Record Labels Looking For Ways To Squeeze More Money Out Musicians -- But They're Too Late

from the squeeze-away dept

For years, many people have been pointing out that the real problem with the recording industry is that they didn't seem to understand their own market. Rather than selling the overall "experience" around music and everything associated, they've been way too focused on just selling the music itself, tied to whatever delivery mechanism is popular at the time (LP, 8-track, cassette, CD, internet). However, in being so focused on selling the music itself, the industry has a huge blindspot to plenty of different business models out there, and that's part of what's made them so intent on trying to sue everyone over unauthorized file sharing, rather than innovating on the business model side. However, that did allow more space for many musicians to successfully experiment with alternative business models. Since most record label contracts are set up so the label gets almost all of the money from album sales, but the artists get money from most other things (concerts, merchandise, etc.) the artists who weren't brainwashed into believing that the labels were really looking out for their best interests had more of a free hand in innovating. Two recent stories, however, suggest that the recording industry is now trying to quietly revamp their business models behind the scenes. First, a story from last week that lots of folks are talking about, notes that the record labels are trying to shrink musician royalties from album sales -- which should pretty much kill off whatever tiny lingering claim they may have had to representing the interests of musicians.

However, more interesting is that they're also signing new contracts with musicians that require a cut of other revenue streams, including concerts and merchandise sales. While this might mean that the industry is finally realizing it's not about just selling the music, but selling the entire experience of a band, it's more likely to mean that bands have a lot less free reign to experiment with alternative business models. The labels have long shown that they have little to no creativity when it comes to business models, and will quickly focus in on locking down these new revenue streams and squeezing them dry. A few years ago, it may have made sense for the labels to offer such a complete package, promising to market the bands like crazy in exchange for a piece of all these different revenue streams -- but after all the labels have done over the past few years, it would seem that many musicians would be much better off running their business themselves, and just teaming with labels where appropriate, rather than becoming entirely beholden to them.


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  •  
    identicon
    franticindustries, Dec 11th, 2006 @ 1:07pm

    Business model of record companies..

    All stick and no carrot. That's their business model, and I'm not sure if it will ever fail because big companies are a tough brand of dinosaurs, but I sure as hell would like them to fail.

    However, I'm afraid that the vast majority of musicians don't even know read the contracts they're signing, let alone considering alternative business models.

    Personally, I'm more concerned with lawmakers yielding to record companies' greed and their desire to put a copyright mark and a profit tag on everything and anything.

     

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    Michael Long, Dec 11th, 2006 @ 1:45pm

    Indie

    Just means that musicians really need to look to newer, more independent labels and distributors that will give them a better deal for the same services, and not the "traditional" houses who only seem to want an ever larger piece of the pie.

    When more and more of the new talent begins signing elsewhere, they'll either recognize that they need to change... or diminish, and go into the west... (my JRR quote for today).

     

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    Anonymous Coward, Dec 11th, 2006 @ 1:48pm

    Internal Struggle ...

    I haven't bought a new CD (or any new music) in a year or so. When I was younger, I used to purchase music almost every weekend ... starting with albums, then tapes and finally CDs (buying new music and making the old titles I loved portable) ... God knows I invested quite a bit in my collection - sometimes purchasing certain albums 2 or even 3 times (different or "disposable" media). I have about 10% of the cassettes I ever originally purchased ...

    Recently I've wanted to start purchasing music again, but find it ridiculous to spend $15 on a CD which should cost

     

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    Anonymous Coward, Dec 11th, 2006 @ 1:49pm

    Internal Struggle ...

    [Sorry to repost ... less than sign verboten]

    I haven't bought a new CD (or any new music) in a year or so. When I was younger, I used to purchase music almost every weekend ... starting with albums, then tapes and finally CDs (buying new music and making the old titles I loved portable) ... God knows I invested quite a bit in my collection - sometimes purchasing certain albums 2 or even 3 times (different or "disposable" media). I have about 10% of the cassettes I ever originally purchased ...

    Recently I've wanted to start purchasing music again, but find it ridiculous to spend $15 on a CD which should cost less than $5 now that production and distribution issues are practically non-existent.

    I look at purchasing online and can't find a source for CD quality music (MP3s don't really cut it for me except when using earbuds). I also think about the fact that I will be giving my $$ to organization like the music labels (and hence RIAA) which continually irritate me with their antics of ripping of the artist as well as the consumer.

    That *leads* me to a third option ... piracy. I've never "stolen" music before with the exception of an occasional song I'd taped from a friend or the radio. I don't really want to start now, but for some reason I constantly consider it simply because I'm so disgusted with the options that are available. And I don't want to slight the artists what little cut they might actually get from a purchase.

    The end result? I haven't "pirated" anything (yet) and I haven't bought anything either ... giving the music labels none of the hundreds/thousands of potential dollars I have to spend.

    But ya know what? If the labels are going to screw the artists out of other forms of revenue as well, I might as well "steal" the album and then go see the group live and/or buy a T or something. At least that way the artist gets what they deserve - more money than the label that "represents" them.

