Labels try to understand fans better with own sites

NEW YORK Wed Dec 17, 2008 4:14am EST

NEW YORK (Reuters) - After years of watching everyone from Apple Inc (AAPL.O) to YouTube develop profitable and close relationships with music fans, major record labels have been quietly making a big push to understand who buys their music.

The labels are betting that owning the music fan relationship will be key in their ongoing struggle to turn around dwindling sales of music after nearly a decade of being ravaged by digital piracy on the Web and CD copying.

EMI said on Wednesday it was taking the wraps off its long-rumored EMI.com consumer portal for U.S. and UK fans, featuring options for them to discover both new and archive music and videos from their favorite EMI artists.

The music company, whose artists include Coldplay, Kylie Minogue and Queen, described the new site as a "learning lab."

"It will help us gain even more knowledge about consumers' preferences," EMI executive Alex Haar said in a statement.

London-based EMI is somewhat late to the game in launching a group consumer site. Its larger rivals all have group or label sites like Vivendi's (VIV.PA) Universal Music Group and Sony Music Entertainment's (6758.T) MyPlay.com and Warner Music Group's WMG.N Atlantic Records.

As CD sales have plummeted in recent years, labels have often been criticized for not knowing who their customers are, enabling a transfer of power to partners like Apple's iTunes and Amazon.com (AMZN.O). This was seen as bad practice in a business environment where customer data became vital for making key decisions.

Attitudes have begun to change at major labels, who have started appointing executives with experience in consumer marketing and digital to top positions. For instance, EMI this year appointed former Reckitt Benckiser executive Elio Leoni-Sceti as chief executive of recorded music and Douglas Merrill, a former Google executive, as president of digital.

Executives said that the need to understand what fans want and how they want it has become a crucial part of the way a music label is run today.

These executives insisted that the motivation for owning the fan relationship is not about cutting out the retailer or building intrusive databases but will instead grow new forms of revenue such as advertising, tickets and merchandise.

"We create products and we create platforms and we can go direct-to-consumer, which is free for the fan, but the B2B(business-to-business) part is where we make our shekels," said a person familiar with Universal Music Group's plans.

Universal, the world's largest music company, aggregates its advertising scale across universalmusic.com and 300 artist sites such as U2.com, blackeyedpeas.com and others.

This is a long way from the label's traditional role as wholesaler with little or no relationship with the fans. In the past the labels discovered an artist, created an artist brand and product and then only earned revenue by selling records.

Warner Music, the No. 3 music company, said a third of its artist roster is now signed to 360-degree deals that go beyond recording rights to include fan websites, merchandise and other media products for example.

"You have to go to where the consumers are, be it MySpace, YouTube or fan sites and you have to monetize every part of the chain," said another music executive who asked not to be named.

(Reporting by Yinka Adegoke; Editing by Gary Hill)

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