How MySpace is Changing the Record Industry

Transcript of a broadcast on Santa Monica's KCRW:
This is Celia Hirschman with On the Beat on KCRW.

It's a wonderful time to be a recording artist. Though the record business may never return to the glory days of the past, today's artist has far greater flexibility to forge expansive and direct relationships with the people who finance their careers -- their fans.

The main shift in the record business boils down to simple economics. In the past, record companies banked on the future potential of new recording artists, tying them up for decades with deals that kept them two steps away from their fan base. And to be fair, many artists preferred this kind of business relationship. They wanted a six-figure guarantee with their recording and touring costs paid up front. And their advisory team of managers, lawyers and accountants often commissioned the money so it looked like everyone got paid. Except it was just a shell game. Not a record had been sold.

In truth is, most artists never recouped their advances.

The debt mentality of the record business past, has no place in the new paradigm of the music business. Today's business is finally being built on a different structure of financial responsibility and 'recoupability.'

No longer do bands need to wait for validation and fortunes from a major record label to kick-start their careers. Today's recording artist can forge their own reality -- on MySpace free of charge and open to all. In fact, MySpace is the #1 site for musicians to audition their music to fans. The unexpected consequence is that record labels are listening too. In fact, just about every label in America uses MySpace to find new talent.

And what are they looking for? Bands willing to work for their future. A band with over 30,000 views on their MySpace page will earn serious interest from most labels. And if 10% of those viewers become fans, bingo. Labels want to talk.

The user-friendly Internet has blown open the notoriously closed door of the music business, kicked open by the artists and their fans. It's now a new market, free from accountants, attorneys and record labels, for artists to strut their stuff.

This does not mean the era of the record label is over. Structure is still needed to keep a band's business operating effectively. But the net effect of the online audition has helped changed the economics of the record deal. Today's deals limit the record labels' creative involvement, its back end royalty rate and the term of the contract Artists receive far less advances up front than before, and must often use their own resources to tour.

What's particularly interesting is just how competitive signing a band to a label has become. Now that all record labels have limited funds, and everyone has access to the same information, just imagine just how fierce the competition gets, to sign a hot group.

Over the next 3 weeks, two live music festivals will showcase great new unsigned talent. Last night, San Francisco’s Noise Pop It’s a week long festival of music, featuring many unsigned and independently released acts. In mid March, South by Southwest in Austin will host almost a thousand more acts. Every label scout in the music business will be at these festivals, hoping to build on the artistry and passion they heard online.

Thanks to MySpace, the music business is fun all over again.

This is Celia Hirschman with On the Beat for KCRW.