If I Ran a Major Record Label...

I'd do these 10 things

A reader asks the following:

Hi Ted, talking about big 3 (Universal, Sony or Warner), if you were appointed CEO of one of them and shareholders gave you a strong mandate for a broad corporate transformation, with execution times well beyond what the stock market is used to, what would you do?

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The first thing I’d do if I ran a major record label is . . .

I’d resign. I’m not fooling—I’d rather clean out the Augean stables with a toothbrush. That would be a neater and simpler mess to fix.

And this isn’t a pose. Of course, I’m not without ambition. But I’ve always worked to avoid positions of power—I want influence instead. (Despite what you’ve heard, those aren’t the same thing, not even close. I need to write an article about that some day.)

But let’s imagine—for the sake of argument—that I had no choice in the matter. A court has decreed that my punishment, for some unspeakable crime, is to devote the next five years to fixing the music business. Or die trying.

What would I do?

Here’s my agenda as the new CEO of Universal Music or Sony or Warner (take your pick).

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10 Things I’d Do, If I Ran the Zoo

(1) I would collaborate with other record labels in a plan to bypass Spotify—bringing music distribution in-house again, just like the old days.

If necessary, I would even lobby Congress to get an antitrust exemption (much like NFL owners have done), so that we could do this as openly and effectively as possible. But even without that exemption, record labels could make this happen.

In almost every industry, competitors work together for the common good. That’s why we have a Milk Advisory Board or the Beef Board or whatever. But the leaders of the entertainment industry, like spoiled toddlers, aren’t very good at playing together—the egos are just too big. So Disney goes to war with Netflix. Paramount goes to war with Disney. Etc. etc. But the leaders of the major labels really must work from the same playbook for the good of music and our larger culture.

In my first month on the job, I’d meet personally with the top execs at each of my competitors. I’ll even pick up the dinner tab.

I will try to convince them that we should cooperate in promoting artistry, raising new music to a higher profile, and creating a fair business model that advances these priorities.

There are plenty of ways we could do that without violating antitrust laws. Even when you can’t legally collude with competitors, you can send signals—and this happens all the time. How do you think all the streaming platforms decided to raise prices at the same moment? Airlines do the same thing. They don’t even need to talk to each other—there are dozens of ways of signaling your intentions and inviting competitors to join you.

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But, as mentioned above, I’d be willing to go to the mat, and lobby congress if existing laws limited our ability to fix the broken economics in streaming. The stakes are so high, that we have to find a way to cooperate.

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(2) My new streaming platform will be organized as a cooperative—and musicians recording for the label will automatically share in the ownership.

In other words, musicians not only will get royalty income from the streaming platform, but potentially receive profit-sharing distributions every year.

This is a smart move for everybody. In a talent-driven business, you create incentive programs for your key assets—which are people. This motivates and inspires them, thus earning their loyalty.

For too long, the record industry has treated artists as adversaries. They have tricked musicians with unfair publishing deals, dubious accounting tricks, and many other bad practices. This is not how you reward talent in a talent-driven business.

A law firm wouldn’t do this. A software development company wouldn’t do it. An investment fund wouldn’t do it. It’s time record labels grow up.

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(3) Once I had this new online distribution platform in place, I‘d cut off (or renegotiate with) Spotify and other technocrat platforms—and connect directly with music lovers.

I would only need to get one or two other major labels to work with me on this new platform—and that would be enough to overcome the tech companies. We could either cut them off completely, or demand better compensation.

Either way we win.

We now have direct contact with consumers. The music business will now be run by music people. Just the way God intended. Even if our financials take a short term hit, it’s worth it.

And all that cash previously sucked up by tech companies will now stay within the music ecosystem. Musicians will no longer subsidize Spotify’s podcasting deals or Apple’s tech initiatives.

In other words, streaming is a lot more profitable for all the actual value creators after we bypass these technopolies.

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(4) I would build a management team from people who love and understand music.

I’d probably need to make a lot of changes to the A&R department—the people who scout and sign our artists. They need to have HUGE ears. But every facet of the business needs to be driven by musical considerations.

For a start, I’d stop letting lawyers determine business strategy. They have far too much influence at record labels. And their track record is lousy. (I could write a whole article on that too. No business puts more faith in lawyers than the music business, and the labels have been poorly rewarded for this trust.)

For the same reason, I’ll put an end to marketing campaigns based on gimmicks. Let other people sign musicians who dress up like dinosaurs or eat raw meat onstage. Those tricks go rancid faster than that dripping slab of beef. We’re paying attention to talent, and have total trust that it will pay the bills.

That’s why. . .

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(5) The days when A&R makes decisions based on the musical tastes of 14-year-olds must end.

That’s not just a wise artistic decision, but also a smart economic choice. Adolescents and young teens don’t spend much on music anymore. Even when kids stream songs, parents are paying the subscription fee.

I’d love to see analysis of the average spending on music by teens over time. It’s probably dropped by 90%.

Even hit stars on the Billboard chart are seeing an aging of their fans base. Their tracks are getting more clicks from folks in their late 20s and early 30s, while high school and college students have something better to do. The peak on this metric will continue moving to the right.

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The record business became infantilized around 1960—because kids drove the market back then. The situation is different now, and record labels need to adapt to the new reality.

Even the young stars appealing to young audiences are older than you think. Taylor Swift is in her mid-30s, and has been recording for almost two decades. Beyoncé is leading the other hot tour right now, and she’s 41. Even Cardi B is in her thirties.

It’s not like the past when rock or punk or hip-hop or other dominant styles represented genuine youth movements. In the year 2023, the teen pop star is an endangered species.

