Wednesday, May 8, 2013

Music Business Journal #2: MAJOR AND INDPENDENT RECORDS LABEL (Case Studies of Universal Music Group and SM Entertainment)

Fadil Pinandita
Music Business, Intake March 2013
SAE Institute Jakarta
May 7, 2013

Music Business Journal #2:
(Case Studies of Universal Music Group and SM Entertainment)

I.                Foreword
Major records label and independent records labels are the most common topic in music industry. Currently, there are three major labels that are acknowledge worldwide and often referred as the ‘Big Three’; Universal Music Group, Sony Music Entertainment and Warner Music Group. According to the statement above, the rest of the records labels in the world should be counted as independent records label.

What makes them different, the major and the independent? Usually, the major records labels have the larger scale of business and distribution networks, also the larger budget. On the downside, it’s often said that major records label hold more control power of their artists. Meanwhile, the independent records labels are often assumed as the more freedom-giver to their artists, with less creative control over the artists’ works and more lenient contracts. And on the downside, independent records labels often associated with the lacks of distribution networks and funds. But, were that sufficient enough to explain the differences? I feel there’s more left to be unfold as there are still lots of grey area in this matter.

On this paper, I’d like to take a comparison between two companies; Universal Music Group (UMG) as the representative of major records labels, and Star Museum Entertainment (SM) as the representative of the independent records labels. What I’d like to do here is to explain the systems and strategies that are used by both companies with unbiased feeling, so I try to present as much as the facts that I can get from the worldwide web.

II.              Universal Music Group Overview
Universal Music Group (UMG) is counted as one of the ‘Big Three’ major records labels in the world. On their own website, they stated that they are the global music leader with strong position in recorded music, music publishing and merchandising.  UMG is known as one of the largest American music corporation, with the headquarters that are located in Santa Monica and New York, United States. But in fact, UMG is 100% owned by Paris-based media conglomerate, Vivendi SA, since the complete takeover of Matsushita shares in 2006. And now UMG acts as Vivendi SA’s subsidiary.

With the long-running history in the music industry since 1934, under the name Decca Records, UMG acts as a parent of some of well-known records labels with strong history in the music industry. There are some notable mentions, in the likes of Interscope Geffen A&M, The Island Def Jam Music Group, Republic Records, Decca Music Group and several others. UMG has their branch offices all over the world to take care and manage the local artists. UMG also owns Universal Music Publishing Group (UMPG), one of the largest companies in the world that operate music publishing businesses.

It would take too many spaces to list UMG signed artists, but here some big names on their artists’ roster with recent released records: Justin Bieber, Will.I.Am and Michael Bubble. Not only recent artists, UMG also owned the music catalogue from some legend musicians like ABBA, Bob Marley, Marvin Gaye, and some others.

III.            Star Museum Entertainment Overview
Star Museum Entertainment (SM) is an independent Korean multi-purpose company. SM acts as records label, talent agency, producer, event management and music publisher. SM Entertainment founded in 1989 by Korean entrepreneur, Lee Soo Man.  And in 1995, the company became a publicly traded company and traded as KRX: 041510. SM was an abbreviation from Soo Man’s name, but now it’s changed into Star Museum. SM Entertainment headquarter is located in Seoul, South Korea.

During its progression, SM Entertainment owned several subsidiaries: SM Tin Tin Hall, SM Entertainment Japan, SM Academy, SM Beijing, SM Pictures, SM Entertainment USA and many others. Its recent subsidiaries are SM Town Travel and SM Culture & Contents that founded in 2012.

In music department, SM Entertainment holds the exclusive contracts with some Korean big names like Girls’ Generation, Super Junior, TVXQ, BoA, Kangta, Shinee, f(X), EXO and TRAX.  SM also owned all their artists’ music rights, including their old rosters like H.O.T, S.E.S and many others.

IV.           System Comparison
In this part of the paper, I’d like to compare the systems that are used by the both company in music industry. I try to divide the comparison into two parts, the ‘Artists Signing and Music Publishing’ and the ‘Distribution and Promotion’.
a.       Artists Signing and Music Publishing
                                                i.     Universal Music Group
As the parent company of several records label, UMG is not responsible in searching the talents for them to be signed. Those records labels act as the feeder and filter for UMG. One does not simply send their music demo to UMG, the material itself has to be recommended to UMG’s A&R Department by well-known manager, producer, agent, radio DJ or other music industry professional. The artists’ contracts and well-being are controlled by those respective labels. The contract itself can be varied depending on each artist agreement with the certain records label under UMG.

Under UMPG, UMG takes care of the music publishing for songwriter and music supervisor. UMPG also takes care of direct signing and catalogue acquisitions. By the work of UMPG, UMG does not need to get their hands on directly for the music publishing.

