy, the market is still dividable between the “Big Five” and independent record companies.
Through Replication
No secret method of success exists within the largest record companies. Therefore, independent record companies can essentially replicate the past successes of the “Big Five” simply on a smaller scale. The true value added intent of record companies spawns from a few key success factors: Distribution channels, recording facilities, networks of agents, managers and venue owners, access to talented producers and engineers, a system of promoting bands, and access to Merchandisers. These success factors for large recording companies are obvious and can, with adequate attention, easily be replicated by smaller counterparts. In fact, while replicating these key success factors, independent record companies can do so with decreased overhead, leading to larger margins. How independent record companies replicate…
Distribution channels: As mentioned before, physical distribution channels have become less important to music sales over the past decade. Digital is the new music business. Therefore, the expenses from trucking systems, storage facilities, retailer relations and sales management have become marginal at best. Where independent companies suffered was supplying the capital to run these operations and now independent companies are able to compete without these extravagant expenses. Access to digital distribution channels is nearly free and actually has potential to provide for a greater market area, essentially the globe. Independents and the “Big Five” basically sit as equals when is comes to distribution. College record companies leverage resources such as CD Baby, itunes, and MySpace.com to distribute their music. These companies are considered cutting edge distribution channels and only take a certain percentage from sales.
Recording facilities: With the proliferation of recording technology, market competition has lowered the price of critical recording gear and increased quality. While a decade ago, multi-million dollar facilities were essential for a quality recording, now a facility with ten thousand dollars worth of gear inside can produce world class recordings. Obviously, independent companies have been blessed with the opportunity to compete with larger companies with a comparable quality of recording. College record companies across the county have built respectable studios with little money but still churn out respectable albums and compete with larger, more established record companies.
Networks of Agents, Managers and Venue owners: In business, it often comes down to who you know and not what you know. Big record companies still have the slight advantage over independent companies when it comes to networks of professionals across the industry. Technology has increased the accessibility and communication between agents, managers, and venue owners and has proven beneficial to small players in the industry to build relationships where needed. College record companies can luckily leverage their educational status to gain access to industry professionals and build their social networks in attempt to build professional contacts. Often, college record companies and other independent record companies have members of their staff on staff at local venues to forge direct relationships. Split Rail Records has had a few members of its team working at local venues and working as booking agents as well on the side. This helps the company stay directly tied in to what local industry trends are happening and aware of up and coming musical acts.
Access to talented producers and engineers: Big name record companies still employ the top engineers and producers in the industry. They enjoy working in the world class facilities and with huge recording budgets. Occasionally, a world renowned producer will work with an independent artist in hopes of developing them into the national spotlight. Independent record companies have been forced to develop their own talent. With the proliferation of recording technology, there has been a plethora of adept producers and engineers that have surfaced as key players in the new music industry. These producers approach projects with hands-on interaction with bands and as independent record companies seek to continually differentiate themselves they often produce influentially unique projects. College record companies have the luxury of working with the next wave of industry greats and often give more creative control to their bands and producers in attempt to release a progressive album. Often, college record companies are successful in seeking the help of a renowned producer or engineer looking to teach valuable lessons to future industry moguls.
System of promoting bands: Promoting records, release concerts, tours and merchandise of bands is a key responsibility of the record company. While larger record companies are able to invest heavily in launching a new band, independent record companies use human capital to make up for the lacking funds. Independent record companies have been successful in creating “Street Teams” of fans to assist in promoting shows and album releases. Social networking sites have begun to operate as huge contact points for independent record companies on a budget. While promoting tours, college record companies have been able to “trade shows” with other record companies bands and reach markets that would have been impossible to access (Wangler).
