If (stipulate) digital distribution on iTunes, Amazon, Spotify and Rdio is going to account for the majority of all music sales in 5 years: exactly what is the "market barrier to entry" a middleman firm like ADA or a "major label" like Warner can rely on? Can you do me a favor, because you know more about this than me, and be as specific as you have time for?
I'm not bullish on the prospects for small music startups. I wouldn't start one. But that doesn't mean that the middleman roles in distribution and promotion aren't going to be taken by some new entrant.
Compare: Ticketmaster has what seems to be a mortal lock on the business of music performance. But concern promotion is a relationship driven business where firms compete to lock up exclusives with a few venues in each market. None of those venues are particularly interested in vertical integration. So Ticketmaster is likely to hold on to their market position until forced out of it by a huge company or government action.
Why, exactly, is Amazon or iTunes going to abet attempts by firms like Warner to lock up distribution? Amazon has already aggressively positioned themselves up against the major incumbents in publishing. Remember, all they have to do for music is to let more small labels interface with them; unlike the agency debates in publishing, they don't even have to fight the business model.
I just don't see it. However complex you think the music world is, so that we need firms like CD Baby to get artists listed on iTunes, I just don't see why 5 years from now a label like Kill Rock Stars is going to need the relationships it needs now to gets its products into the mainstream market.
It is going to get easier for companies like KRS, and harder and harder for firms like Warner. It just looks like it has to.
You're assuming all the record labels do it distribution.
But they also do management. Without a startup that tackles the management side of things (which is pretty complex relationship wise, this includes relationships with venues and between producers and bands, just so much) attacking distribution is only half of the issue
Labels provide one or more of the following to various degrees of capability:
- Management
- Tour support
- Publicity (photos, PR, etc)
- Radio promotion
- Video promotion
- Tour routing and agent of record
- Marketing
- Distribution and Sales
- Websites, fanclubs and direct-to-fan
- Merchandising (physical and e-commerce), including distribution/sales (Hot Topic, etc)
- Art
- Video production
- Online marketing and community management
- Partner relations
- Licensing management (sync, etc)
Not all labels do all of this, it is case to case. Even labels in the same parent corp (UMG, EMI, Sony or WMG) don't do all of these. Indies vary as well.
What is the subset of these services that are (1) competitively defensible and (2) viable?
To be defensible, a major label should hold a significant competitive advantage in providing the service.
For instance, distribution and sales has been locked up by major labels for a long time because they have the infrastructure and relationships to strike deals with major retailers.
But direct-to-fan isn't defensible and websites aren't defensible.
To be viable, the service should matter 5-10 years from now.
For instance, video promotion is likely to be relevant for many years; it's expensive to produce an excellent music video and channels like Youtube mean they continue to matter.
Terrestrial and satellite radio promotion on the other hand is going to be irrelevant in 5 years.
I'm not bullish on the prospects for small music startups. I wouldn't start one. But that doesn't mean that the middleman roles in distribution and promotion aren't going to be taken by some new entrant.
Compare: Ticketmaster has what seems to be a mortal lock on the business of music performance. But concern promotion is a relationship driven business where firms compete to lock up exclusives with a few venues in each market. None of those venues are particularly interested in vertical integration. So Ticketmaster is likely to hold on to their market position until forced out of it by a huge company or government action.
Why, exactly, is Amazon or iTunes going to abet attempts by firms like Warner to lock up distribution? Amazon has already aggressively positioned themselves up against the major incumbents in publishing. Remember, all they have to do for music is to let more small labels interface with them; unlike the agency debates in publishing, they don't even have to fight the business model.
I just don't see it. However complex you think the music world is, so that we need firms like CD Baby to get artists listed on iTunes, I just don't see why 5 years from now a label like Kill Rock Stars is going to need the relationships it needs now to gets its products into the mainstream market.
It is going to get easier for companies like KRS, and harder and harder for firms like Warner. It just looks like it has to.