The shift is happening because artists, and especially established artists, are increasingly able to release their music without the help of a record company. Traditionally artists - even big name artists - needed record companies to provide initial funding to produce and manufacture CDs, and then a global network to distribute, market and sell them. But in the digital age music production is cheaper than it once was. And there may be a time in the not too distant future when artists don't need to manufacture or distribute any CDs. And when they do, alternative sources of funding are now increasingly available - from specialist investment houses or consumer brands or major media. So Radiohead are able to do a major global digital release off their own website, and then do a number of deals around the world with independent labels regarding physical releases. And Prince is able to release his album in the UK, and earn from it handsomely, by doing a covermount deal with the Mail On Sunday.
Of course, most artists will probably still want to work with music companies most of the time, but 2007 also showed that that still doesn't offer much security to the major record companies, because they are not the only major players in the wider music business. One other major player is Live Nation, traditionally a venue owner and tour promoter, but they showed they could just as easily operate in recorded music too by signing an unprecedented new deal with Madonna, which gives them a share not only to Madge's live activity, but also in her recording work - audio and video. The landmark ten year deal, worth a reported $120 million to Madonna, saw the singer end her career long relationship with Warner Music, and saw the live music major create a brand new division called Artist Nation to manage this and future similar relationships. Some said Live Nation had bid too high in order to secure such a high profile first signing to its new division, and most seemed to think Warner had been right to resist the temptation to get into a bidding war. But the Madonna deal showed that major artists now had even more choice in terms of corporate partners, tipping the power balance further in their favour.
Quite what is the dream business model that will enable the record companies to properly maximise on their assets, and to regain some power over artists and management, no one is completely sure as yet, though the consensus is that it will be one of those 360 degree business models. The idea of record companies securing their investment in new talent on more than just recordings (eg also taking a cut of live, merchandising and management revenues) has been around for a while now, and those kinds of deals are now being done more frequently, though it is still early days. What happened this year was that we saw the major record companies start to diversify - recognising that if in the future they will have interests in the live, merchandising and management sectors, they better make sure they have people who know something about those sectors in their workforce. The majors started to do just that, partly by appointing people with a live or management background to senior roles, or by buying up smaller companies that already work in those sectors. Universal Music was probably most proactive in this domain, and most obviously through their acquisition of the Sanctuary Group, the original 360 degree music company, whose live and management assets proved attractive to Universal bosses keen to diversify. That takeover brought to an end another long running CMU story - that of the continued financial hardships at the then indie Sanctuary Group. The takeover brought with it a lot of cuts - especially in Sanctuary's own record labels - but those that survived the cull are certainly in a more secure position now that they are within Universal.