Print

Please login or register.
1 Hour 1 Day 1 Week 1 Month Forever
Login with username, password and session length

[JamSync]

George Massenburg wrote on Sat, 04 December 2004 15:04

I'm really surprised that noone has mentioned the onerous "work for hire" concept, whereby a record company (or whoever) gets ownership of an artist's work by having him/her sign a "work for hire" agreement As it applies to copyrights, see... http://www.music-law.com/workforhire.html George

Or this:

 http://archive.salon.com/ent/music/feature/2000/08/28/work_f or_hire/

It's the reason I always distrust the RIAA whenever they talk about protecting "artists' rights". They tried to sneak this through and it was just by luck that someone was tipped off so that it failed.

[lucey]

Bob Olhsson wrote on Wed, 01 December 2004 14:23

Questionable practices persist in virtually every aspect of business and politics in general. I've never understood how come the music business seems to be held to a higher ethical standard than other business. In the '50s there was a direct connection between anti-rock & roll political interests and the "payola scandal." I really worry about that being the case today. A lot of musicians have a lot of messages that a lot of politicians don't like.

Sure Bob, but Elliot Spitzer goes after anyone doing big business in a shady way ... be it in NYC or State, and the music biz fits right in to his normal mode.


the big problem is that artists create, and fund their recordings yet generally own nothing

[Johnny B]

Bob, I think RAC is looking for broad reforms, and not just addressing the problems that Henley faced. If you go to the RAC website, I think you will find broad-based  support and that many artists are members, all are looking for a better way to conduct business and for fundamental fairness.  

I think what is needed is music industry reform that is fair to all the stakeholders, for example, the artists, producers, engineers, the small labels, and even the radio audience could be in the stakeholder group. I sure there are others who could be stakeholders as well.  

Could we use new business models from other places around the world? From other parts of the entertainment industry?

Besides some kind of straight 50/50 partnership model that apparently some independent labels are using, as was mentioned above, what other models might be appropriate?

I wish Peter or someone would tell us how the "economic pie" is divided by non-American record companies and non-American artists, that would be helpful to know a summary of the kinds of contractual  arrangements used in Europe.

[electrical]

Everybody keeps saying "what is a fair model?" This implies that there is nothing out there that is still working. This is demonstrably untrue.

The traditional music business model has the label advance some cash as an incentive to sign, then advance more money to record, then advance more money for tour support, in addition to paying high administrative salaries for staff. An artist's royalty is then proffered as a percentage of gross sales. Everything considered an advance is then recouped from artist's royalties, in addition to reserve amounts -- percentile reductions in mechanical payments, deductions for packaging, deductions for "breakage," reserves against returns (which are rolled-over into future accouting periods) and "free goods" (which may or may not be sold for money, but are considered "free" from accounting. Points paid to producers and occasionally A&R staff and lawyers are also recouped from artist's royalties.

This model is clearly fucked. It places the burden on the band for decisions they do not get to make, and ensures that whatever money is spent, it will not end up in the hands of the band, but will be spread-out within the industry. This sort of spending increases the power and influence (within the industry) of him who cuts the checks, but is only possible because the bands are attracting an audience.

In contrast, many independent labels have operated on a profit-sharing model, and they have proven to be fair, stable and profitable for both bands and labels.

In a profit-sharing system, all recording, manufacturing and distribution costs (not including salaries and overhead) are accounted on a per-title basis, and are deducted from gross revenues on a per-title basis. Anything left is gross profit and is split 50-50 with the band.

This system is used by Touch and Go, Dischord, Mute, Thrill Jockey, Drag City and many other labels who have enjoyed long-term happy relationships with their bands and earned themselves healthy profits.

The upkeep, touring, licensing and secondary income of the band are the band's responsibility. The upkeep of the label is the label's responsibility. This model encourages frugality on both parties, and it is inherently fair: The label only makes money if the band does, and exactly as much.

Most of these labels operate without formal contracts, as they aren't necessary when the relationship is so patently equitable (nobody has any leverage on anybody). If the band and the label enjoy the experience, the relationship will naturally continue. If they don't, it will naturally end.

The mainstream music business could operate this way, as the principles apply on any scale. The only difference is that huge speculative investment is discouraged, but I don't see that as a drawback, as a good case can be made that only those bands who can operate within the economy of their natural audience are worth having on the label.

