Music Business Models, What Will Work?

Scottish-American musician David Byrne, known best for being a founding member of the Talking Heads, has summed up the future of the music industry: changes in the past decade have reduced the value of its services to artists. With new business models (he counts six total), free distribution and low recording costs, Byrne believes that “at some point [the music industry] became the business of selling CDs in plastic cases, and that business will soon be over.”

But that’s not the end of music in general, and it’s certainly not bad news for musicians. Before, renting studio time and touring was so expensive that labels had to lend the money for artists to record songs, but now, recording an album at on a laptop is entirely possible. Better yet, distribution costs nothing with the Internet, and some of the new business models for selling music are benefiting artists more than ever before.

Touring is no longer promotion. On the contrary, it is the best form of revenue for those who know how to do it. Also, several ways of distributing music have arisen in the past decade, ranging from the 360 equity deal, with the least control over the music rights, to complete self distribution, like Radiohead’s In Rainbows.

The 360 equity deal means that a part of all sales, including revenue from merchandise, concerts, videos, and everything else, goes to the label. Pussycat Dolls, Korn, Madonna and Robbie Williams have contracts like this. Then there is the typical standard distribution deal, where the label only gets the rights to the artist’s recordings and takes care of the distribution and marketing. A license deal is similar, but in that case the artist retains the rights to their songs.

On the other end of the scale, a profit sharing deal works more like a partnership between labels and artists, and the musician takes home more money on every unit sold. A manufacturing and distribution deal is where the artist/band does everything, except exactly those two things. And finally, the self distribution model mentioned earlier and employed last year by Radiohead, which gives the musician the control over all aspects of the business side of their music.

I think it’s important that bands keep the rights to their music, lest they get shafted by the major labels’ capitalistic schemes of money lending. Although these models will probably evolve, and some might even disappear, which do you think will be the most effective? How do you prefer your music? Pre-packaged? Marketed? Self-distributed?  Live?

Photo via AustinChronicle
Source: Wired