Finally singing the right tune

For those with a deterministic view of digital technology’s impact on information economies, Brad Stone’s piece in the NYTimes this morning is a good read. Stone reports on the efforts of Polyphonic Music, the new venture formed by Radiohead manager Brian Message to invest directly in the careers of budding musicians.

recording-studioPolyphonic typically invests a few hundred thousand dollars in unsigned artists and then helps them create direct links to their audience, mostly over the Internet. Each act then functions as its own small business, funding its own recordings and using outside contractors to handle promotion, merchandising and touring. The musicians and investors then share in all revenue from sales and touring.

It’s essentially a complete reversal of the traditional music-industry arrangement, in which an artist is signed exclusively to a record company, which handles all sales, promotion and merchandising while paying the artist a royalty on record sales.

In an even more critical reversal of the traditional model, the artists Polyphonic invests in retain ownership of their own copyrights and master recording, rather than assigning those to the record company for up to 35 years, as is standard industry practice now.

Here’s where the economic determinism comes in: Since the dawn of commercial recording, creating and distributing recordings has required risk capital. Someone had to front the cost of the recording process itself (space, equipment, musicians, cocaine, hookers, etc.), then manufacture, store and ship the discs, and start plugging the new recordings to radio stations (payola) all before a single copy was sold.

With most artists unable or unwilling to put that much capital at risk, the record company assumed that role. In exchange for that capital, however, the record company claimed the copyright on the original master recordings–ultimately the most valuable asset to come out of the transaction.

With the costs of manufacturing and distribution now falling to near zero, however, and sophisticated recording equipment getting ever-cheaper, much less risk capital is required to support a successful recording venture. And as the capital requirements go down, so, too, does the leverage of the capitalist over the asset that gets created.

In short, the record company’s claim on the master recording copyrights is evaporating. Increasingly, artists will have no reason to sign away their most valuable creations because the cost of creating and exploiting them will not be so far out of reach. Classic disintermediation.

Many of the functions once thought of as the essential and irreplacable functions of the record label, meanwhile, like marketing and promotion, will turn out to be easily replaceable by independent contractors.