Why Do Musicians Still Need Record Companies?


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With the proliferation of downloading & streaming of digital music...why does an artist still need a record company? I mean, if it's just a digital file, they could sell it themselves online.
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Truth is, they don't. Which is why record companies are bleeding to death. But....

Record companies still represent the state of the art in record promotion. They generate radio play and overall"buzz" for an emerging artist. They also export hit artists from domestic successes to global markets.

So, musicians don't need record companies (and plenty of acts go straight to iTunes these days) but a record company can still help break a record.
Administrative support is a big reason. I've heard more than a few artists state that managing all the issues involved in accounting, legal, taxes, marketing etc. is considerably more time consuming when you forego the label and take on the direct marketing approach.
I know musicians that can barely drive or do any other type of job. All they do is practice 10hrs per day to bring new repertoire or perfect the existing one.
It sounds so simple on the face of it: just sell it yourself online. The reality is that promoting and managing any artist's career requires a skill set beyond that of many if not most artists. Theoretically it's possible to self manage effectively, the reality is that few know how at the outset of their career to develop themselves and make business decisions that are in their long term self interest. As previously mentioned, expertise is needed in tax, accounting, marketing, & legal issues.
I know some who are long-term weed smokers and like all pot-heads suffer from the delusion that their mental acuity
has not suffered.
The OP asked about record companies, not managers or agents. The admin and financial work mentioned in several responses usually falls to a band's manager. As many have noted, it's usually a bad idea for a band to self manage. See Fleetwood Mac's disastrous experience with Mick Fleetwood at the helm.

Either way, the record company plays a different role.
Leonard Cohen had once manager too, but realized too late that this biatsch completely destroyed his wealth and I doubt that he's ever had any closer than friends relationship with har(the biatcsh).

The 18mts sentence for har was a joke and help from 'Nicky Santuro' or similar movie character doodz found in reality would be much more fair and efficient(in terms of funds recovery) than Court of Law. https://www.youtube.com/watch?v=3ZzAS53gcDg

That huge depletion of his wealth indeed triggered his latest large tour and 2 new albums. Ain't no bad without good tho and I wish his way to be as long and strong as it possibly can be. I wish him outlive Les Paul and make more public apearance, great albums and great books.
Nicky gets the job done well!
Raise money to pay for the recording. Hook up with a sympathetic producer. Eat and have a roof over head during recording. Promote record release. Distribute recording to industry influentials and actually get them to listen. Book tour dates. Arrange travel and lodging. Promote record on AM talk shows/promote record on late night talk shows. Tour. Get song on movie soundtrack. Appear as guest artist on another artist's album. Equipment van stolen, replace all instruments. Become the opening act for mega-star's Australian tour. Get replacement drummer (passport problems). Live the dream for three weeks. Get back home and continue touring, but now you realize how crappy your tour bus really is. Feel good as you hear one of your songs over the radio at a convenience store. Finish tour and have accountant tell you you're $65,000 in debt. Start writing songs for next album...
"Why Do Musicians Still Need Record Companies?"

Another factor is the recordings themselves. Very few musicians have the ability to record an album as well as a record company can.

"09-30-14: Martykl
Truth is, they don't. Which is why record companies are bleeding to death. But...."

The record companies are bleeding to death because they did a really bad job with audio. Instead of marketing based on the quality of the product, they chose to sell on features. An mp-3 player can hold a million songs, the ipod is tiny, you can easily transfer music from one device to another. Those types of things. While those are great features to sell the product, is was a big mistake to not include sq in all this.

If you look at video, its the complete opposite. Why is DVD better than VHS? Picture quality. Why is Blue Ray better than DVD? Picture quality. With video, value in the product is created. With audio, they devalued the product.
Well done, Onhwy61.
Which one of your band-mates is going to do all the legwork and put up the money for a tour? Answer...the record label.

And after they are reimbursed and take their cut, your band will get a little spending money.
Hey, Czarivey, I know a lot of other "disabled" people who don't have the luxury or fallback of being able to play music.
Tostados, me too.
Zd,

I think most data suggests that SQ is the least of the contributors to the problems killing record companies. Consumers overall don't give a sh*t. They want cheap, fast, convenient. Low quality downloads and streams are the fastest growing segments of the business.

BTW, the blu ray argument cuts this way, too. It's a dying segment that Sony (it's chief proponent) expects to shrink by almost half over the next five years.

Digital distribution (as suggested by the OP) has made record companies (and video companies) less important. And less profitable. I'm pretty sure than anyone in either of those businesses would agree with that sentiment.

I think there's a profitable niche business for high quality recordings (or high quality anything, for that matter), but the giant, hugely profitable record company is a thing of the past because people don't need it anymore. And, in total dollars, they won't pay for it, either. SQ notwithstanding.
Digital distribution is vastly cheaper than sending out physical media (CD, vinyl or tape) and should substantially cut record company's cost and increase profits. It's similar to the digital distribution of movies to cinemas.

Record labels have and will continue to evolve if they want to survive. To say that they are not necessary is a myth. Do we still need book publishers since everybody can self publish? Do we need TV stations when you can stream content? Why have financial advisors when everyone can trade on E-trade? Why have police departments when everyone can openly carry a gun?
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Onhwy61...I think you are over simplifying things a bit.

