Warner / Azoff update

[Rip Rokken]

Very interesting... I ran across this on FoxNews.com and thought I'd pass it on...


Warner Music No Longer a Record Company

Warner Music Group conceded on Thursday that it is no longer a viable record company. Forget about ‘em. They are now Warner Miscellaneous Group.

In a conference call with investors and analysts, Edgar Bronfman Jr. dropped this bombshell: "We’re not going to continue to sign artists for recorded music revenue only." So that’s it, and that explains in some small way why WMG no longer has hits or develops recording artists.

The conference call produced a lot of interesting tidbits. Not only is Bronfman clearly not interested in recorded music, he is more enthusiastic about being a management company. During two questions from analysts he stood firmly behind WMG’s $10 million investment in Irving Azoff’s Front Line Management.

Here’s the funny thing about that: Azoff manages the Eagles, who used to record for Warner Music. They don’t anymore. They are now on their own and are the current top-selling pop/rock CD act in the country, thanks to a deal with Wal-Mart. So Bronfman has a $10 million investment in a company that manages an act that records for someone else.

Bronfman must know something about how the record business works that Clive Davis and Doug Morris don’t. They just sell records (aka CDs). They don’t manage any acts. And believe me, if their companies had investments in management companies, they’d be releasing the CDs of the artists they represented.

So far, all this is really working: Warner Music Group lost another 58 percent of its value in the fourth quarter, as announced on Thursday. It had a net income of $5 million in this quarter. A year ago it had $12 million income. So you get the picture. Multimillion-dollar settlements with Kazaa and Napster helped them, but as you can see, WMG still collapsed.

I’m proud of the analysts. On Thursday I asked in this space whether they would ask hard questions of Bronfman. They did, and they sounded disgusted and perplexed by the answers. No kidding.

[Escape Artist]

The recording industry is doomed.

[Rick]

The recording industry is doomed.

I think the labels are doomed. Artists are now promoting their own wares. They'll make more money. The labels have been robbing the artists for too long.

[Saint John]

This is great news for seasoned touring acts like Journey.

[Rhiannon]

Forget about the major industry labels being around another five to ten years. If even that long. Everything will be privately owned, funded, coordinated, marketed, and shopped to the charts & audiences very directly. I personally hate big labels, but the 'dream' of getting discovered and signed is extinct. Thanks to the internet, mostly, anyone can promote their music and develop a sound fan/listener base. The major label is a dinosaur, no longer needed. No longer viable. No longer useful. All because they lost sight of the one truth that brought them their control to begin with. MUSIC.

[Arkansas]

The recording industry is doomed.

No. The recording industry isn't doomed. What may be doomed is the archaic way of doing business. WalMart, or whoever has major market share, ie...Target, Costco, Kroger, etc. ...has finally realized that they are as just a viable music distributor as the once big distributors, ie, Tower, Peaches, Hastings, etc. And there's absolutely nothing wrong with that.

The music industry itself has failed to keep up with today's markets...not to mention today's technologies. I praise WM, and btw, I praise iTunes, among others, for seeing & tapping into the future.

And think about the next future. Who'll be complaining when everything goes completely wireless/satellite? Our future will be completely virtual very soon...and some of us will be laughing all the way to the bank, a virtual bank perhaps.


later~

[Andrew]

The recording industry is doomed.

I think the labels are doomed. Artists are now promoting their own wares. They'll make more money. The labels have been robbing the artists for too long.

Very true....but thus far there is no forseeable replacement for the role labels do bankrolling recording budgets or putting up the money for artists to tour.

Of course they wanted it all back with 300% interest.

[Rip Rokken]

Very true....but thus far there is no forseeable replacement for the role labels do bankrolling recording budgets or putting up the money for artists to tour

I think that's the real sticker. Great for artists to take things on themselves, or under their own management, but distribution and tour funding becomes a huge problem. MySpace buzz alone isn't strong enough to generate that kind of money. But who knows... maybe they end up making more than they did before.

