CBS Records Brand Revived for iTunes Deal

Continuing his public demonstration that a scaled-down media company can perhaps accomplish more than a single, conglomerate colossus of swallowed-up media brands, CBS Corp. CEO Les Moonves is reviving one of the greatest and most storied brands in the history of all media - CBS Records - in order that his company, now separate from Viacom, can partner with music providers such as Apple's iTunes.

After CBS decided last year to partner with Time Warner in the joint management of a subsidiary broadcast network - thus merging UPN with The WB to form The CW - it acquired The WB's lucrative music publicity strategy. Popular CW shows, such as Smallville and 7th Heaven, feature musical tracks prominently, then tell viewers at the end the name of the artist and CD, along with an ad for a music vendor. With broadcast radio's influence waning very suddenly, the WB/CW strategy paid off more than anyone expected.

Now, Moonves wants both The CW and CBS Television to be able to feature musical tracks in programming. The problem is: now that the strategy truly is paying off, music publishers are raising their licensing fees.

The Warner Bros. Music label is not part of Time Warner, despite their shared logos; and Columbia Records (the brand from which CBS was first spawned) was sold to Sony in 1988. Sony's license on the CBS Records name has since expired, so music publishers remain separate parties to this deal, wanting a larger cut.

So Moonves - thinking very much like his long-ago predecessor, William S. Paley - has spotted an opportunity and is seizing it before it gets away. His plan appears to be to re-invent an empire, but from the inside out rather than by grafting together ill-fitting components as Chairman Sumner Redstone tried to do earlier. (Redstone is also chairman of the current Viacom, with which CBS Corp. was formerly paired.) He'll have the benefit of one of the most revered names in the history of recording.

But at least at first, and perhaps well into the foreseeable future, CBS Records will not be cutting records. Instead, Moonves' plan, as made clear by his company's statement this morning, is to sign artists exclusively for digital distribution, including through iTunes as well as through a new online site to be established at cbsrecords.com. New distribution channels will soon be opened through wireless carriers, and if Moonves' past behavior is any indication, those carrier deals may already have been worked out - he may just be waiting until partners' executives return from their holiday vacations to make the announcement.

"With more consumers choosing the online download model as the preferred way to purchase their favorite songs, we have an opportunity to use our unique and broad collection of media platforms to create a new music label paradigm for a small price of admission," Moonves stated this morning.

If his plan works, he could in effect use one of the greatest brands that the recording industry left behind, to establish a new music distribution system that encourages artists' participation, bypassing the recording industry altogether. With CBS Radio still a component of CBS Corp. - having revived that classic brand in a makeover of Viacom's former Infinity Broadcasting - artists may also be assured of over-the-airwaves publicity. CBS Corp. sees the possibility of extending its music publicity model beyond its own holdings with CBS Paramount producing programs for networks outside of CBS Television ("Medium" for NBC was specifically mentioned in today's announcement.)

It will have to compete with MTV, its former sister property, now part of Viacom and a major force in digital music in its own right. But competition could make for a healthy new market, as CBS and RCA discovered to their mutual benefit in the 1920s.

What's more, CBS Corp.'s plan could create a new business model around digital music platforms where the recording industry as we know it isn't even involved.

As CBS Paramount President Nancy Tellem stated in the formal announcement this morning, "Our artists will have access to an incredibly powerful medium - television - to drive music sales; our television producers will have greater flexibility to use music as a creative enhancement in their shows; and our company will be able to reduce the Network and studio's music licensing cost center while transforming it into a new revenue stream."

The news comes amid word that Moonves is also working to build a possible movie studio around CBS Corp., though probably not with the word "Paramount" in its title; while the Paramount Pictures arm of Viacom may be developing a new television unit. It is a wildly changing landscape, where industries that fail to keep up could very well be left behind.