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Musician, Sign Thyself!
by Dina LaPolt, Esq.* - Added March 2004

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As is well known in the music industry today, the Internet has forged and will continue to forge some major changes in artist/company relationship. In addition to the Internet, however, there are other less-publicized reasons driving music industry evolution that will impact the artist/company relationship in the years to come. 

1. "Major" Changes
For one, all five of the major distributors (EMD, WEA, BMG, SONY, and UNIVERSAL) are publicly held conglomerates. As such, each is responsible to its countless shareholders who want assurances that their investment dollars will translate into steady quarterly balance sheet profits. (Incidentally, four of the majors listed above are foreign owned). In this bottom line obsessed market, artist development by the majors has become a thing of the past as the risks are far too great to justify investing substantial sums of money on artists who may, at some point, generate a profit so as to keep shareholders happy.

2. Self-Determined Artists Decide to Go Independent:
Second, artists increasingly believe that the record contracts offered by the majors are simply inequitable and unfair (hence, Courtney Love's lawsuit against Universal and the emergence of the Recording Artist Coalition headed up by Don Henley and Sheryl Crow). Many artists who have had "mediocre success" at the major label level are either attempting to escape their contracts with the majors with the hope of securing a better arrangement elsewhere, or such artists are getting dropped from the majors due to their "poor sales history" (i.e., under a million units sold). As a result, many such "mediocre" artists who may have a loyal fan base but who cannot steadily and increasingly generate millions in record sales are not re-signing with the majors. Ironically, some are not even entertaining major label offers. Such artists have discovered that by selling a considerably smaller number of albums on an independent record label or through independent distribution, they can get their music to their fans and, at the same time, make a lot more money than when they sold a million albums under the major label formula.

To illustrate, Big Head Todd and the Monsters were signed to Giant/Warner Bros. Records in the 1990’s and their 1993 album,  Sister Sweetly,  went multi-platinum (over 2 million albums sold).  Unfortunately, the band’s next two albums each “only” sold between 500,000 and 700,000 albums--a complete failure for any major label.  As a result, Giant decided that it was not going to advance the band any more money to record new albums or to release any further albums.  Big Head Todd wrestled free from its contract with Giant and subsequently established its own record label named, “The Big Records Label.  The group’s first “independent” album, Riviera was released on March 26, 2002 and according to the group’s singer/guitarist Todd Park Mohr, “We’ve seen more money from this album than I can remember ever seeing from Giant after we sold 2 million records.”   

Incidentally, the president of the now defunct major label, Giant Records was none other than Irving Azoff who has now become one of the staunchest supporters of artists’ rights and has been very influential in the Recording Artist Coalition.  In an interview with HITS Magazine (March 29, 2002), Azoff commented that, “The old traditional record model is dead” and that the “business has changed drastically but the music executives insist on hanging onto outdated business models that cannot possibly survive.”  Noted Azoff, “The major labels are clinging to a past dictated by huge CD profits pre-Internet that primarily existed by underpaying artists on a black-vinyl royalty rate for the CD.”   

Another example of an artist taking its careers in its own hands is the group, Wilco.   Wilco was quietly dropped from Reprise/Warner Bros. in 2001 shortly after turning in their fourth studio album, Yankee Hotel Foxtrot.  When the band turned in the Yankee Hotel Foxtrot album to the Reprise A&R representative, the band was directed to go back into the studio to create “a single.”  This, of course, left the band scratching their heads thinking to themselves, “they are all singles.”   Although not openly discussed, Reprise’s message to the band was clear:  Wilco may have religiously played to a receptive fan base of 200,000 album-buying fans every year, however, doing so is not enough to gratify the record company enough to back the band for subsequent albums.   According to Reprise, the band’s prior albums each “only” SoundScanned between 100,000 and 200,000 units.   After battling the label, Wilco was released from its contract and released the album on their own label, Nonesuch Records.  

3. Major Labels- No Investment?
In what has become a shift from the traditional approach, major labels are noticeably hesitant to invest money in newer artists.  Feeling the heated stares of global shareholders on their quarterly balance sheets, the majors now base their decision to release a given album on marketing and statistical information.  

Major label battles are not foreign incidents to many of those artists who have had "mediocre" success at the major label level. High executive salaries and label overhead demand sizeable record sales to support what have become "top heavy" majors. It is becoming more and more of a risk for the majors to operate according to their traditional approach-releasing numerous records at one time with the hope that some of those records "will stick," meaning generate sales sufficient to offset losses by their unsuccessful counterparts.

For example, in 1999, the girl group, Wild Orchid (signed to the RCA Records Label at the time) secured a four month tour with Cher and Cyndi Lauper. One month before Wild Orchid embarked on the tour, RCA informed the group that it would not release the group's newly finished album, Oxygen, because certain statistical information RCA had generated in a marketing report (compiled from an extrapolated sample of a select group of teenagers in the U.S.) was not sufficiently favorable to justify RCA's expenditure to have the completed album released. In addition to its decision not to release the Oxygen album, RCA refused to provide Wild Orchid copies of their first album to sell on the Cher tour unless the group paid RCA $11 for each copy.

