Universal Music Debuts Digital-Only Label

Landing a contract with a major record label can be nirvana for an artist, but it's a heaven out of reach for many musicians. That's because backing an act is risky business. While record companies can make millions from an artist's success , they can also lose millions, if the artist fails to catch on with the public.

Now the world's largest music company thinks it has a way to give more acts a crack at affiliating themselves with a major label while reducing the business risks.

This week the Universal Enterprise Group launched Universal Music Enterprises Digital (UMED), the first label from a major music company that will distribute tunes exclusively for digital downloading.

Exploding Source of Income

"We are always looking for new and innovative ways to expand our business and service even more consumers," UMED President Bruce Resnikoff said in a statement.

"And with the industry on target to sell in excess of 100 million downloads this year," he added, "UME Digital became the next natural step for us. It's hard to imagine that every label will not have a similar download-only imprint at some point soon."

The launch of a digital-only label appears to be a sign that the big players in the music industry are seeing music downloads as an exploding source of income for themselves.

"We're selling about one and a half million downloads a week right now," UMED Senior Director Jay Gilbert told TechNewsWorld. "And as an industry, we're going to hit well over a hundred million this year, compared to five million last year."

"It's ramping up," he added, "and I absolutely believe a record company can be profitable in the digital space."

To be considered for Universal's digital label, Gilbert said an artist needs to have an established fan base and a tour. "We're really not looking to develop brand-new, unknown artists," he said.

Marketing Muscle

He explained that the idea for UMED emerged from conversations with artists in the Los Angeles area. These were artists who could consistently sell out clubs and larger venues and did some touring, but they didn't have a record deal .

"I started thinking that there's got to be a way to get the music out to the people without necessarily going through the long arduous process of signing a regular, physical record deal," he observed.

That way turned out to be the digital label. "With a digital label, we can get the music on iTunes and Napster and Real Rhapsody and MSN and all these music services immediately," he explained. "Then we can do some of the things that a record company normally does."

"We can work hand and hand with the artist when they do tour and they do put out a release to let people know that it's out there," he added.

Seven artists will be part of the initial UMED offering: Parthenon Huxley, Rusty Anderson (Paul McCartney, Stewart Copeland); Ken Stringfellow (Posies); John Jorgenson (Elton John, Desert Rose Band, Hellecasters); The Shazam; Dan Reed (Dan Reed Network); and Will Owsley (Shania Twain and Amy Grant).

Huxley said that he saw the new digital label as a way to get more people to hear his music and benefit from Universal's marketing muscle.

Laying Off Risk

"There's a lot of different opportunities out there, and this is a good one, especially with Universal's marketing abilities," he told TechNewsWorld.

He maintained that the download world has become a real factor for musicians and listeners. "The Internet is becoming a real thing, more than something with just potential," he said. "It's an actual, comfortable place for people to go and find music."

However, critics argue that this new digital label is more about music economics that about lending a helping hand to artists.

"This is a way of laying off risk when figuring out what acts they should really invest in rather than trying to have a vibrant small- to mid-artist tier business," Greg Scholl, CEO of The Orchard, a major global distributor and marketer of independent music, told TechNewsWorld.

The major labels have created a marketing and radio promotion machine that requires an artist to constantly sell significant units and garner significant air play, he explained. Once an artist's popularity wanes, a label will drop them. "The horses that don't perform get shot," he said.

"What this is doing," he continued, "is laying off some of the risk so they don't have to invest so much to determine if it makes sense to invest more," he contended.

Why So Long?

With the music industry continually moaning about declining CD revenues, some analysts wonder why it has taken so long for a major label to cash in on the benefits of digital distribution of music.

"The recording industry has tried to cling to an old style business model that was more fit for 1964 than 2004," Jarad Carleton, an IT industry analyst with Frost & Sullivan in Palo Alto, California, told TechNewsWorld via e-mail.

"In an era of personal computers, CD burners, color printers, online music stores, and iPods replacing CD jukeboxes in the homes of many audiophiles," he said, "it's amazing that Universal didn't see the writing on the wall sooner than this and try to lower their costs."