Reference no: EM131669778

Question: BEHIND THE SCENES

The beginnings of the Celtic rock band Enter the Haggis (ETH) coincided with the beginning of the revolution in the music industry. Millions of music listeners were fed up with the business model that had been in place for decades, in which record labels forced customers to purchase entire albums for $15 to $20, even when they might want only one or two songs on an album-and usually without the opportunity to listen to the rest of the album first. Within the music business, thousands of musicians were fed up with the mainstream business model as well. The industry was dominated by a small number of large record companies, also known as record labels. These labels made major investments in the careers of a small number of musicians, from paying for recording sessions to promoting the music to radio stations, which to a large degree dictated the music the public got to hear. This business model worked out nicely for those musicians lucky enough to get signed by one of the major labels, lucky enough to get significant radio airplay, lucky enough to get significant album and concert sales as a result of that radio exposure, and lucky or smart enough to sign a contract that actually passed some of the resulting profits back to the musicians. However, the dominant business model was far less satisfying for thousands of other musical acts. With a business
model built around big investments made in the hope of big paybacks, the big labels focused on acts with the best chance of appealing to a wide audience. Musicians and groups without a mainstream sound usually needed to look elsewhere.

And when the major labels did sign an act, they often exerted a lot of creative and financial control, influencing the sound, the public image, and the career track of the artists in which they invested. Moreover, they recouped their costs before the artist saw any money from album sales, meaning an artist usually had to sell a huge pile of albums to start seeing any money at all from a recording contract. In other words, for many artists, the chances of getting a major label contract were slim, and the chances of being satisfied with such a contract were even slimmer. Against this backdrop of widespread dissatisfaction on the part of both consumers and creators, a number of forces in the technological environment were turning the industry upside down. The compact disc (CD) gradually replaced most sales of vinyl albums, but it triggered something much more disruptive than simply replacing one album format with another. CDs, of course, store music in digital format, which means the music can be transferred to and played on computers and other digital devices-and distributed over computer networks.

The introduction of widely accepted standard file formats, most notably MP3, made it easy to copy and share song files from one device to another. The rapid spread of high-speed Internet connections, low-cost digital music players such as the iPod, and social media such as MySpace and Last.fm added the final pieces of the puzzle. The music industry would never be the same again. ETH stepped right into this upheaval and embraced a new way of thinking. The group signed with United for Opportunity (UFO), which describes itself as "an organization of experienced, independent-thinking music industry activists that have come together to create a new model for a record label/music distribution company." Not only does UFO support the band's philosophy of giving musicians and their fans more control, but signing with an indie makes more financial sense, too. According to ETH's Brian Buchanan, "The average independent musician sees more real cash from 10,000 independent sales than many major artists see from a million sales." Will ETH ever become filthy rich playing Celtic-influenced music? Probably not. However, as Buchanan puts it, "Success is making any kind of a living doing the thing you love." By meshing their business model with the changing business environment and working tirelessly to connect with their customers, ETH stands a good chance of making enough money to keep doing what they love for as long as they love doing it.

1. Assume that ETH really were in it for the money and not the music. Would it still make sense to stick with an indie label, or should the band pursue a major label contract and all the potential marketing exposure that comes with it? Explain your answer.

2. Search online for "Enter the Haggis" and identify how many ways you can listen to the band's music for free. Why is it in the group's long-term interest to make its music available for free like this?

3. If the band had begun its professional existence 10 years earlier, how might its business strategy be different from the path it took?