Yet Another Music Business Model: Label Signs With A Band

from the fantastic dept

One of our regular critics here claims that part of what I talk about is killing off the record labels. Nothing is further from the truth, of course. I've spoken repeatedly about how I think there's still a tremendous space for smart record labels that get it to help musicians out in enabling these new business models. Some musicians may be able to do everything themselves, but I think most will end up in a partnership of some kind. That's also why I've discussed some newer labels that I think are doing unique and powerful things to enable artists to better connect with fans, and give those fans a reason to buy.

When I've pointed that out, however, some have responded that this just means I want the same status quo as before. But, again, that's incorrect. The way things used to be, was that the major record labels had all of the power. You basically had to sign a major record label deal to get anywhere, and since there are just a few majors, you were pretty limited -- and all of them took advantage of artists. They could do that because they had all the power, and they had a business model that only worked by putting ridiculous and oppressive terms on most artists, guaranteeing that few ever saw anything beyond their advances.

The big difference today? Thanks to new technologies and new avenues for both connecting with fans and transacting with them, the major labels don't have the same sort of power any more -- and artists can actually take back many of their rights, whether it's retaining the copyright on their songs, or negotiating deals that don't seem quite so much like indentured servitude.

And, in fact, we've been seeing more and more of that lately, with newer labels taking a much more innovative, musician-friendly, fan-friendly approach to things. Ian Rogers has a fascinating post that shows at least one situation, where the power structure has certainly shifted, as he read about how a label, Duck Down, had signed to Blue Scholars, a band. Note the direction. It wasn't that Blue Scholars had signed a label deal with Duck Down. Instead, Blue Scholars figured out a unique way to finance, promote and distribute its latest album. First, they did a deal with Seattle's Caffe Vita Coffee to finance the album, and to handle local distribution. The band is retaining all the rights to the music with control over how it's marketed and sold (and, they note, "given away"). Duck Down, though has been "hired" to help with the marketing.

This makes a lot of sense. Certainly record labels have a lot of experience and connections when it comes to marketing music and musicians. So leveraging those relationships makes a lot of sense. Giving up all control and rights just for that marketing expertise, on the other hand... makes less and less sense. So, no, I don't think record labels are going away. I still think there's plenty of room for them in the wider music ecosystem. But their role is changing, and the power shift is moving much more to artists and away from the labels. Some of the smart ones get it. But a few of the major labels certainly don't like this, which is why they fight so hard against the technology that's making this happen.


Reader Comments (rss)

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  1.  
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    jorvay (profile), Aug 4th, 2009 @ 8:36am

    I have a friend who's done very well as an independent artist. He hires a tour manager when he tours, and he hires a record label-type business to do his marketing and distribution when he releases new work. All of the people he hires work on contract for a portion of the revenues from his tours, sales, and other uses (like a song on So You Think You Can Dance).
    He has full creative control, and the people that have the skills to do what he can't make a fair and healthy living doing just that.

     

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  2.  
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    AJ, Aug 4th, 2009 @ 9:09am

    Here we go....

    Que the "Mike hates the music labels and wants them to fail" rant...in 3...2....1...

     

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  3.  
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    cybearDJM (profile), Aug 4th, 2009 @ 9:32am

    Coudn't agree more...

    ... not on the fact that Mike doesn't like labels, o'course...

    Labels have to change, artists need this change... They need real help - services I mean...

    I could tell stories of artists that are great performers, singers, players who have a great background history, but were treated like "slaves", with no or bad contracts, no money, no artistic development, from many different label kinds/sizes...

    Nobody cared, except to pick the money out of their, not so deep, pockets...

    I won't tell names here... ;-)

    DJM

     

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  4.  
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    Seth, Aug 4th, 2009 @ 9:38am

    One correction on copyright

    I've seen it mentioned a few times now and I wanted to make a slight correction about copyright....Labels only own the copyright to the "recording". The artist, upon completing any kind of tangible form of the song (demo recording, lyric sheets) has an automatic copyright on the "song". So even in the old label deals, artists never gave up their song, or publishing, rights unless they enter into a separate deal with a publisher.

    Other than that Mike is spot on

     

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  5.  
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    ScytheNoire, Aug 4th, 2009 @ 10:06am

    Finally logical thinking

    For too long it has been backwards, where the labels where the top tier and bands were a commodity. It SHOULD be the other way around. Bands should be the top tier, with music labels being hired by the bands to do all those PR things a label should do. Distribute music, set up concert dates, promotion, website, etc. Music labels today need to be PR machines for the bands that they work for.

