Major music labels who have taken a blow from shrinking CD sales are diversifying their business portfolio hoping to boost profits.

Typically Major Corporations focus on the core business. The Core business for major music labels is the CD. But since the CD has fallen, major labels like Universal Music and Warner Music Group announced investments in companies specializing in artist management or Web networking.

Major record companies have traditionally acted like venture capital firms by seeking out unknown talent, taking a risk in developing artists. If an artist has a HIT album, the record company can usually make a profit through CD sales. If the artist flops — no dice.

Although the record company cultivates the artist they make no money from the artist’s touring, personal appearances, advertising and merchandising.

With that said — Warner Music has invested around $110 million in the artist management company Front Line Management, whose clients include Jimmy Buffet, Neil Diamond and Christina Aguilera. Warner also has formed a joint venture called Brand Asset Group with Violator Management whose clients include rapper 50 Cent.

Universal Music has taken a stake in Loud.com, a hip-hop social networking site which offers competitions to win cash and recording contracts. The deal follows an $88 million deal by Universal to buy British management and merchandising firm Sanctuary, whose artists include James Blunt and Elton John.

There is no doubt that major music labels need to broaden their business to offset the decline in CD sales. But major corporations who choose to stray beyond their CORE business must be cautious.

Are labels familiar with artist personal management? How will they work with NEW and OLD talent? what will the percentages look like?

Although the road map in question, at least the future of music is in progress.(Reuters)