Mike McGuire

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Mike McGuire
Research VP
11 years at Gartner
21 years IT industry

Mike McGuire guides digital marketers on best practices for developing strategies. He specializes in how context, community, location and time — combined with a consumer’s purchase history and purchase intent — are changing the relationship between consumers and brands …Read Full Bio

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WMG Buys into Eos While Cisco Buys into the Music Biz

by Mike McGuire  |  August 13, 2009  |  1 Comment

If the Cisco-Warner Music Group deal to have Warner use Cisco’s Eos platform for developing and hosting its artists websites is any indication of the future of the music labels, it’s about using websites as a way to establish and maintain market relevance, relevance that labels maintained by the control they used to wield by when they controlled the creation and distribution of physical objects.

Now, it’s about establishing and maintaining the relationships with their artists by being able to help the band find and maintain an audience. Which, when you think about it, was, and maybe still is one of the central roles the music labels played in the distribution of pre-recorded music. (Only back then we called them “record labels.” Anybody reading this who is under 25, go ask your mom and dad.)

A by-product of the music industry’s transition, and the realignment of roles for the labels, has been the emergence of the so-called 360-degree deal in which the label not only gets a cut of CD and online, but now also seeks to get a cut of revenue streams – like ticket revenue from touring, merchandise sales – that were typically not part of most deals. Those streams used to be owned mostly by the bands/artists and their management teams.

So when you add these changes to the marketplace and the actual music labels, it becomes clear how important finding and nurturing talent might is an important role for labels to fill. Succeeding on that challenge means keeping a steady flow of new talent signing on – and in the music industry of 2009, succeeding in that means leveraging the tools of the Internet and social media to promote an artist. While digital sales at outlets like iTunes have been growing, the industry will have to find new ways to monetize both the content and the artists who create it.

To me, the Cisco-WMG deal is about a label putting the infrastructure together to deliver on the promises they have to make in order to get bands signed to the 360-degree deals, also referred to as “expanded rights” deals. WMG CEO Edgar Bronfman underscored this when he, in a recent earnings call, noted that more than half of WMG’s deals with band were of the “expanded rights” variety.

For WMG, Eos is a platform that gives them the flexibility to experiment with multiple engagement and monetization tactics. There are no established practices or music-label playbooks for this new frontier, so rapid experimentation with the ability to generate solid analytics to measure the experiments is required. This seems to be what WMG got from Cisco as they noted that Eos enables WMG to get an artist’s site up and running five times faster than the previous tools they were using.

Will other labels follow suit and sign on to Eos? Will bands and artists who grew up with the punk and post-punk DIY attitude? I think it’s going to be a tough sell, especially with artists who have already left (or were pushed out of) the big-label ecosystem.

More important to the long-term health of the music industry, however, is the sorts of strategies being embraced by labels such as WMG are the kinds of strategies that make them more appealing to artists who are just starting out?

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