[Arkansas]

Very true....but thus far there is no forseeable replacement for the role labels do bankrolling recording budgets or putting up the money for artists to tour

I think that's the real sticker. Great for artists to take things on themselves, or under their own management, but distribution and tour funding becomes a huge problem. MySpace buzz alone isn't strong enough to generate that kind of money. But who knows... maybe they end up making more than they did before.

I think the market has to evolve. And I don't know how yet. But it must.
Basically, the touring segment of the music industry will put itself out of business if it continues to subscribe to the big budget model. Bands will have to go out 'on the cheap', and/or expenses will have to come down. My guess is that both will happen. If a tour has sponsorship, then we'll see multiple bands on the bill. If not, then bands will maintain their own tour bus & trailer and hit the road on their own...playing wherever they can to make a buck, just like the old-fashioned troubador. There will be more burden put upon the tour mgr and the local promoter. Expenses will have to come down because every penny will be constantly scrutinized. Product will be sold onsite and online. The Beatles did it all on a four track recorder. Tomorrow's band will do it all on their computer in the garage. When the record labels see it all come full circle, they'll be forced to capitulate simply for their survival.

I guarantee you that all the labels, worldwide, are horrified mad now that they see what The Eagles have done. And instead of doing it completely on their own, they've one-up'd the whole process. They shifted their business model from the traditional industry to general retail. The record labels are no longer Capitol, MCA, or Virgin, etc. Now, they're Apple and WalMart.

Man, I do love the open free market. Survival of the fittest (smartest) is the way it should be. Sam Walton will go down in history as one of the truly great Americans.


later~

[cudaclan]

Does this mean I can no longer buy records from Columbia Record House for $0.25?

[Rip Rokken]

The record labels are no longer Capitol, MCA, or Virgin, etc. Now, they're Apple and WalMart.

I went to Starbucks this morning, and thoughtful of this topic, I asked them if they sold many CD's there. The girl behind the counter told me "not many at all", but that they were a newer and smaller location. She thought some of the larger stores probably did better. I told her I was curious because of the discussions we've been having, and how places like Starbucks and Wal Mart are the new "labels" that bands might choose to market exclusively through. I'd also read a bit recently about how Michael Jackson was eyeing Starbucks distribution as most other labels wouldn't consider touching him. Of course, I might think twice about drinking a coffee there after they'd been touching Michael Jackson.

[*Laura]

I think the market has to evolve. And I don't know how yet. But it must.

Bob Lefsetz has some aswers.Here's one of his recent letters. (I'm a fan of his articles.The guy is sharp.)



"Clive Davis doesn't break records, he breaks acts.

In the latest issue of "Rolling Stone", Rick Rubin gushes about his
Sonos with Rhapsody system. Hate to tell you Rick, but you're late to the
game. I've had one for years. As have many rich techies. But this
does not mean this equipment and service is about to break through to
the masses.

Sonos throws your music to all the stereo systems in your house. It's
pretty amazing, you use a hand-held controller that allows you to
manage what's playing in multiple rooms from anywhere in wireless range.
But this assumes you've got multiple stereo systems. How many people
have multiple stereo systems in their homes today? I'd venture that
hardly anybody has one stereo system in their house. Unless you're counting
the speakers attached to their computer. So Sonos is a niche product.

Rhapsody gives you access to just about everything legally available in
the music world. Its shortcomings in catalog only matter to those who
are going to steal and never pay anyway. Its under twenty dollar a
month cost is a bargain to the same people with stereo systems who are
thrilled about Sonos. But those less wealthy are frightened off by the
caveat... That if you don't pay, you lose everything you've got. Music
as a service. Sounds good if you're a rich record executive, but two
hundred dollars a year is more than most people presently pay for
music. And at least they get to keep what they purchase.

But more interesting to me is the premise that rental subscription
services will save the major labels. That their only problem is theft.
This assumes that their business model is sound, as long as people pay
for music. But this is patently untrue. The major labels of today
resemble not a whit the record companies of the fifties, never mind the
seventies. The labels of yore were counting on singles and doubles, they
were thrilled with the occasional home run. Today's labels are
predicated on the grand slam. Homers are the least they'll settle for. If
you're not going platinum, they don't want you. But how many acts can go
platinum anymore?