Not surprisingly, Wild Orchid has since terminated its recording agreement with RCA and established its own record company, Yellow Brick Records, Inc. The first album on its own label is currently available on their website.

4.  Setting Up Your Own Record Label
As demonstrated by the plights of artists such as Big Head Todd and the Monsters, Wilco, and Wild Orchid, artists who have a loyal fan base and a record sales history numbering in the hundreds of thousands (i.e., "mediocre success" in the majors' terms) are increasingly forming their own record companies and securing P&D (pressing and distribution) deals with the majors or independents such as Koch, TVT, Lightyear, Bayside, MDI, and D3. Under this arrangement, the artist forms its own record company and "signs" itself. Subsequently, the artist's "new label" furnishes the artist's services to a third party distributor and/or other third party licensees. The artist retains ownership of its master recordings as well as most of its creative approvals (both of which are traditionally assigned to the record company under the majors' approach).

Often an artist will not even form a new record company, but rather, just sign itself to a P&D deal. However, if an artist signing to a P&D has a long term goal of maintaining its success and creating future records under the same model, that artist will need to build up some capital in order to finance subsequent record albums. In this respect, artists who form their own record labels can assign themselves a "royalty" (i.e., a percentage of the profits) from the sale of records as well as build capital in their record company by leaving a percentage of the profits in their record company account. For an artist to venture down this more independent and self-determinative path, foresight is crucial.

One alternative means of distribution for an artist setting up his or own record label is CD Baby.  CD Baby has become the independent recording artists’ answer to distributing their albums without having the traditional means of distribution (i.e., a record label or a “P&D” deal).  Essentially, any artist can get their CD’s distributed by CD Baby by just registering on the CD Baby website.  Once an artist has registered with CD Baby and has shipped his or her CD’s to the warehouse in Portland, CD Baby will then create the artist’s profile on its website so the consumer can just type in the artist’s name and order the artist’s CD from anywhere in the world.  Usually, CD Baby will ship the CD to the consumer within 24 hours charging approximately $4 per CD sold for its services. CD Baby is the independent artist’s “amazon.com” making independent music available to anyone at anytime.  

One additional bonus is that CD Baby is a registered affiliate of Soundscan so every CD sold via the CD Baby website is reported to Soundscan on a weekly basis.  This is quite beneficial to the independent artist without a record label or a “P&D” deal because a new record company has to be in business for two years before it is eligible to register as a Soundscan affiliate. CD Baby also offers other beneficial services such as obtaining UPC codes for its artists as well as providing invaluable information to an artist wishing to tour the college market.  Additionally, CD Baby has been invited by Apple to be part of the iTunes music service, a service that is reserved for artists who are only signed to record companies.  As of this writing, details are currently being worked out.  

5. You Can Get Major Label Product for a Minor Cost
Another recent trend in the music industry has been the decreasing retail price of CDs and albums as a whole. A business-savvy artist can control the release of his or her own record albums (by signing with an independent record company or releasing records through a distribution company), sell its albums cheaper, and ultimately undercut the competition. Currently, the SRLP (suggested retail list price) of an album is $18.98 and albums have historically retailed at a SRLP established by the major labels. However, even some of the majors are beginning to realize the advantage to lower-priced albums as evidence by those who are currently releasing albums featuring their newer artists at a price far below today's SRLP. For example, the albums recently released by Vanessa Carlton (A&M) and Norah Jones (Blue Note/Capitol) debuted at $9.99 and $8.99 each, respectively.

Artists who own their own record companies (or secure independent distribution) can reduce the price of their albums by planning and keeping their production and manufacturing costs as low as possible. Can the majors afford to do this? Not if they continue to spend exorbitant sums of money. Most majors will spend $20,000 to $100,000 per master when making an album depending on the producer engaged. And, it's not always due to the artist per se. To illustrate, producers such as the Neptunes, Timbaland, and Irv Gotti are currently asking for and receiving fees in the $100,000 per master range depending on the artist who hires them. Sometimes an artist may be able to hire the producer for a much lower rate if the producer knows that the artist has potential and is putting the album out on its own label. This has happened many times over with my clients. We are always grateful for those producers who realize that artists are, at the core, driven by the need to get their music out to fans rather than the bottom line of a balance sheet the fuels the corporate conglomerates that have become the major distributors.


Dina LaPolt is a music lawyer in Los Angeles, California at LaPolt Law, P.C. Her clients include the Estate of Tupac Shakur and Afeni Shakur’s group of entertainment related companies, Amaru Entertainment, Inc.;  Ed McMahon and the "Ed McMahon "Next Big Star" television show; the Outlawz,  Victoria Silvstedt, Jasmine Guy, and  the Estate of Lisa “Left Eye”  Lopes, among others. In addition to practicing law, she is a panelist at various music conferences across the United States, she is an author and contributor to many music business books and magazines, and she teaches a music law class at UCLA.  Dina also has a Bachelor's Degree in Music and sings and plays guitar in all girl band called, "Trophy Girl."  To contact Dina LaPolt and to find out more about her firm, please log onto the firm's website at www.LaPoltLaw.com.   

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