The business model of a record label is a funny one. It has been said that about 8 out of 10 albums lose money, so it is the 2 out of 10 that hit the jackpot who have to bail out the losses of the other 8. It is a ridiculous system, but in an industry that is at the mercy of fickle music lovers alongside vast production costs, it seems an unavoidable one. In the ‘olden days’, when fans were happy to part with cash money for records, the labels had enough revenue to nurture new bands, spend a bit of time in the studio, develop talent for a long term career – think Bowie, Rolling Stones, U2. Things are a little different nowadays. With the advent of torrent sites, P2P sharing and legal streaming sites such as Spotify, Last fm and Pandora, the labels simply aren’t making money anymore. Or at least, not as much money. Pair that with the falling cost of CDs, forced down by loss leaders in the market such as Tesco and Asda, and what we have is a great big money-haemorrhaging mess. The labels were slow to recognise the vast potential the internet offered an industry such as theirs, playing catch up with sites such as Napster, Pirate Bay and Limewire, but when they finally got round to monetizing digital music on their own terms it was too late. The public had seen the goods, and the goods were free.

With a burgeoning P2P and torrent ‘scene’, naturally the profits of the labels are reduced and so new measures have to be introduced to maximize the money making potential of their products. Where at one time bands would be signed because they showed long term potential, now artists are being signed because they are already fully formed, instant and a dead cert in terms of record sales. A & R scouts are less likely to take a punt on a new artist unless they have clear commercial potential and Labels don’t necessarily have the money to spend on developing new talent over a 5 album deal. What they want are record sales, and so dawns the era of disposable pop music, artists who are here today, gone tomorrow along with the descending production values that brings. It’s a strange time when the ‘one hit wonder’ becomes the norm. There’s huge pressure on artists to score a number one hit on their debut single and album, and if they don’t, they are deemed to have failed. Of course, this isn’t the case with every single band or artist signed to a label, but it is definitely a growing trend, brought on by the need to make money, and to make it fast. It is a frightening thing to think that if this had been the attitude fifteen years ago, Radiohead would have been dropped by their label immediately after their poorly received first album, Pablo Honey.

Independent labels have always been the quiet, underlings to the behemoth majors and have tended to have a less commercially minded approach to their artists. However, they too are suffering from falling record sales. Even independent labels need a big hitter to pay for the rest of their roster. Domino Records have Arctic Monkeys and Franz Ferdinand; Beggars Banquet have The White Stripes and Adele; Rough Trade have Arcade Fire and The Strokes. Although artistic integrity tends to remain intact longer at independent labels, they too are shying away from new signings that don’t at least show some commercial potential, demonstrated by the recent influx of break through artists signed to the smaller labels.

Some artists have done away with record labels altogether and have recognized that music has lost it’s value - the only real way to make money in today’s climate is to sell out massive stadiums tours. This doesn’t help unsigned or new bands in any way, but it sure as hell helps the likes of Prince, who gave his last album away free with The Daily Mail, but played 21 sold out shows at the O2 for huge personal profit. He’s not daft, is Prince.

All of these changes come from a need to make money in a market with shrinking revenue streams. The Internet is the maker and breaker of the music industry as we know it. We have unprecedented access to music from all over the globe at our very fingertips, unsigned bands have a forum unto which they can distribute their music, promote themselves, do away with the shackles of a record label. But at the same time, the Internet has destroyed the value of music. Great for music fans, not great for brand new bands who want to make money or get signed. Because you can’t touch it or see it, people seem to think that music should be free, regardless to the hundreds of skilled and talented people involved in producing an album. Labels are faced with the ‘bottled water’ quandary: How do you get people to pay for something that they can get for free? Evian seem to have figured it out. The music industry, however, have some way to go.

Someone described us as a “boutique agency” the other day. I’m not sure I’m 100% happy with that description because boutique sounds like something that’s small and expensive. But the concept of working with a digital-only agency versus one that does a variety of marketing disciplines is one that people talk about a lot.

I’m going to be biased in favour of our own set-up, but my view is based on my own real experiences over many years. There are a few myths that are banded around about the benefits of one approach over the other. These are a few of them:

Going to a one-stop shop ensures joined-up thinking

I’m not saying this is the case for every agency, but what I have observed is that each agency within a so-called  'integrated' group will have its own P&L and its own interest in not sharing the love around. If one part has a budget for the year from one of their clients, they are really loathed to give it away to anyone, even if they are all part of the same group. Your DM agency is unlikely to recommend that this year you divert a larger part of your marketing budget to digital – because it will reflect badly on their own business unit’s P&L.  How do you think the excuse that you missed your targets this year is because you were bolstering the Group elsewhere going to go down?

Bigger is better

Imagine, all those experienced directors from all those marketing disciplines all thinking about my business? Er... no. I worked for a large agency where everyone tended to operate in silos. OK they were big and some of the people there were bright, but the client might have one person fresh out of University really thinking about their business. He or she may get a share of a designer and a developer, but again, experience and expertise was a real lottery. Unless you had a lot of money to spend. But please don’t ever think that in a large agency the CEO sits down on a Monday and applies his or her enormous brain to each and every one of the campaigns going out that week.

Multi-disciplined means multi-expertise

Again, not always so. A lot of agencies will offer digital because they see an opportunity to cross-sell to their existing clients. I’m talking here more of agencies whose real expertise lies in something else. This may work for a bit of an HTML newsletter here or there, or a flash microsite, but ask them about database-driven content or video delivery and watch them reach for the “I’ll get back to you on that one” excuse.  I tend to think of it like asking your plumber to build you a shelving unit. Yeah – it all kind of falls under the same broad umbrella, but really wouldn’t it be better to get a carpenter to do that?

So, if being a boutique means that we are digital specialists, that we are small enough that the senior people are able to really care about each and every one of our clients, then I guess we are that. And if a boutique means that we have some soul and passion, where the department stores recycle the same old shit just to make the figures work, then I’m happy to be a boutique agency every day of the week.

Barcamp came to Thailand for the first time on Saturday. As codegent was one of the main sponsors (along with a couple of lesser knowns - Google & Microsoft) Matt and I felt it our duty to come out to Bangkok and join the fun.

Topics ranged from the seriously geeky (the virtues of streamlined ssh) to the seriously socialist (how Open Source can empower the common man) but in between we had some great discussions about RESTful web apps, PHP Frameworks and the most enthusiatic man on the planet eulogising about Twitter. There was even room to talk about online adult video.

The event was a huge success and undoubtedly Barcamp Bangkok II will follow next year. It's just cool to meet the people from around the globe who are as excited about this whole 'web thing' as we are.