When CD sales slump, labels reach for the merchandising booth

by Daysha Taylor, September 5th, 2007, 6:10 am

Large record labels have always been known for nickel-and-diming artists out of their share of album sales. (Yep, recoup’s a pain!) It’s only fitting that big labels would begin to tarnish once artists found ways to cheaply manufacture their CDs through companies like Disc Makers and secure independent distribution through companies like The Orchard, CD Baby, and Amazon. Indie acts aside, even more prominent artists like Radiohead and Moby have found liberation in going label-less.

As album manufacturing and distribution services become easier to obtain than blunts at a Snoop Dog event, live shows and merchandising booths become the ultimate key to an artist’s survival. So, bands may not need their labels anymore, but artist management and merchandise services are still a must. And after proving unable to extort money from iTunes and having trouble meeting CD sales targets, it’s only fitting to see companies like Warner Music and Universal Music buy their way into a piece of the live music action.

Warner Music Group has dropped $110 million for a stake in artist management firm Front Line Management. The company has also teamed up with Violator Management to form a joint venture called Brand Asset Group. According to the PR, “The Group is designed to increase revenue by more aggressively managing artist brands from all genres and capitalize on the value of those brands through corporate sponsorships, strategic and integrated marketing campaigns and comprehensive brand extensions.”

Universal Music Group has agreed to fork over nearly $90 million for UK-based artist management and merchandise firm The Sanctuary Group (home to James Blunt and Elton John). The company has also bought into Loud.com, a social-networking site aimed at the urban music enthusiast.

These are actually smart moves by Warner and Universal. I’ll never complain about a company diversifying its holdings — especially when it is working in a tumultuous industry. As long as their focus remains on the balance sheets, they may find the revenues needed to make up for the CD sales slump.