If you thought it was odd that Starbucks (Nasdaq: SBUX ) is starting its own music label, you ain't seen nothing yet. Video game publisher and Motley Fool Stock Advisor pick Electronic Arts (Nasdaq: ERTS ) also plans to launch its own record label with Canada's Nettwerk.
Electronic Arts and Nettwerk One Music plan the joint venture, dubbed Artwerk. It has signed one artist already, Junkie XL, which has provided tracks featured in the popular EA games Madden NFL 07 and Need for Speed: Carbon. Terms of the agreement weren't disclosed. Electronic Arts already provides some video game tracks on Apple's (Nasdaq: AAPL ) iTunes.
This development is interesting for a number of reasons. Although a music label from Electronic Arts may seem odd at first blush, it makes sense, since the video game industry is increasingly recognized as a medium not unlike the movie industry. After all, video games have soundtracks that complement game play. If the new and emerging artists the two companies tout catch on, it will be a fascinating new revenue stream for the game publisher.
Meanwhile, on the music-industry side of things, it's also fascinating that Nettwerk is the company that EA has chosen to partner with, since it seems to have a pretty forward-looking view of the music industry. Although I immediately recognized Nettwerk as the company that distributed some of my favorite industrial bands back in the day, it also manages musicians like Avril Lavigne, Sarah McLachlan, and Barenaked Ladies.
What I found particularly interesting is that Nettwerk also has an interesting take on the music industry as exemplified by the well-known stance of the Recording Industry of America (RIAA). Nettwerk defends digital downloading, stating publicly on its site that it's against litigation and encourages its fans to share music and thus promote its artists. "We take issue with those labels claiming that litigating our fans is in our interest, as it clearly is not."
In addition, Nettwerk has many other unconventional plans that mess with old-school business models in music, such as forming artist-run labels, as well as attempting to harness the power of social networking sites like News Corp.'s (NYSE: NWS ) MySpace. These plans were highlighted in the September 2006 issue of Wired magazine. Nettwerk head Terry McBride points out that the music industry is changing. It's about more than simply selling albums; it's also about selling ringtones, acoustic versions, and live versions, and stuffing what he calls musical "assets" onto USB drives to attract hardcore fans, according to the Wired article.
EA and Nettwerk's Artwerk is currently soliciting for new talent, which seems like another departure from "business as usual" in the old-school music industry. In these days of user-generated content and the changing landscape for media, this should be an interesting experiment. I, for one, will be very interested to see how this joint venture pans out, as the way media and entertainment companies do business -- and find revenue streams -- continues to evolve.
For related Foolishness, tune in to the following articles:
- Rick Munarriz took a look at the music industry after recent word that CD sales continue to decline.
- Revisit Starbucks' decision to start a Hear Music label.
- The RIAA recently took shots at collegiate downloaders, but shouldn't students be considered the industry's biggest fans?
Starbucks and Electronic Arts are Motley Fool Stock Advisor recommendations. To find out what other companies David and Tom Gardner have recommended to subscribers, click here for a 30-day free trial.