The prolonged slide has prompted record companies to package and deliver their products in new ways, ranging from online subscription services to reality TV shows. But these efforts can’t disguise the fact that their main strategy — placing expensive bets on numerous artists and counting on a few hits big enough to cover all the misses — isn’t working anymore.
Labels have tried cutting costs and trimming rosters, but it wasn’t until last week that a major record company announced plans to abandon the high-risk, high-reward business model. Guy Hands, a venture capitalist whose investment firm bought out EMI last year, said his label group couldn’t survive if it continued to lose money on new releases. In Hands’ view, EMI needs to become more of a service provider, enabling it to team profitably with acts large and small. And he plans to spend more money finding and developing artists, then trying to build audiences for them using new technology.
Hands offered few details, so it’s hard to judge his plan. Still, at least he’s seeking a fundamental change in the way his company does business. […]