New Head of EMI Says 'Embrace Digital Music or Die'

no0b writes "Guy Hands is the new head of EMI, Britain's largest music publisher. Hands has come out publicly with a statement warning the industry against something music listeners have probably understood for some time. In the words of the Telegraph article, 'the industry will not survive if it continues to rely on CD sales alone.' More from the piece: 'With both new and established acts now capable of making money without the backing of a big company, McGee says record labels are being left out of the loop. He scoffs at their efforts to make up lost ground by developing into "multimedia entertainment companies that can manage bands and share in live income". But try they must. Revenues from record sales in Britain have dropped by more than £130m since 2004. The true cost to the industry could be far greater. TNS, the market researcher, looked at the spending habits of file-sharers between 2003 and 2005 and estimated a £1bn loss to the country in retail spend.'"

Radiohead provided the inspiration

Radiohead were signed to EMI, and now they've decided to go it alone and release their new album online, at a price the fans agree on. Could this be what caused this exec to sound the alarm?

Re:Radiohead provided the inspiration

Radiohead were signed to EMI, and now they've decided to go it alone and release their new album online, at a price the fans agree on. Could this be what caused this exec to sound the alarm?

Well, in the sense that Radiohead was able to finally roust them from their slumber and scream "The building is on fire, you lazy bastards!", then perhaps. But this has been going on for a long time now. Hell, it's not even new. I remember when VCR's came out and they said the same thing. Also, they started releasing Betamax copies of movies like Star Wars for $100 (and this is in the 80's, so about $200 today). Of course, everyone simply signed up at a video rental club and acquired their own backup copy from the one they rented. Eventually, prices dropped to where people would actually be willing to buy an original copy.

Didn't Batman play a key role?

Also, they started releasing Betamax copies of movies like Star Wars for $100 (and this is in the 80's, so about $200 today). Of course, everyone simply signed up at a video rental club and acquired their own backup copy from the one they rented. Eventuall

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NetFlix is a temporary abberation. It is because Internet distribution of quality video is impractical today. If it was practical, you would be downloading movies for free just like you are downloading music for free today.

Today nobody wants to wait 36+

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If it was practical, you would be downloading movies for free just like you are downloading music for free today.

It is practical today. I have a 4Mbit connection. Using various peer to peer systems I could download movies from the Internet at a reasonable quality in an hour or two, while a rental takes a day or two to arrive. I don't, however. Instead, I subscri

pfftt...

Sound the alarm? Been asleep for a while or what...?

The alarm went off more than ten years ago when Apple and Tower Records courted each other to sell music online. Apple wanted to supply the hardware/software and Tower planned to run the online store.

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Is "killing the music industry" good or bad for musicians and society at large? Radiohead made their decision. More to follow. Suicide is always the preferred strategy for creative fields.

Too Little Too Late

The record industry has spent decades reaping vast profits, often screwing over artists in the process. That business model is now dying, I think this is all too little too late. In the long-run why would artists want to sign contracts with record companies when they market the music themselves?

Have fun with those lawsuits, they're your swan song, record companies.

Re:Too Little Too Late

In the long-run why would artists want to sign contracts with record companies when they market the music themselves?

Sure when bands turn into household names. But the unknowns who lack the resources to promote themselves on a national/global level need a record company with resources to do so. Sure there are things that small bands can do to reach a global audience. But when was the last time you heard of a band selling-out a stadium that had a popular MySpace profile and no record deal?

Re:Too Little Too Late

Sure when bands turn into household names. But the unknowns who lack the resources to promote themselves on a national/global level need a record company with resources to do so. Sure there are things that small bands can do to reach a global audience. But when was the last time you heard of a band selling-out a stadium that had a popular MySpace profile and no record deal?

They need a marketing firm, or hell, someone willing to put a link to their MP3s from a popular site. I could see a guy like David Bowie popping a link to a band he thinks is great on a site where he's putting out his own MP3s.

Re:Too Little Too Late

In theory, this is how the music industry is supposed to/used to/sometimes does work. Someone who is in charge of the money side of getting the music made (dedicated producer, one of the artists, it depends) hears some new band and thinks, hey, I like that. It's kind of cool. So, they go to the band and in exchange for a cut of the proceeds they give them a chance to get better known. This might be letting them open for shows, collaborating on a song or two, producing a CD, whatever.

