Post by ELLIE on Jan 2, 2004 22:01:26 GMT 2
This article was written by Dina LaPolt, if that name rings a bell it's because she's Wild Orchid's attorney. 
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, as I told you last installment, all five of the major distributors (EMD, WEA, BMG, SONY, and UNIVERSAL) are now 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 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.
Last installment I illustrated this with the examples of the experiences had by Big Head Todd and Wilco.
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.
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.
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 will be released in August 2002. Visit www.wildorchid.com for more information.
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.
3. Major Level Product, 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.
Article courtesy of:www.cosmik.com/aa-june02/mlm3.html
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, as I told you last installment, all five of the major distributors (EMD, WEA, BMG, SONY, and UNIVERSAL) are now 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 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.
Last installment I illustrated this with the examples of the experiences had by Big Head Todd and Wilco.
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.
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.
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 will be released in August 2002. Visit www.wildorchid.com for more information.
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.
3. Major Level Product, 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.
Article courtesy of:www.cosmik.com/aa-june02/mlm3.html
