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Nonesuch and Blue Note 18 October 2004
''This is what the business was built on -- following your taste and supporting musicians. It's common sense.'' Musician K.D. Lang in The New York Times
What does David Byrne have in common with the Orchestra Baobab? They both share the same recording label, Nonesuch records. The Nonesuch label is home to 35 recording artists, connected to each other primarily by the enthusiasm and sensibility of the label’s President, Bob Hurwitz. As New Music composer Steve Reich, a Nonesuch artist for 20 years, told The New York Times, the label "is run honestly and candidly and on a very simple principle: If Bob likes it, he records it.”
Nonesuch, a small division of the mammoth Warner Music Group, is thriving. It has grown in the past 20 years from sales of about $750,000 to sales of $35 million, and 2004 should be its best year ever.
The music business’ overall decline, on the other hand, is astonishing: according to the Recording Industry Association of America, unit sales of music in any form declined by 25% from 1997 to 2003.
Blue Note, owned by EMI, uses a similar approach to Nonesuch. Both labels choose their artists based on the taste and judgment of their Presidents. There are no music videos and very little is spent on advertising.
As a result of this austere approach, albums can be a success for these labels if they sell thousands of copies, rather than millions. And its predominantly middle-aged customers prefer to buy CDs rather than burning MP3s.
Because costs are so low, the occasional mass market hit is astoundingly profitable. In 2002, for example, Blue Note released Norah Jones’ CD “Come Away with Me,” which has sold over 17 million copies. Thanks to this success, Blue Note’s profits over the last two years are reportedly larger than those of EMI’s mainstream pop labels.
The Blue Note / Nonesuch business model is not new to the music business. Since the early days of recorded music, record labels have served an important role in providing buyers a signal for a specific kind of musical sensibility. Think Chess records in the 1950s or Motown in the 1960s. Even if you didn’t know the artist, the label often provided a pretty good indicator of what she would sound like.
Labels are signals
Nonesuch and Blue Note labels are brands – they promise something about the music they are selling. These labels are profitable because their brands convey enough information to enable customers to buy the music without needing to see the video or hear a sample on commercial radio.
This approach does not scale. The sensibilities of Nonesuch’s President may fit well into a $35 million business, but, in these days of fragmented markets, one label can’t support a billion dollars of sales.
Yet it represents a financially viable alternative in a declining industry faced with a profusion of different tastes. The advent of satellite radio and the internet aids in the fracturing of the mass market for commercial music. As the mass market fragments, big investments in a few albums will increasingly miss their mark. It’s no accident that the best-selling albums of all time came in the 1970s and 1980s.
While the Nonesuch / Blue Note model may not scale, it seems eminently replicable. One can imagine the future big music conglomerate as an umbrella company, loosely overseeing 100 labels like Nonesuch. Each of these labels would present music driven by a specific, and personal, sensibility.
A portfolio of eclectic labels may provide better returns to a suffering industry than big investments targeted at a mass market that is shrinking.
Can the current conglomerates make the transition? Because Nonesuch and Blue Note already exist, and thrive, inside of companies like EMI and Warner, there’s some reason for optimism. The challenges of moving to a new business model may be smaller because more successful approaches already exist inside of these large companies.
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