It's pretty clear that the record labels' traditional business model is broken, and since there's no returning the past, the key question is what business model will replace it. Several promising answers have been bandied about, but at this point the question is far from settled, particularly since the record labels have yet to even give an inch. The Wall Street Journal looks at a relatively young company called TuneCore that helps independent bands and record labels connect to digital music stores, like iTunes and eMusic. To independent record labels, the service basically functions as a distributor would, so that the label doesn't have to bother dealing with iTunes directly. What's more interesting is that for bands, TuneCore can help cut the label out entirely, since one of the main reasons for signing on to a label is to get help with distribution. One of the other main reasons for signing on to a label is to get help recording an album, but, just as launching a startup company continues to get cheaper, so to does making a record. Where, then, can record labels add value to the process? One thing they can help with is promotion, although, again, the web has made it much easier for bands to do this on their own. Thinking about the same question, Julian Sanchez throws out the idea that record labels should vacate the business of coordinating production and promotion, and should instead act more like insurance companies that manage and hedge career risk for all of the artists on the roster. In other words, labels could use proceeds from the few successful bands to help provide a safety net for bands that aren't (yet) making it. The idea might need some fleshing out, but it's not a totally foreign concept to the entertainment industry. Hollywood is increasingly turning to hedge funds to fund films and absorb risk. Of course, even if there is a role for labels, there's no guarantee that today's record labels will be the ones to perform it. Unless they get busy trying to adapt instead of fighting change, they risk being left out.
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