Is the music industry finally pursuing the long tail?

Lower fixed costs reduce the breakeven level of sales. So isn’t the long tail really just a hedging strategy that seeks to reduce the risk of the cash flows?

from knowledge@wharton

EMI Music announced on July 6 that it would back a yet-to-be-named record label, started by a management company called The Firm, that abandons the recording industry's traditional royalty payment system for what EMI terms a more "artist-friendly" profit sharing scheme. Instead of paying artists upfront and taking the bulk of the profits later, The Firm will split profits with artists signed to the venture. In theory, this arrangement should lower the risk and upfront costs of finding new talent and encourage more innovative promotion. "You have to give the recording industry credit for realizing that the barriers to entry are lower," says Kendall Whitehouse, senior director of information technology at Wharton. "The industry no longer has a chokehold on distribution. Indie bands promoting their music on [websites like] MySpace are changing the rules."