Record Label Confusion

There is a great article about Rick Rubin in the NY Times. Here is the link:

http://www.nytimes.com/2007/09/02/magazine/02rubin.t.html?_r=1&hp&oref=slogin

Rubin is an interesting character to begin with, but after sifting through the kiss-ass nature of the bio portions of the article, the real substance of interest is his take on where the record business should head.

He admits that Columbia is in the "dark ages" and that the current business model used by the labels is done. But in talking about the future, he brings up a concept that has been mentioned before in that he sees the record business adopting a subscription model where the consumer pays a monthly fee for unlimited access to complete catalogues of music by their favorite artists. The material within these catalogues that could be available for service would include demos, bootlegs, concerts, and the obvious master recordings - anything the artist would approve for release. The music will be available for use anywhere the consumer wants - computers, cars, home entertainment systems, etc. With a model like this in place, he feels the record business will quickly and vastly grow.

Certainly this model has potential. Let's face it; this is the model a lot of music consumers have already adopted. They listen to as much music as they want and because the record labels only release a portion of what is available, the consumer goes underground to hear the rest. They use their iPods in the house, at work, at the gym, and in the car. What he is suggesting isn't revolutionary; he is just admitting that the labels need to get paid for it. And as I have mentioned before, the labels can really capitalize on this sort of scenario because of their vast catalogues. They have a lot of unreleased material in their vaults that fans want.

He also mentions that there will be no need for an iPod. There will be some other machine similar to a "walkman-like device" that one can plug into their speakers at home. Hmmm, no iPods? Could it be that Rubin works for Sony? Hey, record label executives, Apple isn't going away. Ok? Your old s**ty business model is. Apple is still innovative right now, so maybe their products will be around for awhile.

One of my main questions is will the music that is available for subscription actually be owned by the consumer once purchased or will it just be rented? As consumers, fans will want to be able to have unlimited lifetime access to the music they purchase. If their access to the music is up after the month expires (and there is no way to download or copy the files), you will not have people embracing this model. Rubin says if the subscription model is in place for a good price, no one will steal the music. What planet are you from Rick? Yes, you may stop a lot of the free trade between peers, but friends like making copies of music for friends. It has been that way 25 years. And as Steve Barnett (Rubin's co-head of Columbia) says in the article, if the subscription model is not done correctly, it may be the final nail in coffin for the labels. Don't rush into it guys....

The other point I need to talk about is the idea that Columbia is considering asking artists for 50% of their touring/merchandise/on-line revenue streams. Hello? Now, I know that Jeff Kwatinetz has made some similar deals or partnerships for his artists in order to secure loads of cash, but I consider those isolated situations. A lot of managers will not touch that deal with a ten foot pole. Do you see Jon Landau going along with that one? Who wants to give up touring and merchandise revenue to a record label? So in 20 years when you can't sell 10,000 albums, but you can sell 10,000 tickets a night, Columbia will get a piece of that? I know it is more complicated, but still, that is total insanity. If the record label does its job right, they can make plenty of money selling records. Also, does the artist need Columbia so badly that they need to give up touring revenue just to have a record deal? We all know that answer to that one.

So, the label executives are trying to figure a way out of this cluster-f**k they created (while running business as usual). It will be interesting to see how it plays out. One thing is certain, the artists and the public have the power right now. They can partially dictate where this goes. It is going to take more than a monthly subscription fee for music rentals, stealing touring revenue from artists and figuring out how to run Apple out of the business. Stay tuned, the game continues….