hybrid label+blog economics

After I thought more about RCRD LBL‘s economics, I came to a couple conclusions.

I don’t think they’re selling their spots at the listed rates. I think the ads they are selling might be part of package deals with other sites that I don’t know about, because they can’t deliver enough traffic for major brands to pay attention to them. And I think the actual rates are lower.

I also think that I understand their business strategy. They’re able to put major brands inside the world of way-cool MP3 blogging without risking association with copyright infringement. It’s hip but also clean. The business is relying on their squeaky clean copyright status to charge a premium for ads. So even though I don’t think they’re getting the listed rates, I do think they’re getting much better rates than ordinary MP3 blogs.

This points towards an elegant and innovative business model.

Ordinarily internet music companies are forked between two deaths. If they keep it clean they get killed on royalties for licensing. If they’re fast and loose with copyright, they get killed on legal bills and eventually are forced to license anyway. But either problem assumes that they have to carry a broad selection of everything with cultural presence.

RCRD LBL avoids both forks by doing their own A&R, then packaging the results as a blog. The reason they’re a label is that they do their own research work to find obscure gems. It’s important that these are obscure, because it means that licensing costs can be kept down. It’s important that they do their own research, because there aren’t yet strong discovery tools for digging out the gems in the mountain of unknowns. The reason they’re a blog is that they aren’t expected to carry everything everywhere. If they were a search engine like Seeqpod or an encompassing content browser environment like All Music Guide, they would need to carry music that they couldn’t afford to license. The blog format puts them in position to limit what they release.

Note that the importance of lowering royalty costs doesn’t imply that the musicians are getting screwed. If the musicians earn exactly the same as they do on a traditional label, RCRD LBL can still have a winning cost structure by keeping royalties that would normally go to label and publishing bills.

Will it work? It depends on execution. They need to get their traffic up enough to do business with the brand advertisers who will pay a premium for RCRD LBL’s clean but edgy product line. This range is about a million uniques a month.