Universal Music Group Trying Digital Only Releases 
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Written by Diane Sherwin   
Monday, 06 December 2004

Universal Music Group has begun an experiment with a handful of small artists by signing them to a digital-only label – Universal Music Enterprises Digital. This is a great benefit to small acts that will can receive greater online distribution than independent record labels usually provide by releasing music for these artists through digital only services such as Apple’s iTunes, RealNetworks’ Rhapsody and Microsoft’s MSN Music. If digital sales are substantial (at least 5,000 copies), Universal has the option to release the song or album in CD form and begin retail distribution.

It’s no secret that CD sales have been falling, and the music industry is slowly adopting music downloads. With these falling sales, the risk of signing an unknown band has been increasing, but Universal’s move represents a lower-risk way to sign an artist and release their music, since the costs of releasing music digitally are significantly cheaper than through traditional means.

By keeping costs low, acts that can’t sell millions of albums can still make profits, which is nearly impossible for smaller artists in traditional record contracts. The usual deductions for breakage and promotional CDs will not be taken out of the royalties given to the artists, with a rumored royalty around 25%. But the downside for artists? Universal won’t be funding the recording of their albums or giving them an advance.

Many times the record company advance is the reason major label artists don’t make any profits, as they don’t necessarily realize that the money given now will be recouped from the profits made later. But savvy artists have it easier than ever – with the plethora of recording software available such as ProTools, albums can be recorded in home studios for a fraction of the cost of a major studio.

Another perk for artists is that they retain ownership of their master recordings – very rare in the average major label deal – and only license them to Universal for a specific period of time. What’s the benefit? After the license time expires for Universal, the artist is free to license the song without having to go through Universal, who normally would take a cut from their profits.

Source: New York Times

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