A good business is one that moves with the ebb and flow of trends and circumstances. One potent example of how the tides can change is given by the fortunes of the ‘Big Four’ record companies: Sony Music Entertainment, EMI Group, Warner and Universal.
Once upon a time life was relatively easy for record companies who made money with a simple, but efficient, formula: find a talented artist, make them a star and milk the profits from record sales and concerts. Of course, putting that formula together was expensive and sometimes tricky, but the basics were fairly simple to grasp.
And then came The Internet, a big bad wolf in disguise, intent on blowing a substantial part of their house down. Although, historically, major artists make more money from concerts than record sales, record sales still accounted for a substantial portion of the income of such companies.
When the bottom fell out of CD sales, record companies were forced to adapt. The solution? Focus intensely on live music performances and merchandising.
However, the internet didn’t only affect the record companies’ record sales, but it also gave bands a platform to promote themselves independently of any major record label. One such band that did so were Enter Shikari, who still enjoyed a relatively high level of success.
Ergo record companies were left with two problems: attracting new artists and maintaining profits. One company handled this crisis with the kind of lateral thinking that has ensured them top place in record label profit league tables.
They used the power of television to raise interest in upcoming artists and involve the public in such a way that they actually felt a sense of loyalty to the acts being presented to them. In a display of inspired genius, they even managed to get the public to pay for their talent scouting fees.
Have you managed to guess what annoying popular TV show I’m thinking of?
That’s right, it’s the X factor.
By 2008 the X Factor was accounting for 70% of profit at Sony Music UK. It utilises its ability to raise the profile of upcoming artists, with the costs of doing so partly offset by the charges made to voters and advertising rights. A large proportion of the money comes after, with the X-Factor tour and strict and tough contracts that the hopefuls have to sign prior to joining the X-Factor.
That this has proved so successful clearly shows the importance of getting inventive when times get tough. Times may get tough, but if you search for a solution to the problem with a bit of lateral thinking and hard work, you’ll be surprised at what you can achieve.
Similar to the posts I’ve posted previously, a sanguine, but shrewd and practical, business person can often make the most of most situations. Aspire to think outside the box like Sony has done and you can’t fall too far from the mark.
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