You say goodbye, I say Hello Music

The artist & repertoire (A&R) reps at a record label are like reporters at a newspaper: a cost center performing an inherently inefficient task that generates no direct revenue of its own but is nonetheless critical to the operation of the rest of the enterprise. Without reporters to gather the news, publishers couldn’t aggregate reader eyeballs to sell to advertisers; without talent scouts, record companies couldn’t break new acts.

The two job descriptions also face similar dilemmas in the digital age: the high profit margins their enterprises once enjoyed, and that subsidized their inefficiency, have been undercut on new digital platforms. But digital technology has done nothing–or at least not enough–to make those functions any less inefficient. Both remain time and labor intensive and you sink a lot of dry holes in each.

That doesn’t necessarily mean digital technology couldn’t do more to make those functions more efficient, however. Or, if not more efficient than perhaps directly monetizable. The problem has been a lack of digital business-to-business tools to facilitate commerce and capture the value that functions like news gathering and A&R create for other enterprises, or for other parts of their own enterprises.

 Most of the action on digital platforms has been around consumer-facing tools, like P2P networks and iTunes, or web-publishing and blogging platforms, like the WordPress tool that powers this blog, for aggregating and republishing news content. Those tools have enabled new types of value chains to emerge (for better or worse) around music and news content.  

Comparatively little attention has been focused, however, on creating digital tools that might enable new types of business-to-business commerce–and new ways of capturing value–so that might allow functions like news gathering and A&R to sustain themselves without the cross subsidy of monopoly profits from distribution.

So it was nice to see startup Hello Music make its debut this week at the Midem conference in Cannes, backed by $4 million in VC funding from KVG Partners. Basically, LA-based Hello aims to monetize the A&R function by using a combination of human ears and digital tools to help connect unsigned bands with commercial–or at least exposure–opportunities, including digital playlists, concert agents, radio stations, licensing for movie, TV and videogame use and, potentially, even recording deals.

Artists create their own profile pages and use the service for free. Hello takes a cut of any value it helps create.

Whether or not Hello Music is ultimately a success, we need more entrerpreneurs working its territory. A big reason musicians and journalists have seen their professions so besieged is that they have lacked the tools to capture the value they create for others on digital platforms. Change that and a lot of the arguments over aggregators and file-sharing go away.