Universal Music Group Creates Digital-Only Music Label

Another month, another digital music announcement. This time, however, a record label is actually thinking long term. Universal Music Group (UMG) are embracing online technology as part of its business model, rather than wasting its time, money and efforts suing a handful of consumers for downloading copyrighted material.

Universal, which like other record companies, has heavily relied on profits from sales of CDs, will this week promote eight relatively unknown acts on a digital-only label (UMe Digital) through online services including Apple Computer’s iTunes, RealNetworks’ Rhapsody and Microsoft’s MSN Music. Online promotion is an alternative marketing option that’s nowhere near as expensive as traditional forms, but has the potential to be highly effective.

It’s great news that Universal is taking these innovative steps, as it finally shows that music labels will have to adapt to online sales and marketing in order to survive, especially as sales of CDs have fallen over the last four years, record stores are moving from high streets, and more shelf space is being given to DVDs and video games.

The move is also great news for bands because they can get relatively large exposure without having to spend a fortune on recording, making a video and then going on the road to ‘develop’. However, bands do not receive an advance or even the cost of producing an album. Having said that, they do retain full ownership of their master recordings and licence them to Universal for a limited time.

Universal is paying the musicians around 25 per cent royalty on the retail price of the downloads, and if online sales of an artist’s music reach a certain point, say around 5000 copies of a particular song, the company has an option to pick up distribution of the CD to record stores.

It’s now only a matter of time before digital-only independent labels start promoting bands online by creating a low-risk way to market them without producing a physical album or underwriting a tour or music videos. For consumers, gone are the days of paying £15 for a CD – a digital world means more choice and better value.

Warner Music Group is developing a unit similar to Universal’s, initially to sign artists and finance recordings for online sales, with the potential for later CD releases.

Universal Music Group
Warner Music Group