     

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    Tyler, Dec 11th, 2006 @ 2:05pm

    who needs record labels?

    Artists make most of their money from activities such as concerts and paraphernalia, while little is receive from selling the digital audio. Artists and bands can better make their name known by freely distributing their music and marketing their names. Little money will be lost to the artist by doing this.

     

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      drj, Dec 11th, 2006 @ 3:09pm

      Re: who needs record labels?

      "Artists make most of their money from activities such as concerts and paraphernalia, while little is receive from selling the digital audio. Artists and bands can better make their name known by freely distributing their music and marketing their names...."

      Actually, in most cases, they are touring and selling merchandise to repay the label for production costs and studio time for cutting their albums.

      Signing a with a major label is like taking HUGE loan, where your ability to pay it off hinges on the success of your band. Of course ultimately, its really the label that will determine your success... just hope they chose to promote you over the other 100's of bands they sign that year, so you can pay off the massive debt.

       

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      Alex, Dec 12th, 2006 @ 9:05am

      Re: who needs record labels?

      Little money will be lost? you need production and advertising for a cd both cost a lot of money. You could say what do you need advertising for but if no one even hears your cd whats the point of making it. After you dropped some 50-100 grand on production and advertising i think you would be pretty sore to freely distribute the music.

       

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    Xenohacker@hotmail.com, Dec 11th, 2006 @ 2:09pm

    Think...

    I detected no malice in his word simply a statement of his actions. Record labels listen up. This is so pertinent to the conversation that I am just going to repost it:

    "I haven't bought a new CD (or any new music) in a year or so. When I was younger, I used to purchase music almost every weekend ... "

    "Recently I've wanted to start purchasing music again, but find it ridiculous to spend $15 on a CD which should cost"

    Record labels have tried to screw everyone involved... they've tried to screw the fans and the musicians... no one left to screw. I guess people working at those record labels will have to go out and get jobs now or do something even worse... "THINK". Come up with a new idea.

     

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    La-La-guy, Dec 11th, 2006 @ 2:34pm

    An alternative

    Check out LaLa.com. It's a used-CD swapping site with millions of CDs available. It's only $1.75 to get someone else's CD and 20% of the revenue goes back to the artist! I've swapped out a couple of dozen CDs and I'm tickled pink about it.

    It doesn't quite take the record indusrty out of the picture, because someone has to produce the CD in the first place. But you're getting someone's CD that they don't listen to any more, some dough goes back to the artist, and the RIAA can't do a thing about it.

     

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    Stu, Dec 11th, 2006 @ 3:28pm

    La La Guy said, . . . . . , and the RIAA can't do a thing about it."

    My comment: Yet.

    They can just add a paragraph or ten to their contracts or buy some politicians. Both are cheap solutions.

     

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    Okey Dokey, Dec 11th, 2006 @ 3:48pm

    Ouch

    Makes you wonder why any muscian would want to sign with a label any more. The fact that the RIAA is suing 12 year olds and grannies or that now they want to take away almost all of the remaining benefits an artist has left, doesn't sound appealing at all.

     

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    n3o, Dec 11th, 2006 @ 4:46pm

    RIAA

    RIAA = Really Impotent Annoying Assholes!!

     

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    Daerc, Dec 11th, 2006 @ 5:14pm

    It really makes it obvious then why the biggest bands to come around are signed on labels like Epitaph and Fueled by Ramen and other labels owned by artists with less of a reason to screw over fellow artists.

     

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    Overcast, Dec 11th, 2006 @ 5:49pm

    "They can just add a paragraph or ten to their contracts or buy some politicians. Both are cheap solutions."

    Doesn't matter, I haven't but a new or even used CD in 5 years... literally. I'll not buy anything where any portion of the profits go to the RIAA, period. I'll buy CD's through other avenues, however.

    But I do like that idea and will check that out!! Already bookmarked :)

     

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    Dempsey, Dec 11th, 2006 @ 11:27pm

    Well just so you know...

    An artist would still sign with a major because, while the business model is broke, the marketing machine is not. Nobody has become a megastar in any way other than via the distribution by a major.

    It's the musician who don't need megastardom that can't really benefit today.

    Labels don't sell music. They sell a plastic disc with data on them. You have equipment than translates that data to music. Lablels sell plastic.

     

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    The Original Just Me, Dec 12th, 2006 @ 6:30am

    The price keeps going up

    Remember when an album would have a dozen songs or more? Eight to ten bucks was a decent price, especially for real liner notes and maybe a poster.

    We walked through FYE this weekend and noticed that the average price was around $14 - $16, sometimes venturing in to the mid $20 range for a 2 disk box set of songs from two decades ago.

    Even adding inflation I just don't great see why 7 songs is worth $16. Meh, I guess that's why I don't buy music.

     

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    Jeff, Dec 12th, 2006 @ 3:45pm

    HUGE MASSIVE fear, sounds like!

