Archive for the ‘ Major Labels ’ Category

Different Deals that Major Labels Offer

This article I found on Tunecore’s blog lays out the details of different deals that labels may offer you. Even though I am a major proponent of remaining independent, and I probably wouldn’t sign one of these deals right now if it was offered to me, it is useful to know about them so you know what you could be up against. If you know what kind of deals they offer you might be able to work out a more beneficial deal when it comes to the time. For instance, I might want to work out just a distribution and radio deal with a label and work out some percentages that make more sense than the label owning the fruit of my labors for the next ten years.

The Full Article on Tunecore’s Blog

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Key Takeaways:

Deals, Deals, Deals

By George Howard, Read more articles at Artists House Music

The Royalty Deal Type 1: The Copyright Ownership Deal

The most common type of deal that artists were offered emerged from the era when artists needed the label to pay for the creation of their recordings.  In a pre-ProTools era it was inconceivable for an artist to make a competitive recording on his or her own dime.  Similarly, artists were reliant on labels for distribution and promotion.

Grant of Rights – The artists thus trade the rights to their master recordings in exchange for the funds needed to create a recording, and for the promotional dollars and expertise the labels offer.  Remember, the labels control the copyrights to the versions of the songs they release on the album (as signified by the (p) copyright mark); the writers maintain ownership of the songs used on the record (as signified by the ©), and license the songs to the label via a mechanical license agreement.

Term – Up until the early nineties (and, to a degree, continuing today) the vast majority of these exchanges were perpetual.  Meaning, the artists assigned the copyright to the versions of the songs (not the songs themselves) the label release to the label…forever.

The Royalty Deal Type 2: The Term Deal

One deviation from the above emerged simultaneous to the popularization of ProTools.  As artists began to be able to record high-quality masters at greatly reduced costs, the value exchange between artist and label became strained.  Artists no longer needed the labels’ money to record, and while they still needed the labels’ promotional money and expertise, the artists became increasingly unwilling to part with masters they themselves had funded.

This dynamic led to far more so-called licensing or term deals.  In these types of deals, the artist grants the label the rights to exclusively exploit the recordings for a set period of time.  At the end of the term, the rights to the recordings revert back to the artist.  The artist may then re-license them, sell them, or exploit them herself.

This deal is obviously an attractive deal for many artists, as, beyond the financial implications, it also represents a sort of moral victory for the artist who is reluctant to forever part with his or her work. The caveat, of course, is that these deals tend to have little or no advances associated with them. Beyond these differences, the Term Deals operate essentially in the same manner as the Copyright Ownership Deals outlined above; that is, there are clauses for royalty, territory, number of options, etc.

The 360 Deal

While the license deals may have represented a move towards a more balanced label/artist relationship, the 360 deal represents a decisive shift back towards labels as acquirers of all rights.

The 360 deal is a Copyright Ownership deal where the label has rights in not only the master recordings, but also in ancillary rights that artists typically kept sacrosanct; such as, merchandise, revenue from touring, and publishing.

The labels’ argument is that as a result of their exploitation of the artist’s master(s), they increase the value of the artists merch, ticket sales, and publishing, and, thus, should participate in the revenue from these elements.

The problem with this argument is that few if any labels have competencies in the area of merch or tickets.  With respect to publishing, there are a host of conflict of interest issues with respect to a single entity controlling both the master and publishing rights of an artist’s work (these are not insurmountable, and there are benefits, at times, to a “one-stop” publishing/master relationship, but such situations are not without their challenges/potential for conflict).

These 360 Deals have become de rigueur amongst the majors; if you want a major label deal, this is what you will be offered. All other deal elements are consistent with the above with respect to term, territory, and royalty.

Net Profit Share (NPS)/Joint Venture (JV) Deals

On the other end of the spectrum are deals seen with increasing frequency in the indie world, as well as between investors and artists.  These deals, often referred to as JVs, but more accurately described as Net Profit Share deals are typically perceived as more artist friendly than any of the above-mentioned deals.

In these types of deals, the artist typically delivers a finished master to the label.  The label pays a small (if any) advance, and then spends money exploiting the master.

In these deals, the label recoups all expenses associated with this exploitation (remember, in the deals above, recoupment typically tends to be limited to advances and money spent on independent promotion and publicity).  This means that every dollar spent — for postage, manufacturing, advertising, etc. — is all recouped prior to an artist royalty being paid.

Once this money has been recouped, the label splits the profit — on a net basis — with the artist.  Meaning, if the label spent $5000 to exploit the master, and they recouped this $5000 through sales, at the very next record sold, the label would divide the profit after expenses with the artist.  So, if the cost of goods sold on a per-record basis was $3 (for manufacture, marketing, etc.), and the label received $10 from the sale of the label, they would remit $3.50 to the artist and keep $3.50 for themselves.

While these deals do seem more equitable on the surface, it’s important to keep in mind that few records recoup even when limited to advances and costs of independent promotion/publicity, and thus when you factor in all the other costs associated with exploiting records it can be very challenging to recoup all of the costs.

Summary

There are infinite variations to the four principle deals presented above, and future articles will explore in more specific detail the elements associated with each, but understanding the key distinctions will allow you to make better informed decisions, whether you are offering an artist a deal, or being offered a deal.

DJ Premier: Where Rap Went Wrong and How to Fix It

The Villiage Voice recently did a Q&A session with DJ Premier where he gives his views on the current state of the rap game compared to where it was when he first hit the scene. Primo happens to be my favorite producer of all time. He has a giant body of work with the recently deceased Guru in the legendary duo GangStarr. He worked with New York’s elite artists like Jay-Z, NaS and Biggie in their primes on some of their best projects. And he was able to counter his work with established artists with some very impressive underground work as well. The guy has been on the scene for so long and has made so many of the classics I put on to bring me back to a better time in hip hop, so I take notice when he has something to say. In this article Primo adds to the anti label sentiment that a lot of industry insiders are feeling in the aftermath of some questionable decisions by L.A. Reid at Def Jam and labels getting in the way of artists like NaS and Lupe Fiasco making the art that they want to make.