Hence I’m confident that my record label will thrive because I’m ditching the goofy kid stuff and focusing on grown-up music for grown-ups. All the data supports me in this decision.

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(6) I’m walking away from AI music—it isn’t hard to do.

Here’s an interesting fact. I still haven’t met a single person who prefers AI music to human-made music. A few AI songs get noticed as stunts, but demand is tepid at best. Meanwhile Taylor Swift is selling two billion dollars in tickets.

AI is happening as a cost-cutting scheme, and even the companies promoting it must know that. Go check out their websites, and see how hard they push the low cost angle.

So I’m walking away from it. It’s easy to do, because the actual fan base is roughly zero.

Even if I’m wrong, I’m willing to live with the consequences. When you make a quality meal, you don’t use overly processed ingredients. Music is no different.

And let’s imagine a worst case scenario—namely that, five years hence, tech teams surrounded by huge computers can create synthetic hit songs. Record labels have no ability to compete in that kind of world. So it’s better to fight on the terrain where we have knowledge and skill, which is fostering human creativity and a human connection with listeners.

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(7) I would recruit the best talent at music schools (and elsewhere) based on musical ability(!!!)—and give them record contracts with complete creative freedom.

Every other profession recruits the best students at the top schools. That’s true in law or engineering or computer science or any other highly skilled profession.

Except music—where no label even considers doing this. But I would.

I want to know the names of the 5 most talented students at Juilliard. And Berklee and Curtis and CalArts and Eastman and maybe some other places too. I’m sure if I spent a couple weeks at those institutions and asked professors and students, I’d find out who these budding geniuses are.

Brilliant people tend to stand out.

I’d give them record contracts with complete creative freedom. If they want to sing pop songs, they can sing pop songs. If they want to compose fugues, they can compose fugues. If they want to write a Broadway musical, they can write a Broadway musical.

If I’ve actually identified the right talent, this is a smart move. I could easily sign 20 or 30 of these promising artists every year. Even if I gave each one a few hundred thousand dollars to make a record, it wouldn’t make much of a dent in the corporate budget. And I’d rather do that than buy another old song publishing catalog.

At least a few of these newbies would live up to their reputations for genius. Let me do it and I’ll show you.

Some people get upset when I talk about recruiting musicians at actual music schools. This irritates them deeply—because I should look elsewhere. Music schools, they warn me, are terrible places to look for musical talent.

Hmmm.

But f you’re one of these naysayers—rest assured! I will scout talent in other places too. But the music schools are low-hanging fruit. You can find extraordinary musicians with huge upside potential very quickly. It’s a lot harder traveling from garage to garage looking for garage bands.

So here’s the deal. I’ll force my A&R team to sit through a thousand open mics at the coffee house. But, please, also let me hire the 18-year-old Juilliard or Berklee genius. You won’t be disappointed.

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(8) If I sign an artist, I will take a long term view—making a commitment of at least five years.

Five years ain’t much—it’s pretty much what you get for larceny or burglary with a firearm. We’re not even talking aggravated assault.

So we should be willing to give promising musicians that much time to develop.

Manfred Eicher has remained loyal to some artists at ECM for 50 years—and these are people who still haven’t generated a single hit record. Have you seen any Terje Rypdal tracks on the charts lately? Or ever?

But this label as a whole has prospered because it’s run with integrity and commitment to artistry. Or look at how many times Blue Note paid for Andrew Hill’s recording sessions in the 1960s—which didn’t show a profit back then, but those albums generate cash today and will for decades to come. Or look at how the major labels make money today from tapes sitting in their archives for decades.

That’s what a long term payback looks like. But you need to make commitments today in order to enjoy the benefits in the future.

Music lovers understand this.

I trust Eicher because music, not short term money, is his top priority. Here’s the deeper truth—one of the reasons why he has made money (in a field where almost everybody else has disappeared during those same 50 years) is because he’s not blinded by it.

That seems like a paradox, but it’s the way superior music has always been created. The greatest talents are rarely driven by financial considerations.

Manfred Eicher, photo by Bart Babinski, published with permission from ECM Records

Go ahead and tell me that putting faith in artistry won’t work at a major label. Let’s try it and find out. I have a hunch that it will work all the better because I’ll be the only major label doing it.

This determination to raise quality standards is how HBO transformed television with The Sopranos and The Wire. This is how other entertainment companies, form United Artists to Disney, got their start (long before their decline). This happened at Random House and Alfred Knopf and the great publishing houses before they became corporatized.

Now we will do the same thing in music.

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(9) I will embrace physical musical media with enthusiasm.

Vinyl has been the fastest growing category in the record business for the last decade. But this happened despite the major labels—who haven’t invested anywhere near enough cash in manufacturing capacity. Even after a decade, very little of their back catalog is available in vinyl.

Fixing this problem is another no-brainer. Jut look at Bandcamp—which is more profitable than any streaming company, and almost entirely because of physical merchandise.

So it’s not just vinyl. The major labels need to look at other physical media—including futurist kinds that don’t exist today.

Everybody wins in this scenario. Physical media deliver higher profit margins for record labels. Artists make more money. Record stores get a boost. And fans enjoy a higher quality experience.

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(10) I’m willing to get fired—and would rather lose my cushy music mogul job than embrace the dumbing down and other failed strategies of the current moment.

Whenever you try to change a huge organization, there’s tremendous pushback and inertia. But the current approach of the major labels has (1) destroyed the economics of music-making, (2) led to a collapse in demand for new music, and (3) undermined artistry and creativity.

A person who cares about music has to fight against this. And I’m convinced that my different approach will work—if you give it time. Five years is probably sufficient, but I might get fired before I can deliver results.

But, hey, I never wanted this job in the first place. And there’s always a position open at the Augean Stables.