People in the mainstream industry criticise this model as impractical. This is ludicrous on its face: All these independent labels have survived profitably for decades, the bands enjoy good incomes, and there are mercifully few legal disputes. The big-league model is broken because it was unfair on its face and cannot sustain itself. The independent label method has always worked and continues to work.

Another topic:

There is an internal-to-major-labels practice I see happening more and more these days that troubles me, in that it has nothing to do with the ultimate viability of the bands: Belaying.

If an A&R guy or other staff are closely associated with a record in production, then there is a dis-incentive to ever release the record: Once it is released, it might fail, and then the jobs of those associated with it will be in jeopardy. The trend is to keep bands "working" on their records for an indefinite period, during which everyone's job remains secure.

If a record ever threatens to be actually finished and ready for release, somone will quickly suggest another set of mixes, or another couple of songs be tried out, or the band go on a tour to get some exposure -- all in the name of getting the band ready or getting the record "perfect."

After months (sometimes years -- pace Bitch Slap) of this, some of the staff will move laterally into other jobs, and the label itself may even be sold or folded-into another label. At that juncture, it becomes prudent to put everything on hold yet again, "until everything settles."

After a suitable period of inactivity, the label may decide to start the process again, since the material is now "old," and the cycle begins again -- still with no record on the street. The other option is to can the record outright, as the (internal political) risk of releasing a turkey is much greater than killing one off in an uncompleted state. The old Motown adage is often quoted : It is better to have a record fail inside the building than in the stores.

The band may then be held in contractual limbo, unable to record, with nothing to show for their months or years of inactivity. With luck, time and money, they may wrangle a release from their contract, but this is not a given.

This is desperate behavior from people who feel that they are in a dying industry. They are operating out of short-term self-interest based on fear. This sort of behavior is discouraged in the profit-sharing model, as nobody wants to cut into his income by wasting time or money.

[rphilbeck]

If I owned a record label I would not be interested in a 50/50 split with any artist unless they were going to foot 50% of the risk, which never seems to be the case.  Send me an established artist with a history of good sales, and I'd consider a 50/50 deal.  I don't know of any business relationship where one side of the party takes on 100% of the risk, and then splits profits with the partner when all goes well.  

Except the IRS.


If these contracts are so ridiculous, and do appear that way, than why do people keep signing them?

[Bob Olhsson]

How sick! Hopefully the recent restructuring of the majors will slow down some of the craziness.

An important thing to understand is that it's big managers and entertainment lawyers who work for a percentage of artists' advances who are screaming "impractical." THEY are who created phantom points for selling artists these stupid "deals" that are all front-end advance with no back-end income. They are also often taking kickbacks from the people they spend the money on.

Then, of course, they lead the chorus blaming everything on the record labels.

I hope we're about to see a new generation of independent labels and managers who operate differently. We also desperately need a new generation of promoters. I'm told Chicago is the last market in the United States having a major independent promoter!

We've started an Industry forum on the MARSH board to exchange information and learn from each other. WE need to take popular music back from Madison Avenue and Wall Street. Taking it away from the majors and then handing it to Comcast, Apple and Microsoft is not the answer!


http://marsh.prosoundweb.com/index.php/f/12/?SQ=8cd9e56623e9 95ad773e9a103b712fa8

[sdevino]

Bob Olhsson wrote on Sun, 05 December 2004 12:38

We've started an Industry forum on the MARSH board to exchange information and learn from each other. WE need to take popular music back from Madison Avenue and Wall Street. Taking it away from the majors and then handing it to Comcast, Apple and Microsoft is not the answer!

Apple Microsoft and Comcast are the record store of the future, not the record label. They provide an ideal opportunity for independent labels to get shelf space and instant worldwide distribution. Its then up to the label make their target audiences aware of the artist.

If we depend on Apple, et al for promotion then I agree with you.

[Bob Olhsson]

sdevino wrote on Sun, 05 December 2004 13:21

If we depend on Apple, et al for promotion then I agree with you.

As hard as it is for many artists to accept, somebody HAS to do promotion exactly like somebody has to sell every product. There always needs to be some mechanism to pay for sales and promotion. If artists should lose the right to make an exclusive deal for their recordings, they've  lost a major incentive for others to invest in them or to finance sales and promotion.