                                              ii.     Star Museum Entertainment
As an independent records label, SM is responsible to search and sign its own talents. Since SM Academy is founded in 2003, SM scouts and handpicks all the talents through audition. All the chosen trainees are subjected to a long-term contract for 13 years. But due to dispute that the contract was referred as the ‘slavery contract’, now it is changed to 7 years, if the artist is going to be promoted in South Korea, and 10 years, if the artist is going to be promoted globally. And since then, all the artists that published by SM are picked from the academy.

As music publisher, SM takes care and handles all the music that used by their artists. Until now, there are only a few composers and songwriters that are signed directly by SM. The rest of the composers and songwriters are contracted by their songs that are used by SM’s artists.

b.      Distribution and Promotion
                                                i.     Universal Music Group
In the United States, a sub-company named Universal Music Group Distribution (UMGD) manages and takes care of the sales, marketing and distribution of UMG assets in all formats including digital, physical, streaming, subscription and mobile. UMGD has been the industry market share leader for the past fifteen years.

In some markets outside the United States, UMG companies handle their own distribution and sales. In other markets, UMG companies have sub-contracted services to third parties or entered into distribution joint ventures with other record companies.

Most of the global promotional activities of the UMG’s artists and music are going in the worldwide web through its official websites, including the websites of the artists and the records labels. But the other promotional activities are varies according to the artists’ scoop and each records labels’ policy.

For case study, I pick the Justin Bieber’s 3rd studio album ‘Believe’. The album was released on June 2012 by UMG’s Island Records. But before the album was released, the first single of the album, ‘Boyfriend’, were released first in March 2012. And after the album was released, other promotinal singles from the album were released consecutively. The last single that released was ‘All Around the World’ on February 2013. The physical album itself distributed globally through records stores all over the world. The digital copy of the album is distributed worldwide through iTunes and Amazon.

The success of the album is followed by more than 100 shows of ‘Believe Tour’ that are still subjected to be going on until August 2013 in North America, Europe, Africa, Asia and Oceania.

                                              ii.     SM Entertainment
Until 2011, SM self-distributed its own releases in South Korea. Korean Music Power Holdings (KMP Holdings) took over the responsibility. KMP Holdings are joint venture corporation that limited by shares that are created by seven big records labels and music publishers in South Korea, including SM.

Outside the South Korea, SM only distribute their music officially through distribution labels in several country including Japan, Taiwan, Malaysia/Singapore, Philippines, Thailand and Hong Kong/Mainland China. Some big local music distributor in the likes of Avex (Avex Group, Avex Music, Avex Asia), Universal (Universal Music, Universal Records),  EMI, Warner Music, MCA Music and several others are associated as SM’s music distributor. SM also has SM Entertainment Japan, SM Beijing and SM Entertainment USA in their subsidiaries list to manage some the distribution and promotion activities in Japan, China and United States.

For better explanation, I choose Girls’ Generation’s 3rd studio album, ‘The Boys’, as the case study. The Boys is the first album of Girls’ Generation that including an English version single. On October 2011, the first single with the same title was released. And the full album came out later in the same month, and on November 2011 the album was re-released with their second single Mr. Taxi. The physical album is sold only in some countries by some associated music distributors, and the rest of the world must order the album straight from South Korea. The digital copy of the album is released in iTunes on November 2011.

In United States, the album was released and distributed on November 2011 by UMG’s Interscope Records. And in Europe, the album was released and distributed on February 2012 under UMG’s Polydor Records. The Japanese version of the repackaged album is released and distributed on March 2012 in Japan by UMG’s Nayutawave Records.

The promotional activities of the album including several music performances and local TV show programs in some countries. ‘The Boys’ also extended the ‘2011 Girls’ Generation Tour’ that has previously held in South Korea on July 2011 and China on September 2011. The added tour schedules are in Singapore on December 2011, in Hong Kong on January 2012 and Thailand on February 2012.

V.             Closure
Based on what I’ve been explaining above, the distinctive differences between UMG and SM are the artist signing system and the distribution system. If the UMG relies on its records labels as the feeder, SM relies on its audition and academy program to sign the artist. On the distribution system, UMG has their own company that manages the distribution of its assets while SM has to rely on their deals with other distributions companies outside South Korea.

And with this paper, I’d also like to erase the mainstream ideas that make the major label became the evil side that take full control of their artist, while the independent records label, like SM, even has the artists tied up with the long-term contract. And about the funds and budgets, SM might needs some distribution channel to distribute their products but that doesn’t mean they are lacking in money. In its progression, SM even built the kingdom by having some subsidiaries.

And finally, even though this paper is made as a school’s paper. I hope the little comparison that I’ve made could be media for knowledge and bring the positive attitude to the world’s music industry for whoever that reads it, especially in my country music industry. There’s a long and winding road to reach a success in music industry, and the choice of which road to choose could help to reach the glory.

VI.           References

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