    For too long it was a slavery of musicians working for "the man."

    A smart PR company could be cleaning house if they shifted themselves to being a music label that works like this, promoting bands, taking care of the PR. Guess those advertising companies are missing the boat on this one.

     

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  6.  
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    Hephaestus (profile), Aug 4th, 2009 @ 10:12am

    Not to shabby

    "But a few of the major labels certainly don't like this, which is why they fight so hard against the technology that's making this happen."

    The reason for this is they see how far this is going to cut into their bottom line. This is going to result in not the demise of the record labels but a shift from them being monopolies to smaller less profitable service organizations.

     

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  7.  
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    Auditrix (profile), Aug 4th, 2009 @ 10:23am

    Risk

    As an artist advocate, I am interested in emerging business models. However, there are downsides to artists retaining ownership in their masters and hiring record companies to help with marketing. First and foremost, Blue Scholars' model requires artists to assume most of the financial risk.

    I think this is in the artist's best interest less than ten percent of the time (i.e., only in cases where the artist is already or becomes profitable). The other 90+% of the time, the artist will lose money.

    If I were an unestablished artist looking to break through, I would want the financial backing of a major label to increase my chances of success and minimize my losses. If I became wildly successful, then I would be interested in an arrangement like the Blue Scholars'.

    I don't know about you, but I can't name even five artists who have *sold* more than 1 million downloads or physical records without a major label partnership. Can you? If so, let me know - they probably need to audit their licensees at this point!

     

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  8.  
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    Ryan, Aug 4th, 2009 @ 10:49am

    Re: Risk

    You can just sell ownership shares in your music if that's what you prefer. This happens all the time in other ventures.

    I don't know about you, but I can't name even five artists who have *sold* more than 1 million downloads or physical records without a major label partnership. Can you? If so, let me know - they probably need to audit their licensees at this point!

    Correlation does not equal causation. The status quo is actually pretty generous to large artists, and not so much to smaller ones. If you were going to make it big before the internet, you needed ththem because music distribution became very cartelized. Now, you don't need that, which is why it is most beneficial(and ultimately necessary) to change business models.

    Why are you evaluating success based on selling a million downloads anyway? Do the numerous smaller artists not count, only the top few? Are we not evaluating based upon concert and merchandise sales as well? You can't show that this new method doesn't work based on history in which government and the established players have done everything possible to prevent it. And even then, artists from Trent Reznor on down have found just as much if not more success with indepenedent distribution than they ever did with a label.

     

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    Auditrix (profile), Aug 4th, 2009 @ 11:10am

    Re: Re: Risk

    Hi Ryan,

    Yes, copyright owners can sell their copyrights if there is a market for such copyrights. I think I am missing your point.

    I disagree with you that the status quo is generous to "large" artists. Artists that are hugely successful pay for the other 90% of artists who are unprofitable. Successful artists are also the ones who get cheated out of tens of millions of dollars (I know because it's my job to find all that hidden money).

    I agree that the majors' physical distribution systems are less of an advantage than in the past, but major record companies offer much more than distribution: financing for records, videos, touring, not to mention a level of marketing that few independents can offer.

    I don't evaluate success based on selling a million downloads, but I am asking the question, how many artists have gone from unknown to superstars without being party to the old system at some point? Reznor is a poor example of this for several reasons, including that he became famous under the old system. As I pointed out in my intial post, the new models work for artists like Reznor who are already profitable and famous. But what about getting the next big thing to listeners around the world? What new artists broke out big time without help from a major label? It seems like the few who have are flukes.

     

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  10.  
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    Ryan, Aug 4th, 2009 @ 11:29am

    Re: Re: Re: Risk

    I don't necessarily mean selling the copyrights; I mean selling shares in the profits and getting sponsors. You stated that an artist might be averse to the financial risk inherent in owning their own music. In other businesses, owners raise capital and distribute risk by selling shares to others. Essentially, you can achieve the same thing you had under the labels if you so desire, but now you have the option of determining for yourself how much ownership you want to retain.

    I disagree with you that the status quo is generous to "large" artists. Artists that are hugely successful pay for the other 90% of artists who are unprofitable. Successful artists are also the ones who get cheated out of tens of millions of dollars (I know because it's my job to find all that hidden money).

