Could the labels of the future look more like management companies, or even venture capitalists?

I really liked Mark Mulligan’s post back in January - Five Long Term Music Industry Predictions (and how Disney will Rule the World), especially his final point that ‘Labels will become agencies’.

The past few years have seen a lot of new technology pipelines laid down. Now we get to see the adjustments and changes those new technologies bring. As part of that the future of labels has been a continual hot topic, the consensus seems to be that in 5–10 years labels will not look like they do today.

We’re already seeing the core functions of a traditional label turn into an agency/service industry. A-Track, in his re-cap of Rap in 2014, was pretty direct in stating that meant labels of all sizes, noting:
it’s funny because, in relation to majors, we’re supposed to be DIY. But nowadays, even an indie looks like an extra link in the chain. So we have to step our game up and provide more than just distro and executive producer credits.

And he’s not alone, Arcade Fire’s manager Scott Rodger stated in 2012 that for many artists like his, labels are “glorified distribution”.

But labels don’t just do distribution, alongside management companies they can do marketing strategies, syncs, manage mailing lists, get websites built etc. They help scale Sam Smith scale from a voice on a Disclosure record to six Grammy Nominations, there’s a lot of strategic talent there as well as in the management teams.

So where does that leave the labels of today?
If I were a betting guy, I’d say as either a management company, or music Venture Capitalists.

When one side of the label scales down to a service model, that behind-the-scenes operational knowledge can be put to use to hold on to talent by committing to managing and bankrolling an artist in all areas of their career.

Centralising capital (and minimising expense)
Investing sums of money in an act works better at scale, whether that’s the scale of a management or a label. And it’s not just money, having multiple bands in development under the same roof allows you to share resources, say pr for example.

It also follows on from the kind of thinking that lead to 360 deals: if you do the development work (i.e. losing money) to help grow an act because you believe in them and then they score a sync or a sellout tour, you want to participate in it. It could be a reason why a major investor in Live Nation recently considered buying Universal.

And it wouldn’t be a massive leap for labels to realise this new way operating. A lot of an artists’ income in the early days has traditionally come from label development deals and advances, betting on future single/album sales of that artist, (or occasionally a promoter making a bet on the future of that artist’s live revenue), just take the a&r scouts and give them the resources to sign acts early on management deals.

Or a bank?
In fact if you are able to really centralise the capital and become confident in risking it against all of your artists’ activities, you could see a point where the label just acts as a music banking service for their managers and artists: advancing management teams for tours as well as albums.

This is the same way the funding ecosystem for new startups in the tech industry works -
You give a small amount of funding to people with an idea which allows them to develop it. Hopefully as the project grows you’re able to give them more to resources to ‘level up’ and in return ask for a percentage of their future earnings/cash payout if they get big.

Managing all capital coming in and deploying it in a cohesive strategy has always been the role of a manager, but if labels want to exist in a bigger role than a service/agency in the future they may have to look more like a management company and less like a label.

But why stop at labels?
Promoters are also talent scouts, finding artists through tip-offs and testing them through support slots. They too could split themselves in two — providing a promotion-as-a-service arm while also moving into a management position. This would allow promoters to stay involved with artists they discover at the grass roots level. A possible reason Live Nation moved to reaffirm their management ties through the Maverick project.

While we’re at it, why not have a few of these managers-at-scale purchase some small venues in the same way promoters do now? If you are responsible for developing artists and you’re seeing the upside from all of their revenue streams, you can save small venues, (and in many ways the future of the industry) by operating them yourself.

So really my bet on the future of labels would be that the music ecosystem continues to converge and as labels shrink down to a service, there’s even more room for strong management in the middle taking advantage of everything-else-as-a-service.
The great thing about music is that nothing is certain, but it sure is exciting.

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