What Frank Ocean’s Bombastic Blond Moment Tells Us About The Future Of Artists And Labels

When Frank Ocean’s latest album ‘Blond’ dropped, it did so like a nuclear bomb, sending shockwaves throughout the music industry. In one of the audacious release strategies of recent years Ocean and his team at 360 fulfilled the final album contractual commitment to Universal Music by ushering his breaking-the-mold visual album ‘Endless’ onto Apple Music.  Featuring collaborations from the likes of Sampha and James Blake and set as a loose soundtrack to art house visuals, ‘Endless’ looked like the sort of digitally native, creative masterstroke that would win plaudits and awards in equal measure. But no sooner had Universal executives started daydreaming about Grammys then along came what turned out to be the ‘actual’ album ‘Blonde’, self released by Ocean (Universal contractual commitments now of course conveniently fulfilled) and, for now at least, exclusively available on Apple Music. You can just imagine seeing the blood drain from (Universal CEO) Lucian Grainge’s face as the full magnitude of what had just happened came into focus. In truth ‘audacious’ doesn’t even come close to explaining what Ocean pulled off, but where it gets really interesting is what this means for the future of artist careers.

Artist-Label Relationships Are Changing

Quickly sensing the potential implications, Grainge swiftly sent out a memo to Universal staff outlawing streaming exclusives…though voices from within Universal suggest that this diktat had been in the works for some time . A cynic might even argue that it was politically useful for Universal to be seen to be taking a strong stand ahead of the impending Vivendi earnings call. As the ever excellent Tim Ingham points out, in practice Universal could put a streaming exclusives moratorium in place and still have a good number of its front line artists put out streaming exclusives. This is because many of the deals these artists have are not traditional label deals where Universal owns all the rights. And that itself is as telling as Ocean’s bombastic blond moment. Not so much that Universal is probably the major with the highest amount of its revenue accounted for by licensed and distributed works, but that any label’s roster is now a complex and diverse mix of deal types. Artists are more empowered than ever before, and thanks to the innovation of label services companies and next generation music companies like Kobalt, labels have been forced to steal the disruptors’ clothing in order to remain competitive.

Streaming Exclusives Represent Another Option For Artists

Just as labels had started to successfully co-opt the label services marketplace by launching their own – e.g. Universal’s Caroline – or by buying up the competition – e.g. Sony’s acquisition of Essential Music & Marketing – along come streaming services giving artists another non-label route to market. In truth, the threat has remained largely unrealised. Exclusives on Tidal have most often proved to be laced with caveats and get out clauses (e.g. Beyonce’s ‘Lemonade’ arriving on iTunes 24 hours after landing ‘exclusively’ on Tidal). Chance The Rapper’s (in name only) mixtape ‘Colouring Book’ and Ocean’s ‘Blond’ are exceptions rather than the rule. So all that’s about to change now right? Not necessarily…

Album Releases Require More Time Than Apple Probably Has

As anyone who works in a label will tell you, releasing an album is typically a long, carefully planned process with many moving parts. It’s not something you do in a couple of weeks (Ocean started building the hype and expectation for his latest opus a year ago). If, for example, Apple was going to start doing exclusives routinely, even if it just did 20, that’s still a new exclusive to push every 2 weeks. That might work, at a stretch, for music service retailing promotional pushes but is far short of a fully fledged album release cycle. Which means that even for just 20 exclusives Apple would have an intricate mesh of overlapping release campaigns. This is something that labels do with their eyes closed but would it require new organizational disciplines for Apple. Not impossible, but not wholly likely either.

In practice, exclusives are likely to be limited to being the crown jewels of streaming services, their most valuable players, creative playmakers if you like. Even for Netflix, that pioneering exemplar of the streaming originals strategy, only spends 15% of its $3 billion content budget on originals and probably won’t break 20% even by 2020. What Apple and Netflix have in common is that they are using exclusives as a customer acquisition strategy, achieving their aims by making a big noise about each one. But if you’re releasing exclusives every week or two the shine soon wears off. And suddenly the return on investment diminishes.

Streaming Exclusives Are Unlikely To Turn Into A Flood

None of this means that we won’t see more artists striking streaming exclusives. We will, regardless of what labels may actually want to happen. And most of those will probably be on Apple – the service with bottomless pits masquerading as pockets. But the trickle will not turn into a flood, a fast flowing stream perhaps (see what I did there) but not a torrent.

Although they might not realise it yet, Kobalt might find themselves hurting more than the majors from this latest twist in the Exclusives Wars. Kobalt has probably done more than any single other music company to drive change in the traditional music industry in the last 5 years, showing artists and songwriters that there is another way of doing things. But Frank Ocean has just shown that there is now new another option for established artists looking for options at the end of a label deal.

