No wonder the major record labels are in trouble by Stephanie N. Mehta @FortuneMagazine August 31, 2009, 12:57 PM EDT E-mail Tweet Facebook Google Plus Linkedin Share icons A look at music promotions exposes inefficiencies in the business By Cliff Hunt, chairman, Yangaroo Hunt: labels aren't embracing digital. Photo: Yangaroo Does anyone really understand how the record industry promotes new music to the public? If you knew, perhaps it would help you understand why the major record labels are in the trouble they are today. A watermarked compact disc (the file is embedded with the individual’s identification) is delivered from a mastering studio to a couple of key executives at the record label headquarters, most likely in New York or Los Angeles. These CDs are then duplicated and again watermarked with the identities of additional key executives, and distributed to them in order to get their feedback on the album, and to begin the process of choosing the first single to be released to radio. This process takes time and money as these watermarked CDs are created at specialized labs. These additional discs are then distributed, within the label headquarters and in many instances to regional promotion offices throughout the country, all by secure courier at significant expense. When a consensus is arrived at as to what should be the first single — the one that the label will promote most heavily — a release date is chosen, and literally thousands of promotional singles known in the business as “CD Pros” are pressed and readied for distribution to radio, press, consultants, concert promoters and other individuals that are influential within the music business. How do these people now receive these CD Pros? These physical CDs are sent to them by next day or, in some instances, same-day courier. They are packaged in plastic jewel cases, inserted in bubble wrap packs with bios and photos, they are labeled, and finally Fedexed, UPS’d, or Purolated to thousands of destinations across the nation. How many get lost, stolen, or are mislabeled and never reach the destination? How much non-biodegradable materials are used? How much diesel and jet fuel is wasted? How much time does this take? And how much does this all cost? The answer is very simple. A lot. Amazingly, all this can all be done digitally in literally minutes at a fraction of the cost. Since 2005, the entire Canadian music industry has led the world in moving to a total digital workflow. That industry has virtually eliminated the use of CD Pros to promote new music to radio stations, internally within the labels, and to other destinations with great savings of time, effort, and money. Stopping leaks These songs/digital files are delivered securely and are watermarked to the individual that downloads the file, so that not only is it much faster and more efficient, saving in many instances weeks of time and tens of thousands of dollars, but is more secure as well. Security is important when superstar releases are concerned as pre-release ‘leaks’ can undermine an expensive promotional campaign. The songs are delivered digitally in full wave uncompressed broadcast quality and the record label promotion person has the ability to access real time reporting letting them know who received the file, when they received it, if they listened to it and when, and if and when they downloaded it, making their job promoting this music to radio much more effective and efficient. The Canadian major label groups have evolved this digital workflow, while the US labels continue to lag. While the US labels have dabbled in digital delivery, many digital adopters also send out CD Pros –just to be safe. This quasi-commitment is simply not enough to make it work, especially because digital delivery has just taken another evolutionary leap into video. Recently, Sony Music in Canada, a unit of Sony Corp. SNE , announced the digital delivery of the new Shakira video to Musique Plus in Montreal. The fact that the US-side of the industry has yet to fully adopt digital delivery to radio stations will make it even harder for them to adopt this next important phase. The music industry has long been reluctant to embrace new technologies, but with the Canadian industry already having demonstrated digital distribution’s benefits, the US should take notice. Hunt is chairman and chief operating officer of Yangaroo, a Richmond Hill, Ontario, company that specializes in digital media distribution.