As I understand it, it seems that a label is somewhat like a VC for artists. But no VC takes 80-90% of the company they invested in. Why do they need to take such a big part? Is pressing CDs such a huge risk and expense? If such; why continue doing it? Barely anyone buys CDs for obvious reasons, shouldn't there at least be an option for artists that don't want to press CDs? Maybe there is but artists just want CDs for some reason?
Why can't artists get regular bank-loans to fund their business? Is it just too high risk? It seems that someone as famous as Ok Go should be able to take a bank-loan to fund some studio time, but I suppose they're already under contract.
Anyway, if anyone has answers to these questions or links to where I can read more about stuff like this, please do share.
This is one of the fundamental questions that is most often overlooked!
Ok, so three long haired dudes working part-time jobs at coffee shops wander in to a bank and strike up a conversation with a loan manager...
...I think we can all fill in the blanks here. :)
The indicators that banks look to for giving out loans are quite different than the indicators an A&R man is looking at.
Would a bank care about how many people you typically draw to a concert? Would they care about a good review on Brooklyn Vegan? Or how many shows you've played outside of your home town?
Music is a specialized industry requiring specialized methods of investment, much like Internet or biotechnology companies.
This happens in industries as they undergo commidification, and it's pretty clear that the barrier to entry to making music has dropped a ton and the music industry is undergoing the same thing... so why aren't the funding institutions keeping up?
Here's an article from Billboard: http://bit.ly/7qevgk
The concept was very interesting but unfortunately it had a lot going against it, which is why Jake got out of the music industry.
Jake didn't really know all that much about the music industry... he didn't know promoters, or booking agencies... having these connections are still very important, just like in any industry.
Also, Francis and the Lights are incredibly idiosyncratic and would rather not deal with the industry on any terms other than their own... which doesn't make for the best business partnership.
Independent labels still fulfill this role.. to an extent. What they are mainly lacking in is capital and a way to recoup, as bands do not sign contract for anything other recording.
It would seem that a company with the right contacts in the music industry, a good amount of capital to invest, and an all encompassing approach to the artists income would have a shot at becoming profitable.
There is most definitely money to be made from music, but understanding the intricacies of the this new marketplace are more complicated than most people are willing to admit to themselves.
Disclaimer: Jake and I have been good friends since college.
But it's not.
The labels still charge the band members for their services in addition to the 80-90% cut they take!
See the classic http://www.negativland.com/albini.html for an example.
While the major labels had their faults, the DID act as investors for musicians.
This was probably their most important function, and it seems as if though the majority of Music 2.0 proponents do not know this.
This isn't the only thing they don't know about a functioning music industry.
The next time you're listening to a Music 2.0 presentation, stand up and ask the dude if he knows where the closest band rehearsal spaces are, where the closest guitar repair services are, who manages local acts, who does booking, who is currently promoting what genres and at what venues... really, I could go on and on about a lot of details that some messiah of the digital arts is most definitely unaware of.
There needs to be the musical equivalent of the lean startup theory. Just as swarms of young entrepreneurs are embracing the bootstrap, so should bands. Yes the labels could probably tell you where to get your Fender repaired, but so can Google. All functions of the traditional record company are becoming obsolete in comparison to digital methods. I envision an industry where musicians retain artistic freedom and everyone actually gets paid (check out Steve Albini's classic rant on how most artists don't make much of anything www.negativland.com/albini.html)
I think any musician knows where to go to get their guitar fixed or where to find a rehearsal space. Those sorts of things are pre-requisites to having any sort of future in the industry.
By "Music 2.0" I'm referring to any number of articles related to music having to be free, being a loss-leader for t-shirt sales, etc... in these people's minds, bands form out of the ether and well-recorded albums rain from the heavens above!
Businesses involved in the digital commodification of music need to have a firm understanding of how music is made and performed in order to have any measure of success.
Investment under the some of the most onerous terms ever made.
Because music is so readily available, almost no one expects to pay for it. Itunes is cleaning house right now, but that's because people still want ultimate control over their libraries. I'll bet once people can be guaranteed the same level of access that they enjoy on their Ipods as they do on their phones, then Itunes will meet the same fate. Apple probably knows this which is why they are making plays in the streaming business.
What the content providers need to do is accept this fate and start building a new model around distribution and the incredible amount of information (data!) they have available to them. Package the product up in something consumers will always pay for--new devices or other peoples products (advertising).
The beauty about this business is that it hits a chord in consumer's lives. They will always want it because this content defines them in some abstract way. If content companies can learn more about their consumer's identities, they can sell that information to product makers. If you doubt all you have to do is look at the new artist product lines-- Sean Jean and Dr. Dre Beats to name two.
The article says that they used to consider MTV a promotional partner, do they still?
I think the point probably is that music videos tended to be given away as freebies (although public playing of them would still incur a royalty payment) but now the music video is seen as part of the sellable product. I was actually part of the team that helped implement the technology part of this at EMI some years ago.
The article raises more interesting issues than this, however, such as why it's not allowed in the first place, and what needs to change to make it allowed.
I'd like to call that a "mis-speak"
"The digital music business internationally saw a sixth year of expansion in 2008, growing by an estimated 25 per cent to US$3.7 billion in trade value. Digital platforms now account for around 20 per cent of recorded music sales." 
Which makes music sales of US$18 billion for 2008 by contrast the revenue for the top 20 countries in 2005 was $12b 
"PRS for Music, the organisation representing songwriters, composers and music publishers, today published new research showing that UK music industry revenues totalled £3.63bn in 2008, up 4.7% from 2007’s £3.46bn." 
Some fucking trickle
"In the 21st century, consumers spent far less money on recorded music than they had in 1990s, in all formats. Total revenues for CDs, vinyl, cassettes and digital downloads in the U.S. dropped from a high of $14.6 billion in 1999 to $10.4 billion in 2008. The downward trend is expected to continue for the foreseeable future—Forrester Research predicts that by 2013, revenues will reach as low as $9.2 billion. This dramatic decline in revenue has caused large scale layoffs inside the industry, driven music retailers out of business (such as Tower Records) and forced record companies, record producers, studios, recording engineers and musicians to seek new business models."