Last month, the Big Four major record companies announced massive spending cuts in order to offset mounting losses. But rather than blaming internet downloading, labels have begun targeting their own artists’ excessive spending.
In summer 2006, Warner Music released an album by socialite Paris Hilton. Said album sold a meager 75,000 copies in the United States and performed even worse in the UK, selling only 13,000 copies. Yet somehow Ms. Hilton’s management convinced Warner execs to send their client and a sizeable entourage to London for a press tour, at a cost of £160,000. Oh, never mind the wasted millions in recording and promotion for a dud album, WB decided to reward the young starlet with an all expenses paid trip overseas. You know, it’s kind of funny. The labels complain about their artists' "diva behavior,” but they continue to sign the checks.
Clearly something is wrong here.
Perry Watts-Russell, a senior Vice President at Warner Brothers, once argued that major labels lose money on a majority of their acts. According to him, many rely on the sales of a few top selling singers or groups to carry such a massive loss. As recently as ten years ago, this was a workable business model. However due to rapidly changing tastes, fierce competition from other media (e.g. increasingly affordable DVDs) and internet downloading, CD sales have dropped significantly.
So what’s the strategy to combat sagging sales? Terminating artists and dismissing loyal employees. V2 Records, an EMI imprint, recently dismissed its roster and is now concentrating on maintaining its back catalog. Warner Music has been dropping “unprofitable” cult acts like Stereolab since 2004. But these bookkeeping adjustments are minor and they do little to address the real problems at hand. In spite of their cost cutting efforts, major labels continue to indulge artists with nearly unlimited recording and travel budgets.
During the last 25 years, the home computer and independent labels have challenged the Big Four’s monopoly over recorded music. Independent labels, which operate on lower profit margins and spending budgets, can regularly turn a profit. A few have generated sizable sales and influence without the extravagant expense accounts of their larger competitors. Meanwhile, the home computer has allowed millions of unsigned bands to promote shows on their own webpages, as well as record and burn their own CDs. This represents a massive shift away from the centralized power of a few New York and Los Angeles based media conglomerates.
Comically enough, major labels initially dismissed the use of online technology as a means for distribution, thereby closing the door on a lucrative opportunity. Had record executives seen the potential of online music stores, they could’ve organized downloadable libraries of their deep catalog material. Instead, most of the Big Four licensed their music to Apple, and as a result the I-Tunes Music Store currently maintains a vice grip over digital music sales.
The reliance on an outdated business model has left the record industry in a vulnerable state. If the industry does not wish to reign in its hefty costs, it will have to find some other creative means for generating revenue.
Still not getting it, eh? Let's put it this way: The film industry made the transition from the Hollywood studio monopoly to a free agent system. Perhaps record executives should follow their example.
Paris Hilton is to be dropped by her record label within the next few weeks.
According to a report in the Daily Star, Warner Music have not yet told the Simple Life star that they do not wish to work with her for a second album, but believe that Hilton will accept the decision as she has "lost interest" in her pop career.
A source told the newspaper: "Paris will be dropped in a matter of moments. She's totally lost interest in the project and in all honesty, her label feel very much the same."
HMMMMM Perhaps there's hope?
Are there any crap artists that you'd like to see dropped from their label?
Source for "Paris Hilton being Fired"
Daily Express article that provided me with the facts and figures