While many of you may not be aware, living in the music hub of our great nation for hip hop, ATL, I’m privileged to have very direct communication with the industry elite. The biggest misconception most have about the music industry is its success. While blinding bulbs burn bright on the stage, in many cases the stress of dipping profit margins are the reality behind the scenes. Once a well-oiled machine, the music industry is experiencing turbulent times in an ever evolving digital space.
With the success of acts like Lady Gaga and her massive music score last week claiming the number one spot on the Billboard charts with over a million copies of her new CD Born This Way, it is easy to think that the music industry is still thriving. But in reality for many the music game is in shambles, particularly in hip hop. Now a staple in the music game, 360º deals have become a method for struggling record labels to ensure they maximize the profit on their artists. Rather than make money on the artist via record sales, labels are getting paid via the artist marketing dollars and shows. Responsibilities that once went to an artist’s manager belong to the label which gets a percentage of the profit. Is a 360° deal a successful strategy? Well Lyor Cohen, head of Warner Music Group, seems to think so.
In a recent sit down with Forbes magazine, Lyor discussed the evolution of the music scene post the CD era, his excitement for the future and also his feelings on those executive lavish lifestyles. Let’s visit a bit of what he had to say, and then we’ll move on:
Forbes: In terms of artists you know, how do you see the role of the 360º the multiple rights deal having an impact going forward?
Lyor: Well it’s really important for us because we are, you know, these labels are about people. And to get the very finest, the most seasoned, the most creative, thoughtful, transformative people you have to pay them. And I wouldn't be able to have the quality of the individual that populate these companies without having additional rights.
Forbes: What do you say to critics who say that the 360° deal is putting all your eggs in one basket if you’re an artist?
Lyor: I don’t listen to critics. We’re drumming by our own drum. And 360’s are very important for artists. They should look at it as a net positive. The fact of the matter is that we are also walking the walk and not just talking the talk.
That’s an interesting and very honest take. While many of you may not know, it’s being reported that WMG has lost over—are you sitting down?—an estimated 10 billion dollars over the past 10 years. WMG just recently secured a deal with billionaire Len Blavatnik to purchase Warner for $3.3 billion a purchase rumored to be sparked by WMG’s financial problems.
Now to be fair; WMG reportedly had a total revenue of $682 million, up 2% from the last year.
Facts and figures paint an unclear picture on the financial outlook for labels like WMG, and they don’t tell the whole story of the gain artists are getting from controversial 360° deals. Truth is there are lots of problems in the music industry. And if the folks in the biz don’t learn how to quickly adapt to the changing times they will have no one to blame but themselves for the troubles that may lie ahead.
Just my two cents.
Until next time.
(Photo: Dimitrios Kambouris/Getty Images)