We are speaking specifically of musicians and record companies.
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Onhwy,

Lower costs increase profits only if the top line can be held constant. Top line music sales are plummeting. Further, the major labels continue to face new competition that ranges from self publication to streaming subscription services. They can try to compete - see Spotify - but the total pot of $ they're chasing is shrinking.

Yeah, we still need book publishers (sorta), but we're not wiling to pay them as much as we used to. Same for TV networks. But, in each case, the value they add to the chain is diminishing. NBC, ABC, and CBS are losing share to HBO and Netflix, et al. They still add value but their historical primary function - sole distribution channel - is done. They can't get paid for that anymore and that will cause them to shrink or, at least, grow more slowly.

The purest example of this might be Kodak. Digital imaging sucked the lion's share of revenue from their business and their best case was survival as a much smaller company. If they had evolved as you suggest, they might have survived, but they wouldn't be Kodak (the huge company that we knew).

That's my point - the BIG profitable record company is a thing of the past. Maybe they'll make big profits promoting concerts, but they won't make them the traditional way; selling recorded music.
"10-01-14: Martykl
Zd,

I think most data suggests that SQ is the least of the contributors to the problems killing record companies. Consumers overall don't give a sh*t. They want cheap, fast, convenient. Low quality downloads and streams are the fastest growing segments of the business."

I agree. That was my point. Music playback is sold on features, not sound quality. With audio, consumers don't grasp digital quality as they do with other digital products. If you ask the average person about the sound quality of digital music, the typical reaction is "it's digital, so its the best. it's digital, so there's no loss, so it's the best quality.", or other phrases similar to that. Ask the same person why you would want a Playstation 4 when you can get the 3 for less money, they're both digital, and you'll get a completely different answer. Same thing with video and computer products. The average person doesn't understand digital audio quality the same way they do other digital products. For the most part, I think that's the industries fault.
Zd,

If I understand you correctly,you're suggesting that the music industry hasn't made sufficient effort to market sound quality and, if they had (successfully) educated consumers on the subject, they wouldn't be "bleeding to death" (my original phrase). You're point is taken, but - in the big picture - it's hard to see how a better effort would have materially changed the fate of the major labels. Every bit of market research I've seen (and I banked the industry for decades) says that high performance (or hi-rez) formats - at best - offer only a short term sales bump.

SACD (to cite just one example) was Sony's (futile) attempt to sell high quality sound. It was generally acclaimed for performance, assailed for convenience (effectively copy protected) and ended up essentially still born. Even more successful hi-rez roll-outs like Blu-Ray (to use your video example), have proven to provide an early bumps as enthusiasts replace their collections with higher quality versions. From a small early base, rapid growth lasts a few years and then fades. Price premiums are lowered and sales plateau, then fade. That's where Blu-Ray stands today. Like other hi-rez formats, it has demonstrated a limited life span.

BTW, SACD was marketed very aggressively in Japan (where new formats are taken up at a much higher rate than in Europe or the US) and still tanked quickly.

Bottom line: Most people in the business believe that, over the long haul, only a small % of the market will pay a premium for high performance entertainment software. This may be enough to sustain a profitable boutique industry, but there's little evidence that it will support a mass market industry. Hence my original observation about shrinking record companies having little to do with SQ. There's little evidence that there are enough $ chasing SQ to support a mass market record industry that attempts to differentiate itself (from cheaper, lower quality SQ alternatives) on that basis.

BTW, the question has been studied to death. I believe that you'll continue to see proprietary hi-rez music formats (even for downloaded and/or streamed content) because the content companies will seek the short-term sales bump. In the end, I don't believe that they'll ever be viewed as a long term, mass market solution to bringing sufficient $ back to the table to revive the business.
If they want to get rich, they need good promoters and PR people. It all takes money to make money. Historically, thats what a major record company brings to the table beyond the nuts and bolts of producing records, CDs, tapes, whatever the physical format.

Nowadays, physical formats are nice but not necessary, so the only thing left is the money making promo power. You don't have to be a record company to do just that though. ANy large media conglomerate these days would do I suppose.

Has 0 to do with sound quality.
"10-02-14: Martykl
Zd,

If I understand you correctly,you're suggesting that the music industry hasn't made sufficient effort to market sound quality"

Yes.

"and, if they had (successfully) educated consumers on the subject, they wouldn't be "bleeding to death" (my original phrase)."

Probably. We can't predict what didn't happen with 100% accuracy, but I think marketing for quality over features would have made a difference.

"You're point is taken, but - in the big picture - it's hard to see how a better effort would have materially changed the fate of the major labels. Every bit of market research I've seen (and I banked the industry for decades) says that high performance (or hi-rez) formats - at best - offer only a short term sales bump."

Its certainly possible, but we really can't know for sure because they never tried it. The right marketing can pull off some pretty impressive results. Look at every other area of consumer electronics for entertainment. Computers, video games, movies/theater, phones, etc... In every other area, there's a combined effort to market features and quality. Consumers are so much more educated with just about every other type of digital product but audio (and the people who sell it.). If the quality approach worked for every other market segment, why not audio?

I just want to clarity my post. I'm not saying my ideas are the only ones to consider. There are plenty of other factors that will effect the audio market than the quality issue I bring up. I'm just saying to consider it, along with other factors that were brought up in various other posts.