DMW: Digital Music W...

Before I go into it, let's all agree with one thing -- the music industry is collapsing as we speak. Its an industry where record labels have been hemorrhaging losses ever since the by-gone days of Napster. Nevermind what you read or heard about HMV's Christmas miracle profits - that was heavily contributed to a diversified stock of products, namely the growing video game market (which will help the music industry and I'll explain in a few minutes).Guy Hands is just an entrepreneur who wants a challenge. He thrives in taking failing businesses and making them profitable again. It just so happens that he's an outsider trying to change the mindset and attitude of an entertainment sector that is seeking a way to make money again. Out of all the entertainment sectors that are wrestling with digital downloads, the music sector is the most problematic. Why is that? Music data streams aren't as heavy or cumbersome as video encodes are. So they are relatively easy to pirate.Today, the music industry has placed a band-aid on its business model - waiting and hoping for someone to share something that will drastically transform the music industry to a better business. Enter Terra Firma and Guy Hands. He saw an industry that needed saving from itself and a business model that went bust as soon as filesharing became prevalent. Hands took a stab at trying to get EMI back on track. It looks really painful now, but he envisions that EMI will be able to get through this after all the beatings it will go through this year. Plus, people are keen on seeing how he will make good on empowering artists to make more money.Now let's go through his bullet points. He mentions that EMI has about 14,000 artists on its roster - some of which have yet to produce a single album. In most businesses, there would be a certain milestone set between client and vendor (in this case - the client is the label, the vendor is the artist because they are selling their creative in order to get it out to the masses for distribution). If contracts state that an artist has not reached that milestone, then that artist should be dropped for lack of fulfilling its contractual duties. We can assume that EMI wanted to accumulate so many artists to hide some costs that were draining the company - like those "fruits and flowers" expenses.After getting rid of the slacker artists, the next order of business is helping to get profitable artists the tools and marketing power necessary to make them more profitable - and thus make the label profitable. Remember the old adage - ITS QUALITY AND NOT QUANTITY. Right now, EMI has quantity and it is offsetting quality. If they balance out their roster of artists who fulfill their contractual duties and are making headway in their music, then EMI will be doing the right thing. Dead weights will go "bye-bye" while the remaining artists on the roster earn their due.Next up, abolishing the recording music division. This is the department that's a relic of pre-Internet and pre-Pro Tools and pre-Apple. Not a real profit maker since bands seem to do it out of their own homes, apartments, flats, penthouses these days. But Guy sees profit in the music publishing division. Why? Have you read the latest news about MTVN's Rock Band? 2.5 million downloads in eight weeks! That's the future people. The video games market is growing and expanding and is most likely the one ancillary revenue stream that Guy Hands is keeping a close eye on. Its a lucrative market, which explains why Hands and Terra Firma apparently placed a bid on Chrysalis Records. Licensing catalog & new songs for video games is now the de rigueur.

Profit structure is the other bullet point Guy Hands mentioned at the Tuesday congregation. Most bloggers and online rags are balking and being silly and whimsical about this part - saying things like "Coldplay Sponsored by Viagra" and dumb things like that. What Guy Hands would like to see happen for artists is getting money endorsements by companies like T-Mobile or Orange or Coca-Cola or Time Warner or DirecTV or Google or [insert very large corporation here]. If an artist is seeking additional revenue streams, this is the way to get them - and make sick, and I mean SICK, amounts of money from. Weening artists off the old record label system will take time, but there are artists who would die to get their just due in profits. I remember Goldfrapp trying that with Target (a US retail chain) for that Christmas promotional in the US last year. That helped Goldfrapp gain stature in the US. As for Robbie Williams, I have not seen him do the same thing. He's going around trying to get people to picket and whatnot (because he secretly needs his advance). And still, the United States has not a clue who Robbie Williams is (or at least, we don't care). We just know he's very popular in the UK, Europe and other nations - but not in the US. He should probably get a new manager. Or go to Tibet and try to free it. Oh wait, he can't do that. Its against his ego.

The music industry isn't the only entertainment sector dealing with profit issues and piracy and digital downloads. The movie & television industries are trying to sort through and establish revenue streams for producers & directors. The writers are still on strike but that could change now since the directors guild have signed off on their deal regarding digital downloads.

Before I conclude, I want to point out something interesting. It seems EMI has placed a moratorium on funding their other labels like Mute. Because of this, it created a "trickle down" effect where associate labels cannot fund tours of artists such as Goldfrapp. That's my hunch, though. You know what's a shame? When Goldfrapp's Seventh Tree got "leaked", no one thought for a second that maybe they ("they" as in Mute, et al.) should treat the "leak" as an advance copy for digital download only for a limited time - like say, one week. And in order to make the advance copy available, you would need to pay at least $5 USD for the digital download. That way, its no longer seen or treated as a "leak" but rather a clever way to make an advance copy available for people to pay, download and listen to while at the same time talk about the new release prior to its street date. That's additional revenue Alison and Will (and Mute) could've seen.Well, I hope you enjoyed reading my commentary. Its meant to start discussions - intelligent ones at least.