Musical Chairs At The Major Record Labels

from the down-with-the-ship dept

The one thing that the major record labels could really use at this point is an injection of new blood from folks who actually understand technology and where the market is headed. There are a few such folks out there, but they seem few and far between. Instead, it appears that the major labels are simply playing musical chairs at the top. Hypebot has this rather ridiculous report of some ongoing shifts among major label management:

At the same time, Doug Morris, out as Universal Music’s CEO, but still its figurehead chairman until the end of 2011, is negotiating an early release so that he can run Sony when CEO Rolf Schmidt-Holtz’s tenure ends in April. Along with Morris some of his top lieutenants could reportedly jump ship as well.

If that weren’t change enough, Barry Weiss, recent chief of Sony?s RCA/Jive, is talking to Universal Music where he would oversee Universal Motown Republic Group and Island Def Jam. Who is being tapped to replace Weiss at Sony? Strong rumors have the job going to Tom Whalley, who was recently forced out at Warners.

Doug Morris, of course, is the guy who publicly announced to the world that he was too clueless to understand modern technology or business models. Actually, he admitted he was so clueless he didn’t even know enough to hire people who could help him. And he still kept his job after that. I still can’t quite fathom how any board of directors allows such a CEO to remain in place. And I’m curious as to what Sony is thinking in now hiring someone who has publicly said that he’s completely unprepared to deal with the modern challenges of the market. But, of course, since all of these execs are simply swapping seats, it’s just an insider’s club where they pat each other on the back as the companies they lead continue to fail to adapt.

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Companies: sony music, universal music, warner music

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Comments on “Musical Chairs At The Major Record Labels”

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Yogi says:


They have so much fat from the years in which they ripped off both the artists and the consumers, that they can afford to be mismanaged.

Of course, now that they have basically gained control of the Obama Administration, they can hand the keys over to Mickey Mouse because the results will be the same: transfer of taxpayer money directly to the their coffers. Now, you have to admit that is one hell of a business model, if you can afford it.

Capitalist Lion Tamer (profile) says:

Throwing more metaphors on the fire...

I think they believe that if they swap people around enough times that some sort of wormhole will develop allowing them to return to 1991.

Of course, it may also be some overly intricate three-card monte where artists concentrate on all the job-swapping as the labels continue to double-or-nothing their potential royalties away.

Not an electronic Rodent says:

Perhaps late to the party

This has probably been discussed at Techdirt before but I’m relatively new here and haven’t seen much more than allusions to something that sort of formed in my mind from various floating bits of discussion late at night.

The thing that occurred to me is what I saw as a problem with Mike’s cwf+rtb models at least as applied to (and fromt he point of view of) companies like the major record labels:
I’m not convinced that *any* business model can be found that would keep them making money at the rate they expect and certainly not to grow as they expect.

I have always detested the buggy-whip analogy as far too trite but I’m going to use a similar comparison here (if anyone knows a better indusrty analogy…..).
It seems to me that the advent of MP3 is a paradigm shift in music in the same way the internal combustion engine was for transport.
The engine took horses from being a central part of every day life to being a luxury that you could do without. In the course of that the blacksmith/farrier, a central character in a town or village evolved into a specialist serving a niche market.
The recording industry sprang up because of the neccessity of physical media – it made sense because of the difficulty to have a central skilled entity to do that (in the same way the neccessity of having horseshoes combined with the skill needed to make one made a farrier vital to transport).

Except mp3 on the internet changed that. The music is “freed” from the constraint of physical devices and distribution. Digital music combined with the way the internet works means that actual distribution is no longer necessary in any way and distribution (or at least managing distribution) is one of the prime functions of a label (or film production company for that matter). Because technology allows any digital content to become ubiquitous almost instantly (and I’m not talking about accessible in one place from everywhere I’m talking about accessible *everywhere* from everywhere), one of the prime reasons for labels vanishes.

Even the other major function of labels and distributors – marketing and promotion – is not nearly so vital. The increased social contact online among massive groups of people making word-of-mouth seriously effective and instant access to the product to fulfil a “whim” interest mean there are alternatives that can be used to good effect without a massive investment

For that reason I can’t see how any business model no matter how clever can allow those companies to continue at their present levels with much of their raison d’etre eroded. That’s not to say I can’t see there still being loads of money to be made in the space – I could perhaps see them evolving into niche specialised promotional companies for “high end” digital product where the content creators want more agressive marketing than can be acheived otherwise. But that is a service-oriented approach rather than the gatekeeper model of now and is unlikely to command the monetary value and control afforded now. It would of course have the benfit of shifting control back where it ought to be – with the creators.

