The New World Of Label Services

It all started with Macklemore and Ryan Lewis. Instead of signing a typical record deal with a major label, they opted instead to pay Warner Bros promo department to work "Thrift Shop" to radio, taking advantage of one of the attractive strengths that major labels still have to an indie artist. Thanks to Warner's muscle in this area, the song went on to be a world-wide hit, turning the team from modest success story to superstars.

Previously, in order to receive all the marketing and distribution clout of a label you had to sign a recording agreement with them that entitled you a split of the net revenue of between 12 and 15%. Today with an artist able to do so much of the work himself, it's no longer necessary or desirable to sign such a deal. There still are some services that only a major label does well (like CD distribution and radio promotion) that are desirable, and now all the majors have developed their own "label services" divisions to make those services available to indie artists.

For instance, Sony Music provides label services through its Red Associated Labels, Warner Music Group through its ADA unit and Universal Music has it's Caroline division (which handles Peter Gabriel and Korn). Plus BMG transitioned totally to label services when it sold its record label to Sony in 2008 and now handles Back Street Boys, Bryan Ferry and Anastacia, among others. Plus there's Kobalt (Pet Shop Boys and Prince) and in the UK, Cooking Vinyl (Madness and Amanda Palmer), as large indies getting into the arena.

While a brand new artist might not be able to afford these services, any artist with a small measure of success probably can, and should. Label services are a fast rising revenue generator for the industry, and truly a symbol of the new music business. It's a win-win situation for the artist and the label. The artist stays independent and gains the clout of the label, and the label gets added revenue without having to bankroll a new artist.

If you ever wanted to see the face of Music 3.0, this is it.

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The Major Labels Go From 3 to 4

One of the former major players in the music business is back in the game. In a deal announced late last week, German multinational media group Bertelsmann has purchased the remaining 51% of BMG (Bertelsmann Music Group) from investment group KKR, bringing the company full circle and back into the recorded music business.

This is a big deal in that the Big 3 major record labels are now actually expanding to 4. Who could've even conceived that such a thing could ever happen, especially in these days of corporate consolidation?

BMG had been a major player in the record business for 30 years when it decided to sell of it's recorded music business to Sony Music and Universal Music Group starting in the mid-2000s. The company then transitioned into a "rights management" company by buying numerous publishing catalogs with partner KKR. Over the last couple of years, the company has made overtures to return to the business by making offers to purchase a number of record label assets, including those of Warner Music and EMI, but lost out on both accounts. In fact, it was only a couple of weeks ago that BMG purchased Sanctuary Records, home of Black Sabbath, Iron Maiden and Megadeath, from Universal.

That said, BMG has a new-found commitment to be in the recorded music business, and that's a good thing. More competition in this world is just what's needed when it comes to developing new talent and new industry blood.

The other thing that's attractive is that Bertelsmann is privately owned, with 80.9% owned by a private foundation and think tank founded by the Mohn family, with the family directly owning the remaining 19.1%. There's a wonderful freedom when you're not beholden to stockholders, Wall Street and quarterly reports.

The company said it's going to be aggressive moving forward, and this can only be positive for the music industry as a whole. Let's hope they bring in some fresh new forward thinking execs that know the ways of the Music 3.0 world instead of living in the past.

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