A sound initiative

August 13, 1999

A Coventry University business initiative has helped two graduates launch an

internet record label. Wendy Grossman reports One of the youngest British new media businesses owes its existence to a programme at Coventry University, the Graduates into Business programme. Coventry graduates Mark Freeth and Scott Crowther launched their Hanging Stone record label on July 31 with five artists.

But this is a label with a difference: it exists only on the internet, and rather than selling CDs and vinyl LPs, it distributes music online.

Freeth and Crowther's foray into the recording side of the music industry follows years of other related jobs. Shortly after graduating, Crowther was hired as a representative for Sony Music, while Freeth did some music journalism and band management. The two ended up working together running publicity for a concert promoter. Joining forces, they set up a management company, S&M, and got their first artist, Naomi, signed to a record label.

"But," says Freeth, "the ideal was our own label and because we had an interest in the net, we decided to do digital downloading."

At the moment, the fledgling business focuses on artists who already have recordings that can be made available via the Hanging Stone website. Reflecting the varied musical tastes of the company's owners, the artists do not fall into a single category: they range from the acoustic folk-style duo Map to cutting-edge drum 'n' bass group NDE.

Freeth says the Graduates into Business programme was key to getting them started. "It worked brilliantly," he says. "It shows what can happen - postgrads are not just left in the cold on their own."

The programme has three stages. First, Coventry University supplies would-be graduate entrepreneurs with Pounds 1,000 of start-up money to help them explore the feasibility of their business idea and prepare a business plan. If the plan passes muster, participants are required to obtain outside funding, which the university will match up to Pounds ,500 per year out of a European Regional Development Fund grant. In return, Coventry University Enterprises takes equity in the business. In addition, the university provides access to its TechnoCentre facility and puts graduates through a ten-week business skills course.

"There was a lot of new stuff that was very boring, but essential," says Freeth, who says the course included accounting (his bugbear) and issues such as dealing with VAT.

Digital distribution of music files is a hot growth area on the internet, in part because of the high-quality, efficient compression format MP3. In fact, "MP3" has taken over from "sex" as the most common search term. In the past two months, two music distribution sites have gone public to high initial market valuations.

But music on the net goes back to the earliest days of the web, when the Internet Underground Music Archive first opened its doors and encouraged unknown artists to make their material available. At the moment, these music sites derive their chief revenues from advertising, rather than music sales.

Freeth and Crowther's approach is different. Like a traditional record label, they do publicity and promotion for their artists. As the company becomes more successful, they hope to begin financing music production. Freeth does not believe digital distribution will replace existing formats entirely. But sticking to digital downloading means Hanging Stone's business model will always be cheaper than a label working in physical formats.

"We do not have a warehouse full of product. We cut out a bunch of rubbish in the middle and get music direct to the user," Freeth says.

Contact the company at:

www.hangingstone.co.uk

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