March 25, 2011
Signing to a record label is likely not your best option
If you have anything to do with music, you’ve likely heard the story about the decline. Record labels are losing money like its their job, famous studios are being sold off to be scrapped out, promoters are getting pummeled and NOBODY can sell a record to save their life. If you look at the billboard top 200, it doesn’t take much to break in. 3,000 albums on any given week could get you on the chart and 30k or more could get you in the top 10. Nielsen seems to have a new report every 6 months about the continual decline in music sales. Best Buy and other major big box stores have reduced their floor space allotment for the sale of compact discs and other recorded music. Independent music stores are selling record players, novelties and other items as the margin on recorded music continues to get smaller. Even digital retailers like Amazon.com and iTunes are seeing a drop in the sales of music.
Bob lefsetz seems to think that the over saturation of touring musicians and skyrocketing ticket prices are going to drive the touring business into somewhat of a “reset” period not unlike the NFL, MLB, NHL and NBA. There is going to be a breaking point as managers, agents, labels, promoters and the like continue on with what seems to be the last great cash grab in music. In an industry where perception is reality, the world is perceiving the music industry to be imploding and it doesn’t seem like many people are interested in throwing out a lifeline.
So what does all of that have to do with being an independent artist? Everything!
When I signed my first artist in 2003, we did a more traditional artist royalty type of recording agreement. We also signed a co-publishing agreement with the label’s publishing entity. Even then, the labels were viewed as banks and the agreements they gave bands were, at best, really bad loans. Bands would sign away most of their rights for a recording advance, maybe some commitments to tour support and a whole lot of “potential.” Once you sign an ERA &/OR EPA, you are largely at the mercy of the company. Your future will rely heavily on the label’s ability to work your record and support your efforts to exploit your art. The problem with being a smaller band signed to a deal is that you rarely, if ever, see any money from the sale of your recorded music. These deals are structured in a way that the bulk of the financial burden is shouldered by your 10-18% of MSRP (less all applicable deductions, of course). Selling 100k albums on your own would be a hefty pay check where as a selling 100k albums with a recording company may not even recoup your debt to the label. The label bean counters are smart… they use P&Ls to determine exactly what they have to put into a project (your album / life / career) to get a return. With the problem of diminishing record sales growing like an aggressive cancer, labels are, unfortunately, less apt to spend beyond the bare minimum and thus your chances for success are somewhat stunted from the word “go.”
With it getting harder and harder to sell music, many, most, maybe all record companies of any stature are offering “360″ deals. What are these? Well….from the label’s perspective, they are the new way of doing business and the only way to ensure a profit from new signings. 360 deals give the labels access to earnings from not only music and publishing but also touring and merchandise sales across the board. Sure it makes sense to the labels that are hemorrhaging money! The logical thing is to pass that burden further onto the artist. I’m not mad at the 360 deal or the people that use them. I’m not even bummed out at the artists that sign them. Maybe it’s the up-front money or the promise of fame? Regardless, there is no such thing as a bad deal if both parties are consenting. Capitalism…right? In reality, 360 deals are nothing more than a thumb in the dam and the Dutch boy is running out of digits.
Lets do a little re-cap…..
Labels are going out of business because they can’t seem to sell enough music, apparel, licenses, etc. to push them back into profitability. Retail stores aren’t carrying music like they used to, making it next to impossible for smaller bands to get placements at the go-to brick and mortar. Labels are offering increasingly unfavorable deals to the musicians and songwriters. Promoters can’t sell tickets and the general public can’t afford anything.
So what exactly is it that a record label can do for YOU these days that you can’t do on your own? Is that “value” worth giving up most of the control over all of your work? Is it worth giving away a portion of all of your revenue sources? I have come to the conclusion that no, it is not worth it.
Why give over a huge portion of your income along with the control over your art for what equates to little more than a bad loan and no real promise of success? These days you can record, mix and master a professional sounding record in your bedroom AND distribute it around the world digitally for less than a few grand. Signing to a label is almost nothing more than the promise of multiple hands working on your product and some relationships that are spread out over an entire client roster.
While I know the graphs, the statistics and the bottom lines are all morbidly sobering. I do believe that you can make music, sell your music, tour on your music and have a healthy and awesome career, INDEPENDENTLY.
The question is how? I have my thoughts but I would like to hear yours. I’ll chime in soon.
Hit the comments!