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Silicon Follies
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By Andrew Leonard
[08/05/99]

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Meanwhile, in a much smaller room upstairs, Marc Geiger -- founder of Lollapalooza and now CEO of the start-up ARTISTdirect -- was evangelizing his own idea: Musicians should maintain their own Web sites and sell merchandise directly to their fans. With Beastie Boy Mike D. in tow, Geiger promoted his company's ability to build a "direct relationship" between musicians and fans, without necessarily getting the record label involved at all.

There's a conflict brewing here. Record labels are quickly getting hip to digital distribution and the promotional power of the Net, and are hoping to monopolize every moneymaking angle of the online world. On the other hand, new online marketing networks like ARTISTdirect and Electric Artists are encouraging artists to reap those profits for themselves.

Who actually owns the digital rights to Web sites, fan databases and online merchandising?

"When something is new and is there to be captured, I don't know why it's assumed that the label should be owning it," posits Geiger. "The Net channel as we see it spawns multiple new revenue opportunities, including the opportunity to have a relationship with the fan. Artists have the ability to forcibly claim those rights today."

Traditionally, record labels have brought in the lion's share of their revenues by selling records, often using Draconian contracts to minimize the artists' take of the profits. Record labels took ownership of the music, its marketing and sales, reserving only a tiny percentage of the take for the artists. So, the artists made their money by merchandising ancillary products, like concert tickets or T-shirts.

But the rise of MP3s and freely available digital music online has record labels reassessing their business models. If you give the music away, how does the record label generate revenues? Over and over again at Plug.in, record labels advocated the idea of making money from products that have traditionally been ancillary to their business: those tickets, T-shirts, and other promotional gimmicks. Some labels represented at the conference said they would be willing to offer downloadable songs in the MP3 format free of charge, but would demand demographic information and an e-mail address in exchange -- valuable data that can be used for marketing and promotional purposes across the label.

Next page | Who has the right to a band's fan database?