Did you read the David Brooks column? The one revolving around Little
Steven?

http://www.nytimes.com/2007/11/20/opinion/20brooks.html?_r=1&n=Top/Opinion/Editorials%20and%20Op-Ed/Op-Ed/Columnists/David%20Brooks&oref=slogin

If you haven't, and I'd wager that most haven't, based on my
discussions recently, that proves the point. This guy is writing in the "New
York Times", he's a known quantity, and he's got very little traction.
He's preaching to the converted. And it's taken a long time to convert
the public. It took his insightful book "Bobos In Paradise" to even get
the gig in the "Times". David Brooks is not radically different from
a musical act. And, as his piece says, it's hard to get noticed in
today's segmented society.

Labels believe if they beat enough drums, run a track up Top Forty,
that they're going to sell a lot of records and establish a career.
Wrong. Most people aren't listening to Top Forty, and if they do, and
become enamored, they only want the specific track. And they've got no
illusion the act's follow-up will touch them in the same way, if they even
hear it.

This is where Clive Davis comes in. He realizes it's about more than a
hit record. That you've got to establish a platform, upon which you
launch the record, which is only one element of the act's stardom.

How does Clive do it? By choosing very few acts. Usually only one at
a time. And then slowly introducing said act to the media, not the
public, but the media. Showcasing his unsigned performer at his Grammy
party. Letting the people who spread the word own the act for frequently
over a year before the record is released. Clive gets the press on
his side. And doesn't put out the record until he's convinced the
insiders will sell it for him. Everybody from the newspaper reporter to
Oprah. The career is managed. We like the act. No one hates Alicia Keys.
And no one hates Whitney Houston. We might have a problem with Barry
Manilow, but you can't deny that Clive made Barry a star. Barry left
his fold for Concord Records but immediately returned. It's not about
the disc, but the package! You may not like Barry's greatest hits of
the decade series, but the public does. Ditto for Rod Stewart's
execrable albums with Clive. Not only do they sell, he's doing boffo at the
b.o.

Meanwhile, generals far younger than Clive are desirous of getting the
music in the marketplace as soon as possible. And milking it for all
it's worth. They're not managing the career so much as their short term
bottom line. And they've ended up in crisis.

Still, Clive can't sell many records. There are no diamond awards in
the music business anymore. No Whitney Houston "Bodyguard" albums.
Gone, passe. Clive's just carved out a niche. As has the jam band. The
jam band and the other touring denizens aren't in search of a hit, they
want fans, they want to stay alive, so they can tour ad infinitum.
They're not looking to a Rhapsody-style service to save their bottom
line, they're oftentimes giving the music away.

In conclusion:

1. The public doesn't want rental subscription today. Maybe in the
future, but not today. If Steve Jobs anoints it, it will have a bigger
impact, but it will not become dominant.

2. Subscription won't save the majors, because superstars like those
built on MTV are not coming back, you just can't get enough mindshare,
not enough people are paying attention to anything in this dense,
incomprehensible, multi-choice world. Hell, it took Katrina for most of the
public to see the flaws of the Bush Presidency!

3. The record business is no longer about signing and releasing. It's
about managing an act's career. Selling the act to the media and the
public. Aligning the audience with the performer, not the song. It
takes a lot of time. The record must be solid, and radio-friendly. The
act must be likeable.

4. Stars are not the only musicians to inhabit the landscape. It's
hard to become a star, you depend on the media and radio. But you can be
a working musician by going directly to your fans.

We're in a new era. We're never going back to the twentieth century.
No one can sell the tonnage he used to. You can kick, scream and
complain all you want, but you'd be better off spending time finding your
place in the new landscape."

[Arkansas]

Too much to read. Got Cliff Notes?
Maybe I'll get back to this next week-ish...


later~