For a business predicated at least in part on bringing cutting-edge content to young audiences, the music business remains shockingly slow when it comes to adopting new technology. As recently as the late nineties and early oughts, major industry publications were referring to the internet as a fad, and the flat-footed and baffling response to the rise of Napster was a case study in how not to handle disruptive technology. Rather than recognizing that there was a consumer demand to consume music online and creating new businesses around it, the labels whined and sued and let third party players like Apple come in and scoop up the business. When streaming services services started up, labels were again late to the party, and more third party business stand to profit in a space the labels could have completely owned.

From the label perspective, it could be argued that they don't need to innovate as long as they hold the rights to the music -- it gives them ultimate bargaining power and the ability to take stakes in companies that have track records without taking on much risk. But a growing number of artists are rejecting the label model altogether, with Chance the Rapper serving as the most successful example, and more legacy acts are taking back their catalogs once their deals have expired. The idea that tech companies should bow to labels just because they control the IP is starting to fade fast; a new generation of entrepreneurs and creators are simply deciding to avoid the hassle and innovate elsewhere. In virtual reality, for instance, many labels expect creators to simply bring them budgets and pay talent fees, and those creators are choosing to simply walk away and work in other mediums. The danger in this is that labels and artists will be left behind the curve and then have to race to catch up, at a detriment to their business.

What labels can do is focus on disrupting themselves from the inside out. Every few years the labels seem to pay lip service to incubating new tech companies or making investments, but not much ever seems to come out of this.If the labels devoted serious time and energy to snapping up young tech talent and allowing them the freedom to explore, they could actually help shape the direction of new technology, and get themselves out of the responsive cycle they've been stuck in for years.

Alas, this is probably not meant to be. It's the classic example of the innovator's dilemma -- the incumbents believe that because their strategy has been successful so far, it will continue to be successful moving forward. Labels are also huge companies with layers of middle management and bureaucracy, and when people are more concerned with keeping their jobs than doing their jobs, it stifles innovation. The churn at the top of labels also disincentivizes creativity -- it's easier just to hang on for a few years, keep things afloat, and cash out at the end than it is to be future-focused and make potentially risky changes.

Labels need to flip their line of thinking in order to truly grow in this new digital era. They should be throwing hackathons, hiring top engineers, and innovating much of this themselves in house while also encouraging the music tech scene. Interestingly enough, their involvement in startups can even backfire in certain instances- like when the labels hammered down on Spotify for more money (even though they own a sizable equity stake in them and take a huge percentage of revenue) because Apple came to the table with higher rates. The difference is that Apple can afford to make music its loss leader as it is a tiny portion of its business, versus Spotify who live off of only music. It is almost a replication of what happened when big box retailers drove mom & pop record stores out of business, who couldn't compete with the loss leading prices on CDs- and the labels ultimately paid the price for this, being held hostage for limited space in big box stores who just want people to buy a washer and dryer. This type of short term over long term thinking seems to be a pattern at the majors that hopefully will change.


Those potential risks are the only way the business can move forward, though. It'll take a few brave leaders stepping up to start putting things into motion, but the music industry needs to start innovating, fast, or risk being left behind.