The Business Of BPM: When the product is the experience, labels adapt to surviveBy Reggie UgwuWhen he reactivated Big Beat Records as an EDM label in 2010, Atlantic Records chairman/CEO Craig Kallman-w

Reggie Ugwu
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When he reactivated Big Beat Records as an EDM label in 2010, Atlantic Records chairman/CEO Craig Kallman–who originally founded Big Beat in 1987 before selling it to Atlantic four years later–was determined to revive the imprint with its independent spirit intact. He staffed the company with a dozen “dance music fanatics” and set it up to run in its own “separate orbit,” free of a major label’s bureaucracy yet equipped with one’s muscle and resources. But there was another aspect of the major-label system that carried over as well: Artists inked to Big Beat were consistently signed to 360 deals, making the label a partner in all touring and merchandise.

That decision proved critical from Big Beat’s earliest signings, including producer/DJ-turned-international-dance-phenomenon Skrillex, whom Forbes estimates earned $15 million in touring revenue from more than 150 live shows last year. In a genre historically known more for its effects on serotonin levels than for producing hit albums, close involvement in touring and live shows is just one of many ways labels have sought to capitalize on exploding consumer demand.

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“We’ve built out a full touring division that helps market and promote tours and also helps with some production,” says Kallman, adding that Atlantic parent Warner Music Group also handles merch for Big Beat acts. “We want every one of our acts to play sold-out shows every night they’re on tour, so we’re involved in touring with all the acts that we sign on a significant level.”

Though 360 deals and the like aren’t yet the standard in EDM, many of whose stars were self-sufficient before the majors came knocking, they are increasingly common–and not just among the majors. For a recent international tour by artist Wolfgang Gartner, the pioneering, independent dance label Ultra Music handled stage design, props and LED graphics.

“The more you are involved with the creation of the brand of an artist, the more synergistic it becomes and the more you are then involved with different revenue streams,” Ultra founder/president Patrick Moxey says.

Other challenges in the EDM space have brought about new ways of thinking for labels. In January, Nettwerk Music Group launched a singles-focused sublabel called Nettrax in response to the genre’s increasing reliance on singles as ends in themselves. Nettrax signs artists to both one-off single deals and longer-term agreements that include the option of eventually releasing a full-length album on Nettwerk proper.

“There are some good things about the move toward singles and there are some challenges that that presents,” Nettwerk co-founder/VP of A&R and publishing Mark Jowett says. “Nettrax is a way for us to work with an artist and see what they’re about before deciding whether a long-term commitment makes sense.”

In EDM, sometimes singles lead to albums and sometimes they don’t. Swedish DJ/producer Avicii is currently writing an album that will follow his world-conquering, Grammy Award-nominated single “Le7els,” first released in 2011. Skrillex and many of his peers, on the other hand, have yet to record a full-length LP, opting instead to road-test a succession of singles online and onstage before collecting them as EPs for broader consumption.

Ultra and other labels have also had success selling album-length compilations, which mimic DJ sets by grouping singles from an array of artists around a theme. For this year’s Ultra Music Festival, the label will release a soundtrack album in March featuring exclusive tracks from Avicii, Tiesto, Afrojack and more. Sony Music Entertainment cited the strength of Ultra’s compilations as a platform for its own artists when it merged its electronic music operations with the label earlier this year.

Like others in the field, Jowett still believes in the album as the supreme achievement of an artist, but he says singles can support a very lucrative business model provided costs are kept low.

“You can produce records pretty inexpensively these days, and quality records at that,” he says. “And this is music that travels really well, so international sales are strong.”

Regardless of the format, label executives stressed the importance of nurturing the young, club-going, core EDM audience early and often. In his new post as GM of Casablanca Records, which was relaunched as a dance label in 2012 by Republic, Brett Alperowitz says one thing he’s recognized is that most EDM hits literally break first on the dancefloor.

“It’s not airplay, or a block on the iTunes store, or an article in Spin, or any of the traditional ways people discover new music,” Alperowitz says. “Fans will say, ‘Oh, Tiesto played the new so-and-so remix in his set.’ And that’s how they’re finding it.”

To promote its artists, Casablanca has begun sponsoring branded live events in select cities as a platform for engaging audiences directly. Another such platform is YouTube, where Ultra Music’s channel has amassed more than 2 billion views and exceeded 1 million subscribers. The label recently signed an exclusive deal with leading YouTube content partner and gaming network Machinima to handle ad sales against its videos, which serve as an additional nontraditional revenue stream.

Despite a relative lack of crossover albums to push, EDM labels have proved resourceful in monetizing the feverishly resurgent genre. In addition to Nettrax, Nettwerk has made significant investments in its publishing division, which licenses high-energy tracks for use in film trailers and TV commercials.

Atlantic’s Kallman says the most important virtue for any label in the space is adaptability. “As fundamental as making hit records is, the process continues to evolve dramatically because technology is moving so fast,” he says. “What I’ve learned is that you have to approach every day almost as if you’re starting from day one. Humility helps.”

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