Why Do Musicians Still Need Record Companies?

Truth is, they don't. Which is why record companies are bleeding to death. But....

Record companies still represent the state of the art in record promotion. They generate radio play and overall"buzz" for an emerging artist. They also export hit artists from domestic successes to global markets.

So, musicians don't need record companies (and plenty of acts go straight to iTunes these days) but a record company can still help break a record.

The OP asked about record companies, not managers or agents. The admin and financial work mentioned in several responses usually falls to a band's manager. As many have noted, it's usually a bad idea for a band to self manage. See Fleetwood Mac's disastrous experience with Mick Fleetwood at the helm.

Either way, the record company plays a different role.

Zd,

I think most data suggests that SQ is the least of the contributors to the problems killing record companies. Consumers overall don't give a sh*t. They want cheap, fast, convenient. Low quality downloads and streams are the fastest growing segments of the business.

BTW, the blu ray argument cuts this way, too. It's a dying segment that Sony (it's chief proponent) expects to shrink by almost half over the next five years.

Digital distribution (as suggested by the OP) has made record companies (and video companies) less important. And less profitable. I'm pretty sure than anyone in either of those businesses would agree with that sentiment.

I think there's a profitable niche business for high quality recordings (or high quality anything, for that matter), but the giant, hugely profitable record company is a thing of the past because people don't need it anymore. And, in total dollars, they won't pay for it, either. SQ notwithstanding.

Onhwy,

Lower costs increase profits only if the top line can be held constant. Top line music sales are plummeting. Further, the major labels continue to face new competition that ranges from self publication to streaming subscription services. They can try to compete - see Spotify - but the total pot of $ they're chasing is shrinking.

Yeah, we still need book publishers (sorta), but we're not wiling to pay them as much as we used to. Same for TV networks. But, in each case, the value they add to the chain is diminishing. NBC, ABC, and CBS are losing share to HBO and Netflix, et al. They still add value but their historical primary function - sole distribution channel - is done. They can't get paid for that anymore and that will cause them to shrink or, at least, grow more slowly.

The purest example of this might be Kodak. Digital imaging sucked the lion's share of revenue from their business and their best case was survival as a much smaller company. If they had evolved as you suggest, they might have survived, but they wouldn't be Kodak (the huge company that we knew).

That's my point - the BIG profitable record company is a thing of the past. Maybe they'll make big profits promoting concerts, but they won't make them the traditional way; selling recorded music.

Zd,

If I understand you correctly,you're suggesting that the music industry hasn't made sufficient effort to market sound quality and, if they had (successfully) educated consumers on the subject, they wouldn't be "bleeding to death" (my original phrase). You're point is taken, but - in the big picture - it's hard to see how a better effort would have materially changed the fate of the major labels. Every bit of market research I've seen (and I banked the industry for decades) says that high performance (or hi-rez) formats - at best - offer only a short term sales bump.

SACD (to cite just one example) was Sony's (futile) attempt to sell high quality sound. It was generally acclaimed for performance, assailed for convenience (effectively copy protected) and ended up essentially still born. Even more successful hi-rez roll-outs like Blu-Ray (to use your video example), have proven to provide an early bumps as enthusiasts replace their collections with higher quality versions. From a small early base, rapid growth lasts a few years and then fades. Price premiums are lowered and sales plateau, then fade. That's where Blu-Ray stands today. Like other hi-rez formats, it has demonstrated a limited life span.

BTW, SACD was marketed very aggressively in Japan (where new formats are taken up at a much higher rate than in Europe or the US) and still tanked quickly.

Bottom line: Most people in the business believe that, over the long haul, only a small % of the market will pay a premium for high performance entertainment software. This may be enough to sustain a profitable boutique industry, but there's little evidence that it will support a mass market industry. Hence my original observation about shrinking record companies having little to do with SQ. There's little evidence that there are enough $ chasing SQ to support a mass market record industry that attempts to differentiate itself (from cheaper, lower quality SQ alternatives) on that basis.

BTW, the question has been studied to death. I believe that you'll continue to see proprietary hi-rez music formats (even for downloaded and/or streamed content) because the content companies will seek the short-term sales bump. In the end, I don't believe that they'll ever be viewed as a long term, mass market solution to bringing sufficient $ back to the table to revive the business.