Proof That Lady Gaga Is Bigger Than Record Industry.

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Proof That Lady Gaga Is Bigger Than Record Industry.

Lady Gaga’s invite-only social network, dubbed “Little Monsters,” is named after her nickname for her devoted followers. It features a Pinterest-like interface with chatrooms and translation software to let fans to connect around the world to connect with one another.

Co-founded by Gaga’s manager, Troy Carter, the site aims to take fanclubs and fanpages to the next level. Not only does it offer exclusive content, like inside information, it features performances direct from the Mother Monster herself. With over 50 million Facebook fans and 25 million Twitter followers, Gaga has shown a remarkable mastery of new media. But while she enjoys healthy iTunes and CD sales, her tailor-made social platform is a new-millennial, outside-the-box thinking that an outdated music industry has failed to capitalize on.

Gaga isn’t the only artist striking a break from the traditional business of music. In fact, grizzled punk legend Iggy Pop also released an album of French cafe covers, called “Apres,” via digital outlets like iTunes. He’s still contractually bound to Virgin EMI, but when the label rejected his album, he bypassed traditional distribution and released it online.

“[Virgin] didn’t want it,” he told the Telegraph. “They would have preferred that I do a rock album with popular punks, sort of like, ‘Hi Dad’ — I was not going to do that.”

Instead, he seems happy to keep his creative independence and release music directly to his fans, outside the purview of the industry. “What has a record company ever done for me but humiliate and torment and drag me down?” Pop added.

Those disparaging comments show a long-fermenting malaise that artists often have towards an increasingly backwards industry that has failed to adapt to the digital era. Musicians, these days, are beginning to question the purpose that labels serve, and whether it’s necessary to even take part in that system.

Of course, it wasn’t always this way. For an artist looking for a long-term career, signing a record label was once the only option. Sure, the industry has had its share of one-hit wonders, but most profits came from so-called “career artists,” who build a base of fans eager to buy records and concert tickets, even well past a musician’s lifetime.

But building a career wasn’t easy. And an industry sprung up to produce, distribute and promote music. By signing to a label, artists joined a large, efficient machine where large amounts of capital were spent to connect them to an audience. That cycle was quickly established: artists record songs for an album, which are then promoted on radio and television. Then, artists embark on tours that spanned the globe, which in turn, would lengthen the life of the record.

Record companies not only fronted huge sums of cash needed for those activities, they advanced money to artists, based on future profits from recording and touring. And the system worked, because the channels of delivery remained narrow, confined to record stores and mail-order clubs. But as technology mutated the formats that distributed music, from tapes and vinyl records to CDs, consumers began to illegally rip and download songs.

And the machinery began to break down.

It is tempting to say digital downloads ruined the industry — the business as a whole did take a hit from the shift to digital. But in truth, the system had always been dysfunctional for all but the top artists. Long before Napster was an apple in Sean Parker’s eyes, the unsustainable economics of music had long been criticized by the musicians itself. Recording and touring costs add up in the millions, and promotion costs — from getting videos on MTV to songs on the radio — had skyrocketed.

Those expenses were ultimately billed to artists, often masked by byzantine, arcane accounting methods, and sometimes through draconian legal contracts. Even a best-selling artist was often left with just a modest slice of the profit pie.

Musicians with a string of Billboard hits seem like they’re on top of the world, but it can take years for them to pay back management. That’s why artists, like ’90s R&B girl group TLC declared bankruptcy at the height of their fame, due largely to a poorly negotiated contract and onerous management costs.

So it’s no surprise that a diverse group of artists have decried the industry, with those like Prince going so far as to write the word “slave” on his face during performances, and Hole’s Courtney Love going before Congress to liken the system to “sharecropping.”

Is it any surprise, then, that a generation of musicians, both new and old, are eschewing the recording business in favor of the opportunities offered by a digital-based landscape?

Distribution isn’t the problem for resourceful musicians looking to strike their own path. Platforms, like Amazon and iTunes, can sell songs directly to fans, without the middle men of record labels to siphon off a cut. Artists like British alternative rock group Radiohead, for example, turned to the Internet unveil its music. Since its departure from EMI in 2007, the band has released records, like “In Rainbows,” through its website, supplementing it with traditional distribution deals with British company XL Recordings.

Social media has also transformed the way artists build passionate, engaged followers to fuel sales and concert tours. Lady Gaga is one of the most influential, giving her autonomy previously unheard of in the industry. When sales for her album “Born This Way” dropped dramatically after the first week, her large social base insulated her from the typical ups and downs of record sales and radio play.

She hasn’t said how she plans to leverage her Little Monsters site, but it gives her a direct pipeline to people willing to open their wallets, without the need to rely on Facebook or Twitter. While she’s still obligated to release music to her record company, once that contract is up, she’ll be able to take her eager audience will to her next project — a pipe dream for any artist hoping to sustain a lifelong career.

Despite the shift towards digital distribution and social media, touring remains an analog affair, and its importance to the career of an artist has yet to be replaced. Musicians still make most of their money from the road, including merchandising, and in digital era, that emphasis has only grown larger, which explains skyrocketing ticket prices.

Touring is also giving rise to powerful management companies that handle the line operations of concerts. In 2007, when Madonna left Warner Bros., she signed with concert promoter Live Nation. The landmark “360” deal, a term to encompass music and music-related businesses, like albums and DVDs, touring, merchandising and sponsorship agreements, and television and film projects, reflects on a career built on far more than record sales. No terms were disclosed, but the deal is said to pay $120 million over 10 years.

“The paradigm in the music business has shifted and as an artist and a business woman, I have to move with that shift,” Madonna said at the deal’s signing. “For the first time in my career, the way that my music can reach my fans is unlimited… the possibilities are endless.”

Her strategy paid off handsomely: sales of her record “MDNA” were lackluster, but her summer tour sold nearly one and a half million tickets.

While touring is the lifeblood of a career, technology is transforming it with the improvement of Web broadcasts. Coachella, for example, streams live performances on YouTube, while smaller artists, like Swiss electro-pop musicians Tim & Puma Mimi, broadcast “long-distance” concerts via Skype.

Artists can also give backstage access and show extra-footage via webcasts, charging for exclusive content or an entire series of shows. That direction has yet to be fully explored, but it offers rich opportunities for forward-thinking artists and businesses.

Despite the disruptive changes wrought by technology, record companies still have a place at the table. They still control a huge catalog of material, and have significant negotiating power built over years of relationships and partnerships with radio and other outlets. And that’ll continue to be the case, even as digital avenues open up.

Meanwhile, as streaming services like Spotify, Pandora and Rdio create channels for online consumption, labels are the ones negotiating the license dealings, and not each artist. So landing a record deal can boost a musician’s exposure to an audience. Labels still have the marketing prowess to push artists on radio, commercials, TV, movie and video game soundtracks, all of which give them valuable exposure in a crowded market.

Still, loosening up the structure of the industry is a boon for musicians who aim to follow their muse, outside the concerns of selling records or pleasing label bosses. After all, if old punks like Iggy Pop can release classic interpretations of French songs, there’s no constraint to how odd an idea may be.

“[Virgin] didn’t think they would make any money [from my record], they didn’t think my fans would like it — very sensible attitudes for a sensible sort of person,” Pop said. “But that’s a different sort of person than I am.”

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