On Tuesday Wal-Mart started selling on an exclusive basis a three-disc collection by the popular 1980s band Journey called “Revelation.” The difference, however, is that there is no middleman: the album was bought directly from the band without the help of a record label. Journey went right to Wal-Mart and kept most of the money a record company would normally take as profit for the group. Last year Wal-Mart made a similar deal with the Eagles, who like Journey are represented by Front Line Management, the nation’s largest music management company.The Eagles CD sold three million copies, and Journey started of with 45,000 in its first three days. Good numbers even back in the good ol' days of music, and huge in the age of downloads.
I find the info about cutting out the labels interesting:
“It just goes to show you that fewer artists need to be associated with record companies,” said Larry Mestel, chief executive of Primary Wave Music Publishing and former chief operating officer of Virgin Records. “They don’t need to give up a big chunk of money to the record companies when they’re iconic. They can go direct to Wal-Mart and make four to five dollars per CD.”In addition to being a moneymaker (one presumes) for Wal-Mart, such deals are also traffic-generators and brand-builders. For the labels, though, it's just another problem:
It’s hard to tell how much traditional labels are threatened by the prospect of artists’ selling directly to retailers. New albums from more established acts can be less profitable if they have negotiated a higher royalty rate. And although the Eagles are reliable sellers, Journey is what industry executives delicately refer to as a “heritage act,” a steady summer concert attraction that sells relatively few albums of new material.
“Shelf space has shrunk so much over the last five years that for anyone to give you shelf space and exposure is a big deal,” said Terry McBride, chief executive of Nettwerk Music Group. “Should the labels be worried? There’s been a move away from the labels for a number of years now. And it’s not necessarily their fault. The shelf space to have those records sell just isn’t there. That’s the market reality.”These older acts have long been a reliable source of income for the labels -- steady sellers that don't require much promotion. They also appeal to older consumers who are less likely to download and pirate music.
Oh, and the NYT left out another such deal, announced today, with AC/DC.