It's that broken.
Majors might appear as obstacles in the latter stages of the distribution chain, sure, but earlier on they play a key role in ensuring the masses - that's not necessarily you or I but fans of popular music - get the very best. That's the best in talent, from song-writing to singing to producing to touring. For that, an institutional arrangement promising immense returns to those at the top is a decent incentive structure for distilling what gets to us. And even if you look further down the spectrum at the indie side of things, you might notice it mimics what the oligopolies do.
You hear about Bieber as a product of YouTube and yes, streaming was key to his success. But without Scooter Braun's contacts on the industry side of things, the conversations those facilitated behind the scenes, would Bieber have become the Bieber 'we' have come to know and love?
In the end, the music listener's quality of life has improved. For artists, it's tough out there but that's nothing new. The circumstances have changed but fame and money are still on the table for those willing to put skin in the game and lose 99 times out of 100. For those more concerned with the love of it all, they can rest assured their message is getting out to more people than ever (if it's worthwhile). It may not be the best conceivable scenario, but I don't see it doing music much harm longer term. If anything, expect more killer less filler.
And for fans of live music, it's never been better. The prices might be higher but so is the standard, the choice, the accessibility.
For Spotify, the road ahead is somewhat hazy and needs to be navigated as such. A few years of loss making activity make sense if it keeps growing, keeps hammering out deals, and creates the bulk of its value a number of years down the line.
As an insider, pvnick, do you think Spotify could ever pull that off without burning the bridges of its current label deals?
I suppose the music aggregators are a modern day take on record labels.
These aggregators are really for the tail end of the spectrum: the 90% of bands who represent 1% of music listening time and don't have much hope of getting signed.
It'd be hard for them to do a 360 deal to get revenue from the money making aspect of music (sponsorships and live), unless they also staffed up artist development (touring) and sponsorships/partnerships/biz dev.
Its not as easy as just "signing an artist"
If it was, we'd have already been disrupted by the indies.
Are there cases where it would work, though? Bands that stumble upon internet fame are still the exception, but they exist, and it seems like they benefit much less from the visibility and other perks that traditional labels offer. Could a band like OK Go (back in their early days of YouTube success) be better off going directly through a distributor like Spotify, getting less up front, and getting a bigger revenue share? I know a couple of years ago they jumped from EMI (http://okgo.net/2010/03/10/onwards-and-upwards/). Maybe they could have done so earlier?
These "the labels must die" discussions get tedious because not many know what they do. I quit being at a label, but not because I think it should die, just because it was anyhow.
Major label A&R looks for young bands that it can sign to 360 deals and promote like crazy to teenagers. (For those not aware, a 360 deal means the label gets a cut of every revenue source: album sales, concert receipts, sync licenses, etc.)
Smaller labels do not have the capital to operate that way, or (in many cases) choose not to operate that way out of a greater sense of responsibility to the artist. As a result they are more dependent on their cut of album sales--which have declined tremendously under the pressure of piracy.
Labels need to realize they are promotional agencies primarily and take a cut, like acting agencies. You promote them and help them get gigs. You get a cut of the profits in return.
That industry is slowly converging to a state of brokenness near that of album-selling record labels, as Live Nation (themselves a Clear Channel spinoff) were allowed to merge with Ticketmaster in 2010 to form a unified ticketing, venue booking, and promotion cabal.
As of 2010, these are the line items on a budget to release a major label record. The same (minus a few things) applies to indies.
PROMOTION:
Indie promo (paying someone to promote to radio)
Tip sheets (newsletter advertising)
Radio promo contests (those win-it-before-you-can-buy-it and fly-aways)
Radio marketing (ads)
^ the above breaks down by format. Formats are:
Alternative, Active/AOR/Rock, College, AAA, Specialty Format (ie, Urban).
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MISC PROMOTION:
Radio shows (including artist travel, accommodations, etc)
Promotion CD's
Tip sheet design and prep
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SALES:
Advertisement placements (ie, circulars, endcaps)
Retail Marketing
Outside retail marketing
Retail merch admats
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ADVERTISING:
TV
Radio
Online
Outdoor/sniping
Circulars
Prep and art production
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STREET MARKETING
Merch
Promotions
Outside street team
Samplers
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MISC MARKETING:
Advances, DJ advances
Remixes
General merch (ie, those funky things artists do to promote records)
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PUBLICITY
Indie publicists (if the artist doesn't use the staff)
TV appearances (travel, etc)
Photo shoots
Press travel
Tour logistics (aka Artist Development)
Prints, bios, misc (copywriters, etc)
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VIDEO:
Video production
Live footage, EPK cuts
VIDEO PROMOTION:
Video indies
Video promotions
Video duplication
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TOURING:
Tour support
Tour marketing
Promo tours (including setup, crew, backline, travel)
Ticket buys (from the venues, these aren't free!)
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ONLINE
Marketing
Website tech cost
Website design
Other tech (Facebook, widgets, games, Lee Martin)
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PACKAGING
Art
Production
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INTERNATIONAL MARKETING
Tour support
Promo tour
Publicity
Production
Misc
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* Some of these aren't done. Some are much more expensive than others. Anyhow, a lot to be said about this but that's worthy of a blog post.
Also this has likely changed a bit recently.
Marketing is important, even more so than before in my opinion. Look at artists like One Direction, a group of talented boys but nothing special... then look at the hysteria that surrounds them, Justin Bieber is another good example.
The song "Call Me Maybe" is a perfect example. That song was released almost one year ago, but how many people had heard of it? Maybe a few thousand. Then Carly Rae Jepsen signs to the label ran by Justin Biebers manager earlier this year... now it has over 220,000,000 youtube views and almost everyone that pays attention to popular culture can recite the lyrics.
Marketing is everything. Sure it's not always traditional marketing -- billboards, tv spots -- but using existing artists too. Carly Rae Jepsen is famous because of Justin Biebers marketing power.
In summary: very.