Why Record Labels Are Making a Comeback

Record label execs have taken a page out of the movie/TV book (explained in detail here) and the practice of windowing has been widely accepted by consumers: Few people complain about the difference between a $10 movie-theater ticket (upon release) and $4 VOD rental (at home, six months later).

Harvesting consumer willingness to pay is a great way for the labels to boost revenue and profitability without shrinking the market. This release strategy works particularly well in the context of music subscription services. I expect record labels to increasingly play off the various providers (Spotify, Apple, Google, etc) against each other, and possibly even use their market clout to force a higher-paying tier (say, $20/month) for subscription plans without any holdouts. It’s worth every bit for the avid music buyer; s/he was spending more than $120 a year on CDs and digital downloads, anyway.

Finally, music subscription services lend themselves much better to monetizing the back catalog. Today, I listen to my old albums on Spotify. Essentially, I am paying again for the same music I already purchased years ago, because many streaming pennies do make up for real dollars. As absurd as it may sound, this is akin to people replacing their vinyl collection with CDs in the ’90s.

In addition, streaming services are also much better at (re)monetizing the back catalog of songs and albums that people would otherwise never have bought (yes, even if only penny by penny again). This revenue is pure profit, since the direct costs are nonexistent: No A&R, virtually no distribution, and no marketing expense.

Via Re/Code