You know the theory about light and distant stars? That it takes so long for light to travel to Earth that some stars appear to be shining when they have actually burned out long ago? That’s how artists should be thinking about major-label record deals. The industry has burned so long on the fossil fuel of major-label cash, they still appear to be relevant. Are they?
New so-called “360 deals” on major labels want a piece of everything the artist makes. They get their name because they take revenue from all sides of the pie—sales, touring, licensing, publishing, acting, modeling, merchandise—you name it.
They offer big bucks, higher percentages, and look and feel like the major-label deals of yesteryear, with the press releases and executives shaking your hand in offices perched high in a big-city skyline. But are they? Could it be that these deals are merely a façade: one where the label commits fraud right at the onset of the deal, and, in all probability, even before the toner on the contract is dry?
What’s the alternative you might ask: start your own label? Artists can and have tried in the past (failed attempts include The Rolling Stones, Grateful Dead, Bruce Springsteen, and Pearl Jam). But the Radiohead experiment of last year shows why it could be worth revisiting—if you’re an established concern.
Radiohead gave away their new record, In Rainbows, for whatever a fan wanted to pay, including nothing at all. It seems that of the 100,000 downloads, the average fan paid about $9 US. Only the band knows how many opted to pay $0, and that information was not figured into the average. Regardless, the campaign translated into great physical sales as well.
The new album ranked as the top-selling album in the US this month, selling 122,000 copies. Though it’s a sharp drop compared to 2003’s Hail to the Thief and other major label releases, think of the gross revenue—$1.50 per record on a major compared to about $7.00 per unit sold independently. The figures also back up something I’ve been saying for a while now: that music fans still like owning physical product, namely CDs.
So with “pay what you want” versus “pay the label everything it wants,” which model will more likely attract the up-and-coming artist and keep the $10 billion music business from becoming a footnote in history?
If you’re just starting out, there might still be no alternative to majors—even in the age of the internet. Many fans complained about the Radiohead offer. The lack of bandwidth caused time delays. The “shopping cart” utility jammed for many. Some waited so long for the transmission they lost interest.
These problems were all solvable, but none of them were actually solved. Why didn’t Radiohead hire the best IT people to account for the extra traffic and glitches? Because artists often don’t think this
way. They think about their fans and their product, not about technical minutia. Majors are counting on this lack of business acumen as the commodity they peddle in the 360 deal.
Does this mean that emerging artists are once again stuck with accepting the junk contracts labels have given artists for years? Is the 360 deal the new junk deal?
Maybe. But there are several Achilles heals in the 360 deal that majors will not realize until years from now, after they are already entrenched in them.
This Deal is Dumb
Aside from CD and download sales, the 360 deal dips into revenue that formerly was the domain of other vendors to the artist: mainly, the agent, the manager, and the producer (as well as the publisher, if the artist was a songwriter). If the label takes this cash, from where is the vig for these other professionals going to come? Two conclusions leap to mind:
1. The artist will pay a second set of commissions, ON TOP of the split that they give the label. This means the artist makes less money–a lot less.
2. The artist will decide they don’t want to pay two parties for one job and not contract with outside vendors.
Since number two is the more likely scenario, it will mean the inevitable extinction of the manager, booking agent, (some) producers, and handlers. We are talking about roughly a third of the people
listed in The Music Business Registry.
Labels gouging the income from about a third of the professionals in the business will not be met with any degree of acceptance, I can assure you. They will fight back, exploiting some very alarming weaknesses in the 360 deal that will leave labels wondering, once again, how they could have been so short-sighted.
Moses Avalon is former record producer and recording engineer who has worked with Grammy winning artists and received RIAA platinum records. He is now one of the nation’s leading music business consultants and artists’ rights advocates and author of a top-selling music business reference, Confessions of a Record Producer. More of his articles can be seen at www.mosesavalon.com.