Anybody who can show they've got sales and promotion together has no problem getting distribution. To me it's a non-product that sounds impressive but is utterly meaningless in the real world. Sometime soon having sales and promotion together is going to become the price of admission for on-line distribution exactly as it has been for record stores.

There is no question that Apple, et al are likely to replace some kinds of record stores. I disagree that they can replace the role that an indi record store plays for fans and I don't think well-packaged albums are going away any more than tee-shirts are. We learned in the late '60s that it takes more than a hit single or two to sell an album and it's rather amazing that many in the industry seem to have forgotten the lessons Elektra and Warner Brothers taught us.

[sdevino]

Bob Olhsson wrote on Sun, 05 December 2004 16:00

sdevino wrote on Sun, 05 December 2004 13:21 If we depend on Apple, et al for promotion then I agree with you. As hard as it is for many artists to accept, somebody HAS to do promotion exactly like somebody has to sell every product. There always needs to be some mechanism to pay for sales and promotion. If artists should lose the right to make an exclusive deal for their recordings, they've  lost a major incentive for others to invest in them or to finance sales and promotion.

True but so far the Apples are not making recording deals or exclusives. So to me online downloads are simply another form of media used for distribution.  

Quote:

Anybody who can show they've got sales and promotion together has no problem getting distribution. To me it's a non-product that sounds impressive but is utterly meaningless in the real world. Sometime soon having sales and promotion together is going to become the price of admission for on-line distribution exactly as it has been for record stores.

I disagree because online shelf space is virtually free. There is an initial encoding cost and then backup maintenance, both of which have negligable cost relative to a single release. Once the store is up and running there is no reason why the online seller would not accept as much material as possible (especially if the label encodes it for them).  Promotion will be required to get front page mention etc of course. But there is another key difference on the expense side. Indie labels know how to make money on sales of units that are much smaller than the majors by managing their businesses like businesses instead of artist funded parties. Its also easier to find an artist online with a simple search so the front page promotion is not all that important if the artist's label can provide awareness and a link.

Quote:

There is no question that Apple, et al are likely to replace some kinds of record stores. I disagree that they can replace the role that an indi record store plays for fans and I don't think well-packaged albums are going away any more than tee-shirts are.

I don't think anyone is saying anything counter to this. Its just another choice. I am unlikely to ever buy another CD again (unless its on BK's hall of fame)  because the only time I ever have to listen to music I didn't record, is on an airplane via iPod. MY iPod has reintroduced me to my entire music collection and I have purchased more music online in the last 6 months than I did from any source for the 5 years prior to that. To me its the best invention of my lifetime as far as music is concerned.

There are good songs and there are good albums. I enjoy having both a vote and a choice as to which I prefer. Now I am just waiting for music radio to die so it can be reborn as something practical again. I mean who listens to music on the radio anymore?

[Johnny B]

Hmm, I still wish someone with direct experience would post the major deal points that they use in Europe for European artists. At least it would helpful to know, I suspect it may not be as bad or "onerous" as the typical American major label record deal.

In addition, perhaps we could advancxe the discussion by dividing the economic pie into two broad categories, namely,

1. Income
2. Expense  

[J.J. Blair]

Steve, you summarized many of the thoughts in my previous posts, yet more completely and probably more coherently.  (It's tough being an acid casualty.)  IT's great to hear somebody else talking about what you refer to a 'belaying.'

When I meet kids who are wide eyed and think they are gonna become huge rockstars, I tell them a little of how this deal works.  First, I describe how record deals are tantamount to prison rape.  Then I tell them that since they will have no income while recording or touring, and since they are going to blow their advance on guitars and amps at Voltage Guitar, so they can use these cool things on their record, they will have to sell  a portion of their publishing to Warner Chappel, so that if by some rare chance they become huge, Warner Chappel's $150,000 advance will turn into millions for them that could have been the bands.

