 Musician,
Sign Thyself!
by Dina
LaPolt, Esq.* - Added
March 2004
Back to The
Academy
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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