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Superstar Leftovers
by Paul Resnikoff, Publisher Digital Music News, November 15th 2007
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Once upon a time, major labels created superstar artists.  Then, a digital disruption dismantled the major label model, and big-name artists began pursuing post-label ambitions.  

But even in their darkest hour, the influence of major labels is still being felt.  Because without the promotional, marketing, and financial backing of the majors, Madonna, Radiohead, and the Eagles wouldn't be hogging headlines today.  These are superstars created in an earlier era, and that makes their newfound models less indicative of the future music industry.

Get ready for an echo-chamber of "360 degree," quite possibly the next big buzzword - or buzz phrase - of this industry.  But major labels have been thinking about 360-degree possibilities for decades.

That would explain the absorption of publishing houses into major label groups.  The recorded music industry is plummeting, but publishing represents a diversified and more steady sector.  Fresh questions now surround the financial fate of publishing divisions, though so far, they have offered a rather stable counterpoint to sinking recording sales.  

Outside of that, the lack of diversification has always been painfully obvious, but not easily solved.  Perhaps the pain was most acute with MTV in the 80s and 90s.  Labels would sometimes spend hundreds of thousands of dollars on a new video, and reap none of the resulting advertising revenue.  Or, perhaps MTV would simply reject a video, an increasingly common occurrence as programming shifted away from music video playback.

But the promotional value that MTV offered could shoot an artist into the stars, and generate millions of album sales.  Still, labels would have preferred greater control over the music video tentacle.  They just didn't know how to get it.

Terrestrial radio posed a similar problem.  Like MTV, radio represented a massive promotional generator.  But labels lacked direct control over playlists, and to this day, they reap no performance royalties on recordings.  

Even retailers make independent decisions on product placement and positioning.   Sure, major distribution machines can get the product into the racks.  But retailers will always feature the most promising content, whether or not it represents a label priority.

Now, that lack of diversification has become a critical problem.  Labels are currently unable to generate significant revenues outside of the recording, and that is punishing their bottom lines and threatening their existence.

And yet, the label was a critical component of the 360-degree picture, at least until recently.  Without a major, there was no tour support, no funding for expensive recordings (pre-GarageBand, pre-$2,500 albums), no aggressive retail positioning on Tuesday morning, no marketing spend, no publicity department, no knowledgeable A&R, no in-house legal department.  Majors didn't control it all, but they did exert a level of influence and wealth that made them indispensable to superstardom.

And that power created modern-day icons like Madonna, Radiohead, and the Eagles.  And post-label, these bands are using their immense and lofty positions to fuel newer business models.  No wonder labels executives are cranky.

But are these models representative of what the future business will look like?  In every case, post-major superstars are being buoyed by a huge tailwind, thanks to massive upfront label investments that often span decades.  That is something that may not exist in the future.

Suddenly, labels are exiting the picture, thanks to radically altered digital consumption habits.  We haven't seen a diamond album in years, and even multi-platinum releases are becoming rare.  That means less money, and labels now have only a fraction to invest in new artists.  Superstars like Madonna are becoming relics from a different period, a less fragmented and non-digital era.

The RIAA will tell you that stealing music has a profound cultural impact.  That without major labels, great bands will never see the light of day.

Sure, mega-superstars require massive upfront capital, and the money-machine is quickly going away.  But music remains an incredibly important part of our lives, even as the influence of majors erodes. 

Just take a look at any one of the millions of bands on MySpace, iTunes Radio, or eMusic.  Or simply stroll into any club, subway station, or cafe in thousands of cities worldwide.  Most of these artists will never achieve mega-stardom, and larger-than-life stars (and disasters) like Michael Jackson, Britney Spears, and Guns N' Roses are probably a thing of the past.

For a band starting out, that puts a whole new spin on 360-degree thinking.  How many artists can pack an arena like Madonna?  In the present, the answer is precious few.  And in the future, without a major artist development machine, the answer may be virtually zero.

Artist Nation (the Live Nation division minted by Madonna) now has to figure out how to create the arena-packing superstars of tomorrow, a very difficult challenge.  Sure, Artist Nation can cherry-pick major label success stories for mega-millions.  But over the long-term, newer artists will need to be groomed.

And what about the Eagles?  Could Wal-Mart have created a band so huge?  The answer is laughably obvious - because without decades of investment, development, and momentum, the retail exclusive would never have been so successful.  The tailwind remains incredibly powerful - it's just that the label isn't benefiting anymore.

And Radiohead?  The name-your-price plan found itself in the middle of an incredible media swirl, thanks to the massive stature of the group.  And even so, most fans chose to download the album for free.  Sure, Radiohead has disputed the comScore numbers.  But outside of the In Rainbows site, large numbers of fans are grabbing the album for free on file-sharing networks.  In fact, free downloads are easily surpassing paid copies, no matter how you stack the data.

So what does that mean for a smaller artist like Saul Williams, who is also pushing a name-your-price concept?  Without the media hype, without the massive fanbase, without the awareness, does name-your-price change anything?

And make no mistake, Radiohead wants to sell CDs.  "If we didn't believe that when people hear the music they will want to buy the CD, then we wouldn't do what we are doing," Radiohead manager Bryce Edge told Music Week last month.  But CDs are last-generation, and not a smart cornerstone for up-and-coming artists. 

Of course, we're still in the middle of this experiment.  And maybe Radiohead sells a heap of CDs.  But does that mean someone smaller, and lesser-known, can achieve the same thing?  Not without the stature and awareness that comes from a superstar profile.

All of these models are healthy experiments, and a progression from earlier structures.  But they are being executed by extreme cases, not grassroots artists.  These post-major superstars are making moves from great positions of power and wealth, something created in an entirely different marketplace.  

And that makes it less realistic for everyone else.  And quite possibly, unrealistic for the future-generation music business. 

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Paul Resnikoff is the founder and publisher of Digital Music News (www.digitalmusicnews.com), a premier industry source for news, information, and analysis. Digital Music News has quickly grown from its humble roots as a small, executive news service to the most widely read information source in the field.


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