In the context of this article I wonder if the reason the CEO’s seem to behave in such a blinkered manner is because there *is* no answer? Do they perhaps realise that the flood washed away the foundations on which the business is built and now they are on shifting sand? Time to think about sacrificing the east wing of the house to do some underpinning before the whole roof comes in?

I’m sure there will be many dissenting opinions out there as well as many denials and insults. I welcome the dissenting opinions because mine is based on outside observation (objective maybe?) rather than industry knowledge. Or you could just ignore me rambling on a wednesday afternoon because I’ve lost the will to live with the proposal I’m writing.

fogbugzd (profile) says:

Perhaps late to the party

I think you have pretty well summarized the last five years of TD in one post. Everything you are saying sounds pretty obvious to most people outside the recording industry. Industry executives and their paid operatives don’t seem to get it however. As Upton Sinclair said, “It is difficult to get a man to understand something, when his salary depends upon his not understanding it!”

Not an electronic Rodent says:

Throwing more metaphors on the fire...

wormhole will develop allowing them to return to 1991

Wouldn’t that have to involve an increase in velocity of change? Can we therefore expect them to move again next month, then a week after that? In 2 or 3 months they’ll be but a blur of imaginary motion and then the earth will get sucked into the hole after them… bummer!

Hephaestus (profile) says:


” I’d love to just see these old labels die and make room for some new music production organizations.”

Its less than five years before the final three fail. With EMI out of the picture, and their catalog now in limbo, its only a matter of time. No record label can pick up the catalog, as it would add to much debt and accelerate the failure of that company. If one of the final three does pick up the catalog, the math says thats the next label to fail.

Determining which of the final three labels will fail next is based on debt to earnings ratio. The lower the debt to earnings the less likely that company will fail next. The problem is that the number is above 50% no matter which label picks up the catalog. 60%,72%,85% +-5%

When you get to the final two the numbers for who will fail first if they buy the combined catalogs jump to 88%, and 98%. Again depending on debt to earnings of the purchaser.

If the catalog is split between the final three or final two it doesn’t change the timeline of when they will fail, just who fails first. And that again is based on debt to earnings.

Here is the kicker. If no one picks up the catalog it devalues the remaining companies catalogs and accelerates the failure of the final three. So they are between a rock and a seriously hard place here.

coldbrew says:

Perhaps late to the party

I think most people would agree with what you wrote, in general, as most of it has been assumed for a long time (even in the usenet days). These label businesses are large enough to look at adjacent markets as opportunities. The oft mentioned specifics of merchandising and touring make the most sense. I know a local label that started a travel company to help fans with transportation/ accommodations to shows for the bands they represent. They could look to acquire something like Zazzle or Cafepress, as well (not sure it would make sense to them). A good manager would obviously look to optimize and reduce costs. I’m guessing most of the c-level folk are from the marketing side rather than operations.

I’ve heard the disruptive nature of the internet characterized as a “massive of destruction of wealth,” and you’ll find no shortage of pissed off people trolling these comments to find that quite apt.

Hephaestus (profile) says:

Re: Perhaps late to the party

” They could look to acquire something like Zazzle or Cafepress, as well (not sure it would make sense to them).”

Anytime an old school content corporation aquires or gains any sort of control over any web site. It kills it. The record labels, News corp, etc. Its why Hulu is going to be short lived. The content types do not learn from their mistakes and can not reinvent themselves.

The Groove Tiger (profile) says:

Perhaps late to the party

I believe the problem with the big labels is that they’re not interested in providing a service to musicians. They never have, not that way. It’s always been the musicians who have worked for the labels. They’re interested in keeping the status quo: we own you and your band, you go out there and make us some money.

Changing that paradigm would require a big reorganization, reduction in scope. No longer are they the traders and the musicians the commodity. Might as well just start over.

Smaller labels are more like agents, maybe. Or managers. They have a job, and the bands hire their services. Those are more likely to shift from printing plastic discs to helping organise concerts and stuff.

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