An example of a Traded Show…
Access to merchandisers: Huge revenue drivers in the new music industry are t-shirts, hats, and various merchandise with bands images on them. Independent record companies have been successful in printing their own merchandise in small batches from entrepreneurs such as AKT Entertainment and Zazzle.com. Both of these companies are geared toward independent artists in need of printing small batches of inexpensive merchandise for their fans. While larger record companies traditionally have purchased huge lots of merchandise, Zazzle.com allows bands to keep less capital tied up in inventory and more in working capital.
Through Innovation
Smaller, new companies innovate and adapt quicker than large established companies. With the music industry in a wild state of change, independent record companies have been on the cutting edge of marketing, distribution, and developing new niches. College and other independent record companies continually react to trends better than their corporate competitors because of the whole nature of their business.
New marketing ideas: Independent record companies have been successful in utilizing new marketing strategies. First, many independent artists give away songs to their fans in hopes of selling them a full length album at a later date. In hip-hop and rap, artists have developed a “Mix Tape Phenomenon” and artists often build huge underground followings by giving their music away for free. Some artists have released songs online in a format that fans can mix the song as they see fit and compete on the best mix. This increases exposure for artist and helps engage listeners. Independent musicians have been known to be more reactive to fans desires and can often tailor their sound to fit the audience they have at their shows. While larger record companies dictate what their artists sound should be, independent musicians have the creative control. Independent music companies continually seek out the next best way to promote their musicians and while big name record companies are left scratching their heads trying to sell cds, independent companies are undercutting their revenues and reaping a return for their innovations.
Distribution Channels: Independent record companies have leveraged digital distribution as their main source of distribution. Secondly, selling albums at shows and on tour boosts album sales. May independent music companies have looked to Facebook, MySpace, itunes, and cdbaby to get their music to their fans. Often, the ever fleeting, record store will seek to only carry music from independent musicians in attempt to keep the industry new and exciting. Radiohead, an international sensation that was signed to a record label for the majority of their career has recently released an album on their own, only online. As independents, Radiohead decided to let their customers decide what they would pay for the album. Customers would simply enter the amount (In Euros) they chose to pay for the album and were given access to download the album at will. This, all digital, you set the price release was the first of it’s kind in the music industry and proved a great decision for the band and a lighthouse for future independent musicians.
New Niches: Independent record companies have seen great returns from developing bands in new genre’s of progressive music. The name “Indie” music, now known for its off mainstream appeal of the sound, is directly associated with independent bands and record companies. Independent is seen as a positive in many people’s minds because being independent in the music industry represents full creative control in the writing and recording process. Indie music has become so popular because of help of independent artists and labels that even major record labels have sought out indie sounding acts.
Through Foresight
Often those who choose to start independent music companies are those who are true lovers of music and those who want a shot at becoming the next big thing in music business. Independent music companies are filled with personnel that consume music daily, are on top of industry trends and able to see where the industry will be in the future. Independent record companies leverage their foresight through trend awareness, technology capabilities, and using their paradigms to access what is next.
Trend Awareness: As top consumers of music and fully entrenched in the industry, operators of music companies can gain first hand experience in assessing future trends from current trends. For example, the students in Appalachian State University’s record company Split Rail Records, have a great awareness of the next trend in music when they sign their artists to recording contracts. They assess the current state of the industry and assess bands based on where they see the industry going in the future. Instead of having huge corporate structures and oppressive management personnel deciding what bands to sign and develop, Split Rail Records is on the ground level gaining first hand contact with the actual music industry and using their knowledge to choose the right band.
Technological Capabilities: As independent record companies battle to continue to grow market share, they continually seek out the next technological opportunities. Because of the size of most independent music companies, a few employees are responsible for completing the tasks often assigned to hundreds of employees in larger companies. These companies are tech savvy and able to complete important tasks efficiently by leveraging the use of computers. In the studio, recording programs such as Autotune have assisted many independent companies in producing pristine vocal tracks and allowed small record companies to compete with larger competitors. For promotions, independent record companies constantly seek out and utilize new means of promotions such as Facebook, MySpace, and purevolume.com. The little cost associated with dedicating an FTE to promote via these mediums is virtually 2% of what it would have cost twenty years ago to get the same advertising impact. By continually assessing and leveraging new technology, independent record companies are able to increasingly compete.