Most importantly of all though, is that streaming exclusives (and indeed label services deals) work best when an artist has already established a brand and an audience. Most often that means after an artist has had a record label recording career. Apple cannot be relied upon to build anything more than a handful of artist brands. One of the founding myths of the web was that it was going to do away with labels and other traditional ‘gatekeepers’. Now, decades later, labels still account for the vast, vast, vast majority of music listening. Make no mistake, a momentous value chain shift is taking place, with more power and autonomy shifting to the creators, but that is a long journey and ‘Blond’ is but one part of this much bigger shift.

Dear Lucian Grainge…

Dear Lucian Grainge and co,

Congratulations on your successful bid for EMI.  You are about to find yourself in charge of an unprecedentedly large share of the world’s music market.  Not so long ago, to have even imagined that regulators would countenance such a situation would have been fantasy.  But the world has changed, and I’m sure you’ll be glad that Prime Minister Monti will be too preoccupied with cleaning up Silvio Berlusconi’s mess to block another EMI acquisition (though time will soon tell whether Joaquín Almunia will be any more understanding, or indeed if he intends to carry on Neellie Kroes’s crusading).

For argument’s sake, let’s assume that the acquisition clears all regulatory hurdles and challenges.  You now control more than a third of the recorded music market.  And although some suggest that market share doesn’t matter anymore, I just don’t buy it.  In fact I think market share matters more than ever and I think you do to.  Of course, in pure business terms market share on its own means nothing.  Revenue pays the bills, not market share.  And yet, in the digital arena, market share takes on a whole new meaning. Because you and your label peers still exercise an effective monopoly of supply of content to digital services, whoever holds the largest market share holds the greatest degree of market control and can thus shape the market.

But you already know this because Universal was already the world’s largest label before the EMI acquisition and Universal exercised that dominant position to full effect.  I have to say, I think Universal has done so in a way which, on balance, has encouraged marketplace innovation.  Being the first to license to edgy services such as Spiral Frog, Comes With Music and – in principle at least – the stillborn Virgin Media unlimited MP3 service, saw Universal shoulder the risk of disruptive models.  You may have charged a premium in these situations for being the first major willing to take that risk, but you knew that your unique position as the world’s largest record label would – in most cases – led to the other majors coming on board.  (A fact that your licensee partners were banking on and were willing to pay that premium for.)

Now, as head of an even bigger ‘world’s biggest record label’ I’d love to watch you oversee a stepping-up of this approach.  And I’m not even too bothered about you charging a premium for being the first to license.  (Between you and I, that’s because I’m waiting for market dynamics to balance things out, for your bold licensing strategy to pull the rest of the marketplace with you, and to such an extent that all of the majors will be fighting to be the first to license to the next disruptive service.  So that nobody will be able to charge a premium for being first anymore.   I guess when it comes down to it, I’m hoping your exercising of seller-control will paradoxically create a buyers’ market.  But I can keep a secret if you can).

And while we’re talking, what I’d like to see less of, is using the justification of ‘risk mitigation’ as a means of stifling the market.  Yes, all majors demand big fat advances from digital services, and yes, it does a great job of separating the wheat from the chaff, of ensuring the market is driven by serious companies with serious scale.  But, as much as the prospect of the digital market evenly split between the Triple A of Apple, Amazon and Android may be more palatable to you than one in which Apple controls 75%+, you don’t really want that any more than I do. As pesky and unpredictable as those small disruptive start-ups can be, they are the ones which ultimately drive the quantum leaps in digital music progression.  If young start-ups have to commit the majority of their investment to label advances, that means that they will have so much less to spend on technology development and marketing.  Which of course means that you end up with safely secured digital income but no great new services driving the market forward.   Have you stopped to wonder why there has been a slowdown in licensed digital music services?  VCs are getting tired of financing non-starters.

Why am I firing this broadside at you when all of your major label peers are just as guilty?  Because now as head of the world’s biggest ever ‘world’s biggest record label’ I think it is only right that you start using your power to drive change across the entire market.  Your company has done so well in the digital arena by being bold, ambitious and, most importantly of all, by being innovative.  I’ve long held Universal up as the innovation standard for traditional media companies of all shapes and kinds.  But there comes a point at which that innovation must focus on providing the necessary conditions for driving innovation in the marketplace.

In short, I am asking you to continue to be a catalyst for innovation across the digital music marketplace, but also to resist succumbing to the conservatism and caution that your unprecedented market share will undoubtedly tempt you with.

Be bold, be brave, take risks (big risks) and most importantly of all, use your new power responsibly, don’t give the sceptics ammunition.  The digital music market needs Universal Music to continue to drive innovation not stagnation.

Good luck!

Kind regards

Mark Mulligan