While I’m preparing the agenda for the online music business chats I’m hosting tonight (discussion items so far: the effect Apple’s variable pricing has on publisher’s income, Sarkozy’s thoughts on the three strikes rule, direct to fan marketing techniques, and more), I thought to drop a quick note here to say that our next term here at Berkleemusic begins this Monday. There’s little I like more than to talk about music and the music industry, and I’m lucky for the opportunity to do that with 19 other folks from around the world on a weekly basis. If anyone is interested about what studying music business online is like, I’d be happy to give you some background. Direct message me here: www.twitter.com/atomzooey

In addition to Music Marketing 201, I’m also teaching Dave Kusek’s Future of Music course. The first lesson in the course looks at the difference between the music business and the record business (there’s a big difference, of course), what a major/independent label offer musicians, the importance of touring and merch, and an overview of publishing.

Part of the first assignment in the course has students evaluate a hypothetical situation involving a songwriter that is beginning to have some success, and is now being courted by a major. The question: should this artist take the major label deal?

It’s a pretty broad question in theory, and one that requires a lot of questions in return. What are the terms of the deal? Is this a 360 deal that will require this artist to relinquish control (financially and creatively) of merchandise, touring income, publishing? Does this artist feel that a major label can effectively do things that the artist cannot do for him/herself?

From a critical thinking standpoint, all the above (and more) should be considered (by a lawyer, if possible). But from a knee-jerk standpoint, my first thought is to walk away. Consider these two news releases from last week. The first is from London’s Guardian paper:

“EMI, bought by Guy Hands’ Terra Firma group last year, confirmed today that worldwide headcount will be cut by between 1,500 and 2,000 as it slashes costs.

Confirming EMI insiders’ fears, the company said ahead of staff briefings this morning that it was launching ‘a series of wide-ranging initiatives within its recorded music division to enable the group to become the world’s most innovative, artist friendly and consumer-focused music company.”

On the flip side, there continue to be interesting ideas popping up on how artists can run their own label. Take a look at this company, called Slice The Pie. The company enables artists to connect with financers who want to invest in music. It looks to me like the company is in its infant stages, but it is definitely an interesting idea.

I’ve worked at labels. And while I think that a small tightly run forward-thinking label can survive and prosper in this environment (Stone’s Throw is one of my favorite examples at the moment), I still think the majors are a ways off from being even remotely close to navigating the current environment. I think times are going to continue to get worse for the majors before they get better, and the resources available to independent musicians are going to continue to improve.

Terra Firma is the private equity firm that purchased EMI, one of the remaining four major labels (the others being Sony BMG, Universal and Warner), last August. A friend passed on a letter that the Chairman of Terra Firma, Guy Hands, recently sent to artists signed to EMI and its subsidiary labels (Capital, Virgin, Astralwerks, Blue Note, among others). Take a look:

Dear colleague,

Last Friday, I was on a panel on embracing change at the UK’s annual
major convention on broadcasting at which all the industry’s major
players were represented and which received some press coverage.

I made the point that Terra Firma’s biggest successes over the years
had been when we had bought those businesses in need of the most
change and in sectors facing the biggest challenges and that EMI fits
that model perfectly. I went on to say that Terra Firma’s model
transforms companies that have been in the past poorly managed and
have lost their direction and EMI had to date not disappointed in its
potential for transformation. However, this is not just an EMI issue
as the recorded music industry as a whole has not positioned itself
well for the changing environment over the last ten years and has
failed to anticipate or adapt to the new market place.

With regard to EMI specifically, I believe that there has been too
much management focus over the last seven years on a potential merger
with Warner and on a continuous cost cutting programme which has
failed to deliver a new business model and sadly has led to the loss
of many talented people from the business. Terra Firma has inherited
EMI past management’s business plan which is currently being executed.
However our future focus is to develop a plan that ensures that EMI’s
Recorded Music business, as an independent company (i.e. without a
merger with Warner), can best serve its artists, the music industry,
its customers and employees. Put simply, focusing alone on the
production of multi-million selling albums cannot produce a
sustainable business model. In developing the business plan for EMI
Recorded Music, we intend initially to look at these areas:

* the relationship between EMI and its artists and what contractual
relationship best serves those artists;

* digitalization and how EMI’s recorded music business can embrace and
benefit from it;

* how EMI can be the most efficient partner in recorded music for
artists who are likely to sell less than 200,000 copies of their

* how EMI can develop a closer and more valuable relationship with its

* what services and products EMI should be developing and delivering
to its artists and customers; and

* how EMI can provide multi-million selling artiists with a top
quality service internationally.

In short, how EMI can be big enough to serve anyone but small enough
to truly care.

So far, we have not spent a huge amount of time on analyzing what
might be done with EMI’s publishing business. As I said at the
broadcaster’s convention “if it ain’t broke, don’t fix it.” However,
Roger Faxon has a number of new initiatives which he is intending to
roll out to ensure that EMI Publishing will continue to grow and
prosper which Terra Firma supports.

In the near term, I am embarking on a roadshow over the next month in
which I intend to meet as many of EMI’s employees as possible. At
those meetings, I will be happy to answer your questions.
Additionally, feel free to email me in confidence on the following
email () any ideas as to how we can make the business work better to
the benefit of EMI, its staff and its artists.

In spite of a lack of clear direction and an extremely challenging
market, EMI’s artists and employees have delivered a huge number of
successes in recent years and have much to be proud of. I continue to
be impressed by your commitment and creativity and would simply ask
that you continue to be focused on the work you are doing for EMI and
its artists. Terra Firma’s commitment to EMI is total and we have
invested more financially, both personally as individuals and as an
organisation, in EMI than any other company in our history. We are
absolutely committed to making EMI the world’s most innovative and
consumer-focused music company and the best home for musical talent. I
look forward to working with you in order to achieve just that.

Guy Hands



This is a much more succinct and realistic outline from a major label chairman than things I have read from other folks (LA Reid’s quote being the most egregious as of late). Still broad strokes, but nothing in here strikes me as being completely outrageous.

I like:
* Focusing on artists that sell less than 200k (200k would have been a
major label failure back in the day). Realistic expectations in changing
* Developing a closer relationship with it’s customers (instead of an
adversarial relationship). I also like that the label realizes that
relationships with customers should come before their relationship with
radio, retail, and other outdated gatekeepers.

* “Top quality service.” Moving the label from manufacturing, promotion and distribution entity to “360″ merch, management, publishing, marketing entity?
* “What contractual relationship best serves artists.” Label perhaps looking to move into non-traditional contracts involving other revenue streams with artist? Cut of merch, touring proceeds?
EMI/Capital Recording Artists: Beatles