Paradigms: While the “Big Five” have been competitors in the music industry for decades, they have developed great means to churn out superstars, but do so quite inefficiently and without much concern to the changing industry. With their nimble and innovative leaders, independent music companies often employ people with an outsiders view on the industry and this is often beneficial. Instead of viewing musicians and music and simply products, new music industry players are truly into the music. They have not been tainted by years of corporate structure and hierarchy. Viewing the industry in this new light has been the number one success story for independent music companies because of the true concern for producing quality music instead of simply producing music as a product.
Through Alliance (IRLA, industry outreach, disk makers, ESPN-U, independent music awards, Contacts, Networks, tour assistance, home grown music, festivals, fan clubs, street teams.)
Independent music companies are known for their friendly attitude toward competing music companies and willingness to form coalitions for the greater good of independent music. Organizations such as HomeGrownMusic continually help to promote independent bands and record labels throughout the world. The independent music awards were formed to honor and praise independent musicians for their contributions to the new music industry. Music festivals across the USA are dedicated to independent musicians and have grown in popularity over the past decade. The general attitude toward competition from independent music companies is that of a friendly, supportive and benchmarking situation.
College record companies have been a leader in alliance in the music industry. DiskMakers, a CD manufacturing company has been ever faithful to independent musicians and offers assistance in the production of albums for college record labels. As Mentioned earlier: The Intercollegiate Record Label Association is intended to bring all student-run music companies together and “to establish a mechanism for music industry entities to communicate with all student-run record labels easily” (IRLA). Established in the spring of 2008, the IRLA has begun to act as a liaison and facilitator between college record companies and has won much favor across the country. Currently the IRLA has forged relationships with ESPN-U and DiskMakers, and promises to offer assistance with tour support, and further industry connections.
1 The IRLA has begun to form a relationship with ESPN-U, the college sports channel. This relationship was initiated by ESPN-U, in hopes of broadcasting various music from college bands as background music during it’s shows. This is a wonderful opportunity for college record companies to have their music heard and their names seen as credits at the bottom of the screen as their music plays.
2 The IRLA has formed a relationship with DiskMakers, the industry standard in manufacturing CD’s. Disk makers also offers access to key distribution channels for digital and physical sales. The IRLA may be able to encourage DiskMakers to offer discounts to any company that is a member of the IRLA that needs CD manufacturing. Currently, disk manufacturing is the most expensive part of releasing an album so any discount would help.
3 The IRLA acts as a great connection for record labels interested in helping their bands tour around the country. When artists seek to play shows in new areas of the country, then seek to partner up and ‘trade shows’ with bands from their area of interest. Bands must contact each other, and check legitimacy before the show. The IRLA acts as a great facilitator for these connections.
Although the IRLA has only existed for just over a year, it has been very successful in acting as a great representative and connector between college record companies and various music industry companies. As a voice of college record companies, the IRLA acts in the best interest of whom it represents, entrepreneurial students of music around the country. While the ILRA is still a very new concept, it represents the importance of alliance in the new music industry and shows the great desire and ability independent record companies have in their mission of continuing to transform the music industry.
In conclusion, the new music industry has been developed through the proliferation of technology and the ability of independent music companies to be profitable through leveraging technology. Independent music companies continue to gain market share from the ‘Big Five’ as consumers are beginning to embrace their mission. College record companies exemplify independent music’s impact of the music industry through Innovation, Replication, Foresight and Alliance and through their unmatched ability to leverage the technology that has changed the industry. This new business of music hold great promised for those companies who can quickly adapt to trends and lead the development of new marketing techniques. The consumer has undergone great changes in the way music is consumed, and must consider what is next for the music industry.
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