Business Matters: What Exactly Is Blackwell Fuller's Business Model?
Business Matters: What Exactly Is Blackwell Fuller's Business Model?

What is Blackwell Fuller's Business Model?
-- The new music industry grew on Monday with the announcement of Blackwell Fuller, a new company created by Island Records founder Chris Blackwell and 19 Entertainment founder Simon Fuller. The pair of industry legends wants to give artists the freedom and financing "to explore new paths to market."

But figuring out exactly what the company will do requires parsing a number of vague media reports and looking at other attempts at new business models.

Here's what we know for sure about Blackwell Fuller based on the press release and media reports: it's for "important artists" whose contracts have expired or will expire soon; it will give those artists "full control of their careers and their businesses for the first time;" it may eventually sign newer artists, too.

We know it wants to take the record label's place as the financier in many music projects. "We're not competing with management companies," Blackwell told the WSJ. "We're more competing with major record companies." And in the press release statement, Fuller was clearly talking about record labels' 360 deals when he mentioned "financial models" that have become "more and more restrictive and onerous."

We also know it's well funded. Although the company has financing in the "hundreds of millions of dollars, according to the WSJ. Established in 1962, its only acquisition to date is Blackwell's Blue Mountain Music Ltd, the publishing company administers the catalogs of Bob Marley and U2, and it also has songs by Manu Chao, Justice, Black Uhuru, Baaba Maal, Marianne Faithfull and many others.

So we can only surmise that Blackwell Fuller will invest in artists who are likely to be older and have established fan bases, and that no two deals will necessary look alike.

But a few important questions arise in all this ambiguity. For example, would an important, older artist - well past their peak unit-moving years -- really need a record label deal? Or are financing and risk-management the more important issues at play here? That would make sense given the lack of alternatives to record label financing.

In the end, Blackwell Fuller could take many shapes. In one instance it could be more of an investment vehicle while being a full-service management company the next instance.

For clues into how Blackwell Fuller could finance projects, we can look at Ingenious, a U.K. group of companies advising and investing in media. Ingenious is a venture capital trust (VCT), a U.K. investment scheme created to encourage investment in small, developing companies. Both original investors and owners of second-hand shares receive various types of preferential tax treatment on VCT dividends and capital gains.

Through its music funds, which have raised about £40 million, Ingenious has invested in artists such as Peter Gabriel, UB40, Travis, electronic group the Prodigy and Ulrich Schnauss. By way of its Live fund, which raised over £18 million, Ingenious has invested in music festivals such as Cream, the team behind the dance music festival Creamfields, and Simon Fuller's 19 Entertainment (which was sold to CKX in 2005). Ingenious also has funds that invest in broadcasting, television, games and film.

In addition, Ingenious acted as corporate finance advisor to Robbie Williams in his non-traditional deal with EMI. "With this joint venture arrangement, Robbie Williams has achieved greater ownership and control over his creative services whilst securing the backing of a worldwide music partner across the entire spectrum of his professional activities," Ingenious explains with words (ownership, control) very similar to those chosen by Blackwell Fuller.

In the U.S. there are a couple good examples. The bigger is Live Nation and its multi-rights deals with U2, Nickelback, Shakira, Madonna and Jay-Z. None of the deals include recorded music, but all deals that package some combination of rights (tickets, fan clubs, merchandise, sponsorships) in a way that creates a deep partnership with the artist. In the case of Jay-Z, Live Nation funded the creation of a joint venture, Roc Nation. On a smaller scale, Nashville-based Bigger Picture Group has relationships with artists that range from full 360-type partnerships to radio promotion.

Google Gets Admeld

-- Google's latest online advertising acquisition is Admeld, a supply-side platform. In a blog post, Google explains that publisher partners have been asking for it to further invest in its ad products. "By combining Admeld's services, expertise and technology with Google's offerings, we're investing in what we hope will be an improved era of flexible ad management tools for major publishers," explains Neal Mohan, vice president of display advertising. "Together with Admeld, we hope to make display advertising simpler, more efficient and more valuable, provide improved support and services, and enable publishers to make more informed decisions across all their ad space." ( Google Blog, paidContent)

Nokia Taking Lumps in Smartphone War
-- The smartphone war has found a big-name casualty in Nokia, and it is changing not only the types of hardware people buy but the operating system they use. As the blog Monday Note explains, Nokia's share price is down big this year (down 40.79% year to date through the end of Monday) and another profit warning two weeks ago did not help matters.

Nokia's partnership with Microsoft is getting some of the blame. The stock peaked just three days before the company's partnership with Microsoft was announced. That meant the Symbian platform was dead and the nearest Windows Phone 7-powered device was at least ten months away. Investors' concerns about those interim sales of Nokia's legacy platform were confirmed by the May 31 profit warning, writes Monday Note. "Nokia had run straight into an army of handset makers who offer a wide range of devices powered by Android, a platform with a virile present and an exciting future."

To make matters worse, reports Monday claimed Samsung would overtake Nokia Oyj as the worlds's leading smartphone manufacturer this either this quarter or later this year, depending on who you ask. Apple will leapfrog Nokia and take second place. "With Symbian demand crashing, there is growing opportunity for Samsung or Apple to grab the lead," said one analyst. ( Monday Note, Reuters)