How The Record Labels Are Killing Innovative New Music Services: No Money, No Content

from the death-by-stupidity dept

A couple years ago, we discussed how Universal Music CEO Doug Morris gleefully explained how clueless he was about technology -- while also being quite ignorant of basic economics and business models. It's amazing that Vivedi has allowed him to remain in charge. One of the more stunning statements was that the idea that you had to give up some money now to make more in the future just means "someone, somewhere, is taking advantage of you." Apparently, the guy has never heard of investing and has no bank accounts that earn interest, because that's just "someone, somewhere... taking advantage."

With that said, the following really isn't all that surprising. Gerd Leonhard highlights the explanation of why concert video site FabChannel shut down:

No money means no content. That is the way the labels (major and independent) look at potential partnerships with internet companies. Even when it is obvious a service provides added value in promotion and sales, the mantra stays the same: no money, no content. Even when a service invests substantial amounts of money in creating high quality concert footage and an award winning platform to show it to the world, the mantra stays the same: no money, no content.

When you look at it from a label point of view, it might even look logical. Their business models have been hammered the last ten years by decreasing CD sales. Their radio, TV and newspaper partners are not doing their promotional job as they used to. And last but not least: the majority of consumers are now downloading tracks for free. All bad things for companies that invest in recordings of artists.

So the most important feature that new partners have to have is: MONEY. Money to counter the decrease in CD sales. Promotion has turned into a dirty word. MTV for example got big and wealthy by showing video clips paid for by the labels. So now these labels think: We will not let that happen again. From now on everybody who wants to become a media partner online is going to have to pay up front to even start.

It's hard to think of anything more short-sighted or suicidal. Here are all sorts of online companies looking to help promote your works better so that you can make more money, and the you decide that unless they give money up front, they need to be shut down. And we've seen this over and over again. It's why every hot new music startup ends up getting sued by the record labels, with the end result being either the site gets shut down, or the startup gives a big equity chunk to the labels, in combination with promises of impossible-to-afford payments. The record labels with their "no money, no content" mantra have destroyed their own business. So many services that could have helped better promote musicians killed off because of this silly and suicidal mantra. It makes you wonder how the management at those record labels keep their jobs. Don't they have boards and parent companies who monitor what's happening?

Filed Under: content, deals, music industry
Companies: fabchannel