google-site-verification=svZ8iJUoxD8RZw8aRWYBCrvo0mDJN3S0dhsn0daAdsE A Market Analysis for Atlantic Records

A Market Analysis for Atlantic Records

Actualizado: 16 de oct de 2019



January 28, 2016

EXECUTIVE SUMMARY

1. Objective

2. Research Methodology

3. Research and Key Findings

3.1 History

3.2 Digital Sales and Streaming Shares

3.3 360 deals

3.31 Examples

3.32 Response

3.33 Artists Opinions

4. Conclusions

5. Recommendations


OBJECTIVE

This analysis document purpose was created in order to be able to have an insight into what Atlantic Records was, how it developed, how it stands in the present and where it can go depending on certain actions the company may take.


RESEARCH METHODOLOGY

The information contained in this report is publicly available on the official pages of Warner Music Entertainment, Atlantic Records and Billboard. A few articles were found via Full Sail library and EBSCO Host.


RESEARCH AND KEY FINDINGS

HISTORY

Atlantic Records is an American record label and a branch of Warner Music Group. It was founded in 1947 by jazz and rhythm and blues fanatics and avid listeners Nesuhi and Ahmet Ertgun with the help of a jazz label National Records A&R and manager named Herb Abramson. By 1949 they had their biggest hit with the McGhee brothers who sold over 400,000 copies. By 1952 they signed R&B legend Ray Charles.


Atlantic Records has always been a pioneer regarding technology and new ways to record; in 1953 they were the first independent record label that recorded in stereo and issue commercial LP’s recorded in binaural recording (stereo). They also were the first ones to press records of 45 rpm, later on 78 rpm. By 1958, Atlantic Records was America’s second largest jazz independent label and popularized the genre Rhythm and Blues with pioneers such as John Coltrane and Ray Charles and later on entered into the folk and gospel era with Aretha Franklin.


Later on, by 1967, Atlantic Records was sold to Warner Bros.- Seven Arts for 17.5 million USD. Along with internal changes, external changes were going on and music genres and popularity diverged from jazz to rock. Atlantic Records had notable intermission with bands such as Cream, Led Zeppelin, Crosby Still and Nash, Genesis, Yes, Foreigner, AC/DC, etc.

Warner Music in Atlantic Records.


In 2004 Warner Music created Atlantic Records Group; an umbrella label to cover every possible genre need with more than 30 independent labels.


For Warner Music Group as of 2015 recorded music digital revenue grew 3.8%, domestic recorded music digital revenue was $576 million, or 58.8% of total domestic recorded music revenue, versus 57.0% in the prior year. Total market shares as of 2015 for Atlantic Records UK singles was 9.0%, 8.2% streaming and 5.5% artist albums.

Digital Sales, Streaming and Shares.


In 2008, Atlantic Records became the first label to sell more than 50 percent of its music as digital files. "It's not preparing for a digital future — we're in the digital business," says Julie Greenwald; Atlantic Records COO. As trend makers and trend followers, Atlantic Records foresighted the impact of digital downloads in the music industry.

While, in 2015, sales dropped drastically in both CD’s and digital 5.7% and 6.6% respectively in the UK. Generating concerns amongst the industry because streaming is becoming rapidly a trend.


The label has increased its current market share by more than 14% since the beginning of 2004. And year to date, Atlantic Records ranks N. 3 in total market shares in global record label’s market. For Atlantic Records UK, its global record shares ranked singles was 9.0%, 8.2% streaming and 5.5% artist albums. 2014 and 2015 main income artists were Ed Sheeran, Charli XCX, and Charlie Puth. Ed Sheeran’s earnings in 2015 were of 57 million, generating 20 million on Spotify while his touring profit just in the USA was of $8,122,992. Ed Sheeran is the most streamed artist in the world; according to Spotify, Sheeran tracks have been streamed approximately 2.9 billion times in total on the service.


360 DEALS

As of 2011, 360 deals became the contract of choice for labels, and they began implementing it to almost all independent artists who wanted to ascend to the music industry.

But what are 360 deals? Its name comes from a circle and its 360 degrees, basically it covers everything that an artist needs without having to go to another agency or label in the process. The label gets a certain percentage of the artist's revenues and is in charge of publishing, licensing, recording, merchandising, touring, etc.

While most labels believe this is the future and a way to help artists, most people don’t feel that way. Julie Greenwald (Atlantic Records Chairman/COO) states that "How do we do what's right not just by looking at [profit and loss] on one album but by taking a very long-term approach? How do I get you to become an arena-touring act someday and sell a ton of T-shirts, music, whatever?".

A good example to understand 360 deals would be the next one:

Justin Bieber is one of the highest paid artists in the world, as of now he is worth 200 million dollars.


Normally, 360 deals take between 60 to 80% of the total revenue an artist creates. So, let’s say that Justin’s deal was that he earned the total of 20% of his revenue. The label gets 80% of everything Justin Bieber makes in different areas like merchandising, publishing, touring, etc. And give 20% of that net worth to Justin Bieber.

While 20% doesn’t look too much, Justin also has to pay for a lawyer, touring manager, manager or more.


So in other words, the 200 million Justin's worth is the 60% out of the 20% of the total earnings he has.


That doesn’t sound like a bad investment for the label or Justin, but what if those same deals go to independent artists that didn’t have the same luck as Justin, well then the record label has to charge in some way the investment already made.


There is a general believe that 360 deals are obsolete and that a great artist can do everything by themselves with all the tools technology give to people.


Atlantic thinks that is a perfect opportunity because “The need has increased” as Craig Kallman (Atlantic Records Chairman/CEO) mentions, his point of view resides in the value of A&R and how they are able to help people find the right artists and let everyone hear them.

Cee Lo Green’s successful single F#ck You is a clear problem of how Atlantic Records and major record labels are being perceived by people and artists nowadays. As mentioned before, 360 deals create discontent in fans and artists by chaining artists into complicated contracts. As Cee Lo mentions “the success of the song is completely ironic to me because I just wanted to be dropped from my label, Atlantic just didn't understand me, even after I was signed. So I was like, 'What's the most ridiculous thing we can do?' I couldn't believe they liked the song. I was trying to offend them."


CONCLUSIONS

In summary, Atlantic Records is a worldwide renowned label that has its own mark in the music industry, business and history. It is a great acquisition for Warner Music Group and is facing some serious threats with the concept of 360 deals and its perception amongst people. If common people who are not related to the music industry have the knowledge of what 360 deals are, less and less artists are going to sign them willingly. While Atlantic Records, and a lot of other record labels believe that it is not a serious threat and that they are completely needed in order for artists to emerge from the unknown, there is a possibility that independent labels, independent recording studios, independent venues and such can gain a serious market share. The 360 deal threat is just opening a gap in the machine that is a music industry that maybe won’t have a serious effect in the present, but it might in a near future.


RECOMMENDATIONS

As mentioned before, both digital and physical CD’s are dropping their sales in UK, Atlantic Records UK being the one with the major global record shares of Warner Music Group, should be preparing for a contingency plan for the new trend that is streaming. Should they create a new app with a variety of Atlantic Records artists, in which users pay a certain amount and get special box sets, unreleased contents, t shirts, etc.





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