Why Can't EMI Make Bank on Katy Perry?

[This post by FMC contributor Scott Oranburg]
A couple of weeks ago, NPR’s “Planet Money” broadcast an episode about Katy Perry’s recent success. In case you didn’t know, the pop star has locked down the Billboard charts with five different singles from her album Teenage Dream, selling over two million albums and 24 million songs on iTunes. Besides itemizing these accomplishments, “Planet Money” focused on EMI’s inability make more than eight million bucks from Perry’s popularity.
While we think it’s pretty amazing that anyone has trumped Michael Jackson’s chart records, there are a few things that “Planet Money” seem to confuse regarding Perry’s success and EMI’s lack of a commensurate windfall.
As NPR points out, a huge bulk of mainstream artists’ record sales are now single-driven and purchased through iTunes. The Apple retailer does take about a 30 percent bite out of individual song sales, which is certainly a lot compared to the days when music was sold almost exclusively through local mom ‘n’ pops or even big box stores like Best Buy or Wal-Mart. But now the tech companies like Apple and Amazon are the ones who can more or less set the terms, because they have the infrastructure. OK, fine. But is this really a horror story?
Consider that the new music economy allows songwriters and performers — those who produce the stuff we want to hear — to enter the marketplace without necessarily having to sign to a label like EMI. While it’s true companies like EMI made way more money from pop stars of the ’90s, it was also the era of the $20 ten-track album — hardly a boon time for fans. And what about artists who aren’t named Katy Perry? Nowadays, getting your music in online stores is an option for pretty much any musician. Whether it sells is another matter. Still, it’s hard to imagine how technology that eliminates shipping and manufacturing costs while letting anyone in the world access and pay for that music instantaneously could be considered a bad thing.
“Planet Money” also highlighted the cost of promoting an artist to radio as another reason for EMI’s diminishing returns. The two-million dollar undertaking to get Katy Perry’s five Billboard hits up to number one took a major radio push, and that doesn’t come cheap — even without institutional payola (we hope). But is EMI playing yesterday’s game? It used to be that commercial radio was the only way to find out about new music and be part of a community. That’s certainly not the case anymore. Exposure can come from anywhere, and some of it doesn’t cost a dime. Of course, we still love radio, especially the noncommercial side, where they actually play music beyond the latest Katy Perry. The point is that there are now countless other ways that music can be discovered. Can commercial broadcast behemoths still create pop stars? Obviously. But the return on investment might not be what it once was when boy bands walked the earth. Why exactly, is this news?
These are expenses the major labels take on but indies would never dream of. Many indie artists and labels find success on noncommercial radio and the internet, as Bon Iver’s recent Grammy win attests. Yes, we do find it somewhat ironic to be saying this in context of discussing an NPR program.
The weirdest thing to us is that that Katy Perry is not signed to a “360 degree” deal, which would have given the label the opportunity to take a slice from every aspect of the artist’s brand — from merch to tour grosses to lip gloss endorsements. While we’re not necessarily championing that kind of contract, it probably would have netted EMI more money. Another missed opportunity. Could be why EMI is now looking to be absorbed by Universal Music Group?
EMI’s inability to make more than a few million dollars off Katy Perry’s five number-one hits seems odd, but it’s really just evidence that things are changing. Sure, there’s unauthorized distribution, but that’s not the whole story. We’re willing to bet that one of the biggest reasons that EMI hasn’t made big-time bank off of Perry is because they’re trying to do things the historic way: purchasing entry into the mainstream by plying the old-school gatekeepers with scads and scads of cash. Sure, you might rule the world for a few minutes, but you may end up with less than you started with.
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