But I tell them not to worry about that because here's what's really gonna happen:  You're gonna meet an A&R guy who says he really likes you.  Over the next several months, he will ask everybody he knows what they think of your music, so that he will know what to think himself.  Then you will start to negotiate a record deal, and somebody whose name starts with 'Eric Greenspan' will gladly do it for a percentage of whatever deal he negotiates for you.  (Don't forget, he negotiated your A&R guy's contract with the label.)  Then, over the next 12-18 months, you will somehow have a finished album, ready to be sent to stores and radio stations.  However, by this point your A&R guy has been fired or downsized, and nobody in the promotion or marketing department knows who you are.  This means that at the beginning of the month when they look at the 30 titles coming out that month and try to figure out which five they actually have the ability to work, yours will not be one of them because nobody will be at the label fighting for you.  (Not that your A&R was going to lay down his belief in your band over the possibility of looking bad or losing his job, anyway.)  You will spend the next year in an Astro Van playing clubs all over the country with no people in them, listening to radio stations that never got copies of your CD.  Your label will then not let you make another record, but they won't release you in hopes that somebody buys out your contract, so that they don't lose everything they spent on you.  You will have to break up just so you can make another record (

[Johnny B]

Sounds like there's a man who would vote for some good reform legislation, better contracts, or business models that are fair.  

[Bob Olhsson]

We need education and intelligent entrepreneurship, not legislation. Legislation will only make things worse because it generally gets sold to the highest bidder.

Here's my little attempt at some education:

http://marsh.prosoundweb.com/index.php/t/83/?SQ=dc2ac3c3fe90 bb9c8cf09e6cd6713139

[Rigby]

Johnny B wrote on Sun, 05 December 2004 18:36

Hmm, I still wish someone with direct experience would post the major deal points that they use in Europe for European artists. At least it would helpful to know, I suspect it may not be as bad or "onerous" as the typical American major label record deal.

The situation in the UK is, as far as I know, largely as it is in the US in terms of the relationship between major labels and their artists. The major labels advance the artists hundreds of thousands, piss a lot of cash up the wall in their efforts to record and promote the product, and the artist then finds themselves in debt even though they've sold X thousand copies of their album. The classic example is XTC, who were signed to Virgin in 1978, and still heavily in debt to them by the mid-90s. Eventually they went on strike to force Virgin to release them from their contract.

As far as I'm aware, there's one dubious record company practice that was actually pioneered in the UK by a producer/label boss and his wife. He would sign new bands to his label, and they would record in the studios that she ran -- at the inflated ratecard rates, rather than the discounted rates they could easily have got anywhere else. And this was on a so-called independent label, too...

As far as radio play is concerned, the situation is a little different in the UK because radio is dominated by one public service broadcaster, and the BBC would surely look askance at any employee who was found to be taking bribes. There are, however, numerous 'record pluggers' who are paid by the record labels to get singles onto radio playlists. Some are independent, some are employed by the labels. They certainly have the resources to set up attractive but unnecessary jollies for radio station programmers -- a friend who works in this field was recently flown to Canada to go to a gig, for example -- but I somehow doubt that these would stretch to large-scale cash bribery.

The impression I get from this person, though, is that the influence of the pluggers is declining, or perhaps even beginning to flow the other way. Radio stations, especially those with a well developed digital or on-line presence, are now able to conduct incredibly detailed audience research, and many now base their playlisting on this rather than on how much free stuff they get from the label. Plugging may still be necessary in order to get the station to consider a track, but if that track gets a negative feedback from the test audience, it won't get on the playlist. And it's now getting to the stage where record labels will actually ask the advice of the radio people, for instance concerning what track from an album should be released as a single. At the moment this is the exception, but I wouldn't be surprised to see it become more widespread.

[Bob Olhsson]

Rigby wrote on Mon, 06 December 2004 08:17

As far as I'm aware, there's one dubious record company practice that was actually pioneered in the UK by a producer/label boss and his wife. He would sign new bands to his label, and they would record in the studios that she ran -- at the inflated ratecard rates, rather than the discounted rates they could easily have got anywhere else. And this was on a so-called independent label, too...

We had our own variations where the studio would be paid an inflated rate with a large "finder's fee" going back to label executives, the producer, the band's manager or sometimes all. We also had lots of bands billing fictitious time and either splitting the money with the studio owner or having the owner buy drugs for the band.

Almost all of these kinds of things I've run into have been the scams of INDIVIDUALS as opposed to the actual label. There are ugly things that labels HAVE done but most of the stuff commonly mentioned are typically done by individuals who work for labels, individuals who work for bands and the bands themselves. Changing labels or "business models" will not stop the unethical practices of individuals.