Then the new band either takes off or not. If they do, a few years down the line, they hear someone know and the cycle repeats.
Right now, the section of the industry that has this working best is the rap industry. For all their other faults, they are really good at bringing in new talent(?). You can see it if you look at most rap artists on Wikipedia. Their history goes "was discovered by.." who in turn "was discovered by..." and so on.

I think you can judge the health of any section of the music business based on the percentage of the artists who got their starts playing small gigs until someone bigger gave them a shot.

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There should be EMI lite, where lots of artist can get a modicum of promotion in the right places to make a name for themselves. Instead those same artists unable to even get in the door of a major label (because they don't like licking asses or write tota

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The bottom line is if a piece of music kicks ass enough it'll rise through all the shit and become a shining star, but unfortunately a lot of this awesome music never even makes if off the hard drive.

In a perfect world that ought to be how it works, but in

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But the unknowns who lack the resources to promote themselves on a national/global level need a record company with resources to do so.

The same could be said about any other fledgling business. The steps to national or global success are gonna be the sam

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Sure when bands turn into household names. But the unknowns who lack the resources to promote themselves on a national/global level need a record company with resources to do so. Sure there are things that small bands can do to reach a global audience. But

see: Phish

Sold out stadiums. Had a record deal as a side project. Also Dave Mathiews. Anyone remember the Grateful Dead (man)?
Not a fan of above, don't mind early Dead, but I'm just sayin ... Later, see: Wilco. Anybody who ever ran a minor label will tell you promot

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I'm not sure HOW the labels are marketing their wares except by puting them on the radio and puting them in their distribution catalogs.

A lot of teens now just surf around MySpace and the like for new music. I really don't see why the label is of a benefi

130 million is nothing

In the UK we're struggling from huge consumer debt and massive house prices, 130 million can be the loss due to people not bothering to buy CDs simply because they need to pay their mortgage and debt off.

If the music companies were feeling the pinch they wouldn't be making expensive music videos.

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Actually, music video budgets are shrinking. [usatoday.com]

EMI gets it...

At least in my opinion. I stopped buying iTunes songs that were protected after that EMI and Apple introduced the Plus songs. If it isn't plus, I won't buy it. That simple. I have a playlist called "To Buy" in iTunes. It contains links to songs I'd like to buy but that aren't Plus. I review them from time to time if anything has changed. Never happened, tough shit for them. If I find a Plus song that I like, I buy the whole album, just to support the idea.

All songs before I started boycotting non-Plus songs, have been cracked with Hymn.

I don't want to do illegal downloading, besides it's a pain in the neck. Give me an easy way to download and honest prices, and I'll be happy. I can't be alone.

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My biggest beef is with the price of the tracks. $1.29 for a track is way too much. Even the $10.99 for the album is too much, especially considering there is no distribution chain, and no physical product. For me, eMusic offers a sane price. They have a

I wrote this in December of 2003...it still rings

In an Alternate Reality(Score:4, Interesting)
by Hangtime (19526) on Friday December 12, @01:21PM (#7702447)
(http://slashdot.org/)
(AP) Paris - 12/12/2003 10:53 AM
Vivendi Universal today was among the host of media companies with record company subsidiaries

Well, what did they expect?

It took the recording industry an amazingly long time to figure this out.

On top of their distribution problem, the recording industry has other problems. The rock music part of the industry is endlessly recycling decades-old music. The hip-hop/rap/urban component has bands with a very short commercial lifespan. (Rap band members tend to get shot, too, but that's a separate problem.) Folk is dead. Classical is tiny. Country really isn't that big; the Dixie Chicks are more successful since they quit country.

The top two stories on Billboard this week are about litigation, not music.

Fundamental problem: the industry spends far more on promotion than on making the stuff. Any business in that position can be undercut on price.

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It was Joni Mitchell who once observed that the guys running the record company were always greedy bastards, but at least they used to be greedy bastards who liked music. Listen to some of the pure crap coming out of the record companies these days and on

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Folk isn't dead, it has just gone independent of the major labels. Many artists either have their own label, or record for small labels like Compass, Waterbug, Red House, Gadfly, or Rounder. The economics of the big labels just don't work well for smalle

FINALLY!

At least someone has seen the light! :') I'm moved.

If EMI does this well, i might buy a song from them.

Here's how they can survive.

