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  • 08.28.08

Are Record Labels Backward?

The Washington Post recently carried an article about Pandora’s struggle to stay alive. The article raises some serious questions about the people running record labels.

Giant of Internet Radio Nears Its ‘Last Stand’.

SoundExchange, the organization that represents artists and record companies, managed to get the per-song royalty rate for web radio to be doubled last year.

“Traditional radio, by contrast, pays no such fee. Satellite radio pays a fee but at a less onerous rate, at least by some measures.”

Justification?

“SoundExchange…said it supports the higher royalties for Internet radio because musicians deserve a bigger cut of Internet radio profits.”

The key phrase here is “Internet radio profits”. They don’t exist. Even Pandora is not profitable yet and with this kind of attitude, web radio will be effectively dead in 2 years and only the ClearChannel’s will be left to stream online.

In business school and all my readings, it has always been said that “it is better to have 10% of $1 million than 100% of nothing” but it seems that these brilliant businessmen do not think that way.

Independent artists, to my knowledge, welcome something like Pandora because it helps their music get discovered. This will only cause fewer artists to want to sign with record labels, which already suffer from a very negative perception amongst musicians.

So in the end, they have finally found another revenue source but have decided to choke the goose that lays golden eggs to get all the gold at once.

We know how this fairy tale ends.DM