    Without doubt you know more about the intricacies of this business than I do, but I think you are ignoring the many artists that have not or are unable to sign with a label and hand over rights to their music. Because distribution has in the past been almost exclusively the domain of Universal, Sony, etc. those artists have been unable to reach an audience well at all. Now, they have vastly more tools to do so, and those tools are just as useful to more established artists as well.

    I agree that the majors' physical distribution systems are less of an advantage than in the past, but major record companies offer much more than distribution: financing for records, videos, touring, not to mention a level of marketing that few independents can offer.

    And this is where Duck Down and the like come in. They will never be as successful in promoting the most popular artists simply because there will be more competition and more artists, but there will be a lot less overhead and more choices available to the musicians that want to control their own music.

    I don't evaluate success based on selling a million downloads, but I am asking the question, how many artists have gone from unknown to superstars without being party to the old system at some point? Reznor is a poor example of this for several reasons, including that he became famous under the old system. As I pointed out in my intial post, the new models work for artists like Reznor who are already profitable and famous. But what about getting the next big thing to listeners around the world? What new artists broke out big time without help from a major label? It seems like the few who have are flukes.

    You haven't really given it much time here, have you? But techdirt has cited numerous examples of artists that have seen a lot of success without utilizing a label. However, one aspect of giving every artist a voice is that there will be vastly more choices for relatively the same amount of attention(although I would expect this to go up somewhat as music becomes so accessible and cheap, thereby creating new fans); this means that the distribution of profits will become less concentrated on the few at the top. There may or may not continue to be superstars that can make millions upon millions a year, and even they will be forced to make it from things like touring and new albums as opposed to living off royalties. Overall, this system is better for the fans and better for the majority of artists, and new business models like Duck Down would appear to take advantage of the new empowerment smaller artists are now finding themselves with.

     

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  11.  
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    Anonymous Coward, Aug 4th, 2009 @ 11:36am

    Re: Risk

    this assumes the artist has to sell records to be successful.

    What percentage of artists really get major label deals anyway? For most artists (talented ones anyway), paying a reasonable fee to a PR service would most likely be an improvement. The PR company can get people in seats at gigs where the artist is going to make their money.

     

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    Auditrix (profile), Aug 4th, 2009 @ 12:00pm

    Re: Re: Risk

    Hi Coward,

    I don't assume artists must sell records to be successful. It is a metric, but not the only one. The majors know this, hence their insistence on 360 deals, although those haven't been very successful for the record companies, so far.

    Incidentally, since it is somewhat relevant to the topic Masnick raised, 360 deals do turn the record company/artist relationship inside out in some instances. For example, sometimes the artist must account to the record company.

    Surely less than one percent of artists get major label deals and only one in ten major label artists makes a profit for the label.

    I would agree that if an unknown artist can't get a record deal in the first place, hiring a PR service might be an improvement, except... I know more independent artists who have lost money by hiring a PR service than those who have increased profits this way. That's just anecdotal, though.

    Thanks for your reply.

     

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  13.  
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    Isaac Ludwig, Aug 4th, 2009 @ 12:13pm

    This sounds like the artist uses the label as a "sub-contractor." On an as-needed basis. THAT is an intriguing concept.

     

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  14.  
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    Anonymous Coward, Aug 4th, 2009 @ 6:17pm

    in indonesia, label still contract an artist. the funny thing is what mike predict already happen in indonesia. because of piracy, the number of label is shrinking, but the number of artist is increasing. artist get money not from label, but from performance, specially live performance.

     

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    Anonymous Coward, Aug 4th, 2009 @ 6:27pm

    In a related story, a mailman today bit a dog.

     

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  16.  
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    Anonymous Coward, Aug 4th, 2009 @ 9:24pm

    Re: Re: Re: Risk

    I like the name "Cedar", but do have to admit that "Auditrix" sounds a bit domineering.

    My feeble attempt at humor aside, you make the one point that so many fail to grasp...namely that risk capital is the "grease" that is needed for any business to succeed, whether that business be a band or a new technology startup.

    For all of the promise the internet holds, even it is subject to the immutable rule that someone, somewhere, somehow has to front the money.

     

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    vervelife (profile), Aug 6th, 2009 @ 1:17pm

    I think artists taking back control of their music is great for the industry. Labels have been resisitant to change while indie artists have seen incredible success embrassing technology and doing their own marketing through social media. Interestingly enough, some artists have used the brand platform, like we do at VerveLife, to promote their their music (http://www.vervelife.com). Some bands have even gone as far as to sign with brands abandoning labels all together. Are brands the future of music?

     

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