1. Offer unencumbered mp3/flac/ogg/whatever downloads as their primary product at a reasonable price. This is below $1/song.
2. Tell the customer exactly where their money goes: "Out of every download, $.30 goes to the band, $.10 goes to the people who operated the recording equipment..." People will buy music from bands they like if they know they're actually supporting the band.
3. Save money by cutting marketing bullshit. Market music by selling *good* music, not by convincing 16-year-olds that they'll be cool if they listen to XYZ.
4. Diversify. Rather than trying to "produce" some canned pop "product" that they can sell to everyone, recognize that people's music tastes are often pretty eclectic, and their catalog needs to match that.
5. Stop trying to make obscene profits by underhanded dealings, and be happy with a sustainable business. Recognize that you're a middleman, and that you succeed by being as transparent as possible.
6. Cut the compression bullshit. If I want my music to sound louder I'll turn up my speakers, thanks.
7. Operate anonymous tip jars with a known cut (65% to the artist/35% to us, or whatever), and encourage people to download music via bittorrent or whatever and then donate to the artist. People will use them.

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I'm adding your post to my blog. This is a very good summary.

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The problem is, marketing the next pop sensation or fad (such as emo or "gangsta" rap) to 16 year-olds is pretty much a guaranteed way to reap in huge profits since they have so much disposable income (the parents take care of necessities) and are feared t

Re:Here's how they can survive.

3 would reduce sales, 4 is a prescription for losing money, 6 is the exact opposite of what most people want, and 7 is a recipe for not making any money at all. Do you honestly think we would be stuck with crappy pop acts if they didn't make money for the record companies? The reason mass media is so awful isn't because of some conspiracy to dumb down the populace--it's because the populace is already dumb enough to want those things.

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Dude ! You are espousing altruism.
If any label does this, they will be sued by their shareholders for not generating profit.

The labels are caught in a bind as much as bands are, PROFIT.
The pathological pursuit of profit alone is a company's role.

If the lab

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1,3-6: Agree 2: It would be nice, but the implementation may be impossible or improbable if these percentages are different per artist or even per album. 7. Do not agree. Whether you or anyone else wants to believe its not true, everyone needs to make a l

Loss in retail spending?

It's amazing how well polling organizations can misinterpret data. The spending wasn't lost, it just didn't go through the record companies.

Cant survive on CD sales alone?

True, and they always have the lawsuit business model to fall back on if times get rough.

Music is free now

The cost of something is determined by the lowest retail price. For music that is zero today. Most people are unwilling to assign a much higher value to it either.

This means any commercial enterprise which revolves around selling music is doomed. People will redistribute it and remove any possible value from your product.

This means the end of recorded music as a commercial enterprise. Period. I don't see a choice. I understand this is now how it is in China today - they gave up against piracy. I is going to be that way elsewhere shortly.

Movies are probably next.

The LIE that few spot

I am a person, I got an income of 1000 dollars which I spend completly every month, 600 of which goes to fixed expenses like housing, insurance, taxes and other mundane stuff that you have to pay. Two hundred I spent on essentials like food, clothing, phone, etc. That leaves 200 to spend on fun. Lets say that before filesharing I spend that 50 dolllars of that 200 on music, now with filesharing I don't.

How much money has been lost to the economy because of filesharing?

Not a single penny.

If you don't understand why, you are an idiot, stop reading, american idol is probably on, if it ain't watch the static.

To everyone else offcourse it is obvious, I spend ALL my money in the economy, it does not matter to the economy WHAT it is spend upon. If I don't spend it in shop A I spend it in shop B, shopowner A may not like it but the economy doesn't give a shit, as long as I spend.

Now if you were to present me with figures that show that people nowadays are saving more money then before, then you might have a point, if teenagers start putting their allowances into banks instead of CD's then the world might indeed come to an end (although I am sure an economists could explain how this too would just be another way of spending)

Simply put, although I haven't bought a CD or a DVD or even a game in ages, that doesn't mean I don't spend money, turbine has large faction of it with my lifelong LOTRO copy, Blizzard got maybe a half-dozen full games sales out of me with WoW. The record company doesn't sell me CD's but I pay several CD's worth each month to my ISP.

They talk about money flows sometimes and that is just what money does, it flows like a river and sometimes that river changes courses, leaving one area dry and flooding another. It is part of live. We spend less on coal and more on gas. Once we bought hay, today we buy petrol, tomorrow, who knows, but there always be a inn/service station beside the road selling fuel, not just for our mode of transport, but ourselves.

If you really want to talk about lost money to a countries economy, check where those CD's are made. I can bet you a lot of money it ain't the US of A or Great Britian or wherever. It is china. Now putting ALL that manufacturing in low wage countries, now THAT hurts the local economy, to the tune of far more then a handfull of billions. Why don't we hear the music industry about that eh?

