Just because there are no smart, modern recording labels, doesn’t mean we don’t know what one looks like. First and foremost, a successful label requires expertise in selling music, and some objective means of connecting artists to fans. To this end, the label must know who the leaders are in every aspect of retail sales, including unconventional channels. Just as important, labels must have some expertise in recognizing demand across many markets, including niches. Demand is distinct from talent, just as retail awareness is different from distribution.
Reconstructing the Label
Traditional labels are like prospectors or sports franchises. Their model requires them to pick “winners” and encourages them to dump “losers”. Contracts are based on the (false) assumption that the labels deliver some sort of economy of scale, and technical know-how when it comes to marketing music. They sign artists to deals that include investment for development, not only of product but artists themselves. But they cannot actually pick, breed or train “stars”, and in practice, the culture and history of the business almost precludes any sort of useful development. The concept of “the sophomore jinx” is a monument to the success of major label A&R. The problems with this model are manifold and should be obvious to all, if only in the results: Every major has historically failed to develop artists, and all profits are based on continuously churning catalogs of known, proven “hits”, usually acquired through dumb luck or licensing. Fortunately, one doesn’t have to deconstruct this mangled monster to see a better way.
Labels cannot pick winners and losers, but in a modular culture, anyone can recognize and respond to demand. Demand for products is linked to market niches and events, all of which are easily sortable by the databases driving our life. For instance, the sudden success of a local professional sports franchise creates predictable demand for merchandise of all sorts. That demand is broad-based, and not necessarily limited by official license channels. In the past, selling novelty singles and LPs in traditional music marketing chains has been a disaster: Returns tend to swamp sales, and devour most of the investment. Today a savvy label is selling the identical product in non-traditional venues (Starbucks, iTunes, supermarket checkout impulse buy), but with virtually no risk of return! Similarly, custom CD’s may be produced under license to be sold or given away as hand outs by lifestyle retailers; these deals are closed-ended and flat rate license, so there is virtually no risk, and known reward.