Primo: “I’m 44-years-old so I remember when the majors had passion and cared about music. That’s gone now, which is why they crumbled so tremendously. They want to blame the internet but that’s not the main culprit–it’s the lack of passion for what you’re signing.”

djpremierinterview.jpg

Full Article on Villiage Voice

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Key Takeaways:

A few years back Papoose and Saigon were tipped as future superstars capable of re-asserting New York’s rap credentials, but their careers quickly faded. Why do you think that was?

Papoose had a million dollar deal at Jive but I knew Jive wasn’t going to let him drop all the street shit he was doing. You can’t all of a sudden convert him into a commercial artist. They’re going to force him to make those commercial songs and when they don’t work they’re gonna drop him.

And Saigon?

Same thing — they’re not going to let the grimey, ‘hood, chase-you-with-a-knife music out. They’re not releasing that shit. Sai has more of a commercial appeal, but a street artist has to be broken in the streets first and then developed in the mainstream.The street is where you want to get broken at first if you want to be a hip-hop or rap artist.

Do you think that’s something the major labels will ever understand?

They did in the beginning, just cause they were allowing people to take chances. Then when it came down to the money piling in, and it was so cheap to make, the love and passion went away. Then they see the slips in the sales and they panic, like, “Don’t do that street shit, we need more commercial stuff!” No, you don’t.

So is there a healthy underground New York rap scene at the moment?

It’s so much stuff that just doesn’t get regular radio play. Thank god you have me and DJ Eclipse, who does a similar show to me on Sundays. We don’t have a playlist — we make our own choices. If everyone was like that, hip-hop would still be a billion dollar business. Now, it’s just a million dollar business.

What has changed most about the record industry since you first came out?

I’m 44-years-old so I remember when the majors had passion and cared about music. That’s gone now, which is why they crumbled so tremendously. They want to blame the internet but that’s not the main culprit–it’s the lack of passion for what you’re signing. And there’s things like putting an age limit on rappers, like you can’t be 44-years-old and sign to a major label. Come on! When you’ve got an upcoming 18-year-old, the difference is they haven’t experienced the lifestyle of hip-hop when it was fresh and new. The kids today that are born into hip-hop don’t appreciate the history: “Those artists are old so I don’t listen to them!” But if you’re not gonna care about the history of something that’s a culture, then you’re gonna lose down the line. I see that every day. I see when they’ve gotta tour just to pay bills–I’ve been through it. I’ve had money and lost money. My experience is 23 years in the business and there’s nothing I can really be schooled on unless it’s something higher than I’ve experienced.

A Modern Day Gold Rush (pt. 1)

Anti label sentiment is reaching a boiling point (most notably NaS’ beef w/ Def Jam and Lupe Fiasco’s beef w/ Atlantic) and it almost seems like a new niche service being offered to independent artists each day. It’s time for artists to cash in on this gold rush.

On October 27 I posted an interview by Young Guru (the sound engineer behind big hip hop stars like Jay-Z and Kanye).  In that interview he said, “What we’re dealing with now is the emergence of independence, right? And the emergence of the Internet. So people are finally waking up to these things that I’ve been saying for, I’d say about 20 years. That you don’t need a record label. At all, whatsoever. I work with ‘em, I know I don’t need ‘em.” He also said, “Don’t deal with the company. Period. Start your own company. This is the perfect time for musical independence. The perfect time.” And he went as far as to call the labels slave masters.

The lesson is clear. If you’re trying to start out as an artist right now don’t focus all of your efforts on getting signed to a label! Ten years ago you probably would, but the landscape has changed. The outlets that were controlled by labels have opened up somewhat and access for everyone is increasing each day.

What remains to be seen is whether an artist can use these tools to become huge. It is definitely true that at some point you need a team of people to help you, but when you do need help be smart about it. A number of services have started that allow fans to help the artists they love. Involve your fans in the process. The change is coming, and all it takes is one mega success to come out of one of these services and others will flock.

More on the services available to you in pt. 2

Young Guru — “Major labels are slave masters” and why we don’t need them

Key Quotes:

The corporate system doesn’t owe me anything. I’m very aware and I understand exactly the situation when I walk in to it. I don’t have love for that corporation, and that corporation don’t have love for me. This is a business arrangement. I think too many times when we dealing with our heart, we put our love into it, and expect that person’s gonna love you back. That person’s never gonna love you.

What we’re dealing with now is the emergence of independence, right? And the emergence of the Internet. So people are finally waking up to these things that I’ve been saying for, I’d say about 20 years. That you don’t need a record label. At all, whatsoever. I work with ’em, I know I don’t need ’em.

Like a good slave-master [the major labels] said, “I need to lock down my slaves.” So they come with these 360 deals, which means that I own you completely.

Don’t deal with the company. Period. Start your own company. This is the perfect time for musical independence. The perfect time.

The end is coming. Ten years from now these record labels will not be here in the capacity that they are now. Because it doesn’t make sense. If I’m an artist I would not sign to a major record label at this point. Because I do all the work. I go find the artist, I make the beat, he writes the rhyme, I record everything, I mix it, then I have to hand it in and I don’t own it, and I make ten cents off of it. That doesn’t make sense.

The only thing [the major labels] do for you is give you a loan, it’s a bank.

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