Wanna see proof? Go into an archive and look at pictures of your local highstreet, see how one type of store just gets replaced with another over the years. I am willing to bet that your local music store is now housing a mobile phone store. That is what people spend money on nowadays.

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To everyone else offcourse it is obvious, I spend ALL my money in the economy, it does not matter to the economy WHAT it is spend upon. If I don't spend it in shop A I spend it in shop B, shopowner A may not like it but the economy doesn't give a shit, as long as I spend.

(Assuming for a moment that the economy doesn't mind us anthropomorphising it . . .)
The above isn't entirely correct. Capitalism builds on a premise that what people spend money on is a decent expression of what sort of things they want and what sort of t

And why shouldn't it die?

Hey, I'm all for capitalism and all, but the music "industry" must die as it isn't about music. If you are a musician you know that radio play is tightly controlled by the big corporations. You ain't getting radio play if you ain't dealing with the big cor

Hands is not the Head

Guy Hands is the founder and CEO of the private equity firm Terra Firma Capital Partners that bought EMI, not the head of EMI.

I'm sure as the owner of the owner of the company he holds a fair amount of sway, but he's not in charge of running the company. T

Embrace Digital AND Die

Can't they do both? A decade ago, there were too few record labels. Now there are only four, and that's four too many,

If I were a professional musician, I'd be releasing my recordings under a license that permitted (at least) verbatim redistribution, incl

Welcome to 1999 fellas

If the record companies had changed their business model when the business actually changed, they might have survived. As it is, they spent years alienating their consumers, crushing innocent people in extremely vindictive lawsuits, and generally establishing themselves in the minds of young people as the worst thing since the Third Reich.

Changing direction might have worked before you all made yourselves into the embodiment of corporate greed, contempt for humanity and disregard for civil liberties.

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Quite right.

TNS, the market researcher, looked at the spending habits of file-sharers between 2003 and 2005 and estimated a £1bn loss to the country in retail spend.

No, that's a £1bn loss to the music industry. If I download an album, and

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Artists had absolutely no problem producing art for most of human history before limits were placed on what one could copy. Copyright is a recent invention, going back only 400 years. Before that, patronage was a successful economic model. In Rome, for exa

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You mean those 3000 "artists" who signed up with majors? That is life. I am for creative destruction of the music industry.

Re:That's a 1bn GAIN to the country.

Your belief that everything should be free is what is putting many artists out of business.

      Please name a few.

      I will counter that those "artists" are "out of business" because THEY SUCK.

At your job, do you work for free?

      No one is saying the artists shouldn't be paid. We're talking about the middleman here. There is no more room for the middleman, he has been made obsolete. Nice switch of the argument. EMI is not an "artist" as far as I know.

      Now how hard would it be for a band to set up their own "store" on the internet and sell their tracks directly? Not very. I think the technological advances of the past 10 years have gone right over your head. Wake up, the world has changed.

      The old model had the record industry going out to "scout" new bands to find a sound that they thought hopefully would sell. Now the bands just have to make themselves available electronically, and the people will decide what sells.

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Now how hard would it be for a band to set up their own "store" on the internet and sell their tracks directly?

How hard would it be for a band to sign up directly with iTunes to sell their tracks for them? Yes, there is still a middleman, but one that onl

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I don't see how the record companies are necessary for marketing. It does mean that management and PR agencies will likely take a greater role. MTV barely covers music anymore anyways, but I can see the online pop culture community, guys like Yahoo and t

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I gather you don't get irritated by purely semantical arguments. CDs are very much the same marketing beast as LPs. By popular usage, digital music applies to downloadable compressed formats.

Do you also have the same freak-on when people say "I need to d

Re:The industry will not survive?

Well, to be more precise about it, the major activities of the recording industry which enabled it to maintain itself as an oligopoly [wikipedia.org] are being radically transformed by technology. It no longer takes a multi-million dollar recording studio to cut and mix a decent recording, you can do it with a Macintosh and Logic Pro. Distribution doesn't require production and distribution of expensive physical media. Copy a file to a web server and pay for bandwidth as it's needed. The recording industry won't survive in its current form. It has enormous volumes of valuable copyrighted material, so it will probably survive in some form. There is one leg holding them up right now, which is that new bands don't yet have a way to become super stars without expensive promotion, done by the record labels. If new bands ever figure out how to make money with the record labels, say through some thing like google ads or some mechanism as yet unthunk, this industry is so totally over, overnight.

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s//with the record labels/without the record labels/