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New Music Business Model: Ancillary Revenues

Yesterday's WSJ has an interesting discussion about a new music industry business model, using the The Pussycat Dolls as the prime example. The key takeaway is the potential revenue from ancillary lines of business.

Here's your ubiq-cerpt:™

"The Pussycat Dolls aren't due to release their first album until next month, but they've already got the No. 1 song on Billboard magazine's Pop 100 chart -- plus their own makeup line and a Las Vegas nightclub. A clothing line, a possible reality television show and more nightclubs are in the works.

The new, all-female pop group's far-flung endeavors are a departure from standard music-industry practice. The Pussycat Dolls' record company, A&M-Interscope, is an equal financial partner in any money-making enterprise the group participates in, from touring to TV.

Interscope last year created a company it jointly owns with the Dolls, which at the time wasn't a pop group at all, but rather a long-running Los Angeles dance troupe that performed a burlesque routine at nightclubs and events. Now the Dolls consist of six members who record and tour and another eight-member troupe that performs in Las Vegas.

Normally, music companies make money only by selling their acts' recordings, whether on compact disc or as digital downloads. Music labels typically don't see any direct benefit from concerts, movie appearances or ads in which a performer appears. Past manufactured pop groups, such as the Backstreet Boys, were usually created not by their record labels but by their managers, who primarily reaped the profits from promotional activities.

As recorded-music sales have plummeted in recent years -- due to excessive pricing, weak offerings, lack of consumer interest, and competition from other entertainment -- there has been a search for alternative sources of revenue.

And, its beyond the usual touring and t-shirts. Call it more than Merch:

"One of the most relevant words in the music business today is 'ancillary,' " says Jeff Haddad, the Pussycat Dolls' manager. "It's no longer strictly music."

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Source:
Pussycat Dolls, Music Label Share All Profits in Novel Deal
ETHAN SMITH
THE WALL STREET JOURNAL, August 26, 2005; Page B1
http://online.wsj.com/article/0,,SB112501337985823631,00.html

Tuesday, August 30, 2005 | 08:30 AM | Permalink | Comments (4) | TrackBack (0)
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Comments

So let me get this straight: The new music business model is take the pre-fab boy band model to its extreme, making the "acts" not musicians or artists so much as subsidiary corporations of their record labels, designed not to make music but rather for ease of insertion into any media outlet? Color me bored and depressed....

Posted by: Jason | Aug 30, 2005 11:51:21 AM