    Re:


    Signing a with a major label is like taking HUGE loan, where your ability to pay it off hinges on the success of your band. Of course ultimately, its really the label that will determine your success... just hope they chose to promote you over the other 100's of bands they sign that year, so you can pay off the massive debt.


    Waaaaaaaaaaaaah.


    Words like "HUGE" and "massive" with regard to the debt that a band undertakes. This makes me think you're more likely a record-company shill trying to scare bands back to the labels, rather than an ordinary joe or jill reading Techdirt.


    In the scope of things, the debt undertaken by most bands is neither HUGE nor MASSIVE when compared to the revenue that comes in when a band hits it big. The problem is that relatively few bands hit it big, so in that respect your comments are accurate for MANY bands.


    Today's record companies can stay in business because the few bands that do hit it big provide so much surplus revenue to wash away the debt from those bands that "default" on their "loan", to borrow your analogy. Then yes, those "defaulting" bands essentially become corporate slaves in order to bring the band back into the black.


    The thing is, here on Techdirt, writers/editors have made the point numerous times, including THIS VERY ARTICLE, that the above business model SUCKS.


    Your little rant and fearmongering about the way things ARE does absolutely NOTHING to advance the discussion of new business models that ARE more advantageous to today's artists. Because even the slaves of today's studio era have limited contractual obligations, and even those "lifelong" slaves will no longer be a factor when their "lives" as artists becomes a moot point and other bands form.


    Those new bands, unrestricted by the old abusive record-industry models, will help define the way music is produced, distributed and consumed in the 21st century.


    Used to be that yes it took thousands of dollars to produce a high-quality "album", and this usually meant sucking up to the recording studio and record distrubution industries. Not so anymore. Computing technology has now reached the point where any punk with a software package can hook up various instruments and mics to the computer, one instrument at a time if necessary, and make their own songs in MP3 format or whatever else is necessary or desired.


    For some people, they will whine and point out that such musicians still need significant money to shell out for instruments, a computer, etc.


    The silly thing is... in many cases, that's money that's already spent. We're not talking about junior-high-school kids that decide they're gonna be famous by ripping off a Green Day song and posting their "video" to YouTube, and who need to beg their mom and dad for instruments and tech.


    The true musicians of the new era of music already are passionate about their music, and already have their gear, including fairly new computers in most cases. For these people, it's not a matter of buying equipment. They'd buy it anyway -- THEY HAVE BOUGHT IT ANYWAY.


    For these folks, it's about having the skill and time to actually produce high-quality music. Those that have the passion and excel at making music that people WANT to hear will be the ones who are successful at it. And that success might not be measured by huge gobs of cash.


    The time is at hand where a musician just starting out can look at his pile of gear, look at the music industry and say, "I already have EVERYTHING that I need to put my album out there WITHOUT any help from ANY corporation."


    "So why don't I?"


    For those that go ahead and produce their own music in this way, most will be successful because of their passion for their art, and any fame or fortune that follows will be quite secondary. Which isn't to say that those that find fame and fortune can't be devoured by it if they don't watch themselves, but at least it will be THEIR fame and fortune haunting them, and not that of some record-industry bigwig.

     

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      Nakor, Dec 13th, 2006 @ 10:39am

      Re: HUGE MASSIVE fear, sounds like! -- Separate th

      Just an observation... Perhaps you should consider the wisdom of ripping into someone for their post, specifically siting they are not adding to the larger discussion by introducing or talking to the possible range of new business models, AND THEN NOT doing so yourself in your 17 paragraph post! Not that I disagree with most of your points, but I was interested to see the lack of "furthing" the discussion.
      My 2 cents... Labels are nothing more than the bank with connections. What do artists require? Capital and connections for production, distribution, exposure, and the costs of touring. The simple question in my mind is, can these items be secured from other parties or entities that do not have a history of bloodshed cloaked in promises of stardom etc. (lables)?? My thought is yes. In my opinion, herein lies the key to what will be the emergence of these new business models. Will technology play a role here? Yes, BUT as an enabler rather than a CORE lynchpin of the model. Technology makes the acqusition and efficiency of these items easier.
      One more thought... There's some posts here speaking to the "emergence" of the indie / small labels as solutions. I respectfully disagree. Small or big, labels have THE SAME business model. I am a musician and also know a ton of musicians (both established in the industry and independant) and the feedback and resume are the same... Sign deal. Record. Hit the Road. Come back into town and go back to work at Starbucks. Repeat X 4 or until record deal terms are met. End of the day... no money and very little to show for royalties. Oh, and now you're 35 years old. Do some lables give artists better deals? Yeah, however, same model. Dog food is still dog food. I do think that some of the more forward thinking lables could potentially lead the charge on changing the model, but they're gonna have to prove they're not just wolves in sheep's clothing AND that they are innovative enough to depart from old school methodogies and standard practices.

       

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    identicon
    Ty Cohen, Mar 2nd, 2007 @ 12:31am

    Recording Contracts

    For some people, they will whine and point out that such musicians still need significant money to shell out for instruments, a computer, etc.

    click on this link

     

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