The Real Record Business
July 10, 2009 by Swift Rock Ski
Filed under Homepage Feature, Main
Leave a comment
The real Record Business
I was watching some chatter on Twitter from some individuals who I consider enlightened having the old age debate about the structure of typical recording contracts. You know the squawk about why do labels still own masters after an artist has recouped. I understand the underlying thought of the argument but it is time to move the conversation away from the land of disgruntled children and discuss the issue like real businessmen.
Now I get it. Even after running a record label for many years I am no fan of the system. It is a corrupt oligarchy built upon baseless inflated margins and practices that should come with RICO charges. But this old argument makes just as little sense. And as the old model dies we must move the dialogue forward less we stay stuck in the same mindless conundrum.
I believe the issue is the lack of proper definition of terms. A record label is really a venture capital firm. The artist is the entrepreneur. In that situation the relationship is clear. The VC funds the entrepreneur. Assumes all the risk and in return receives the lion share of the profit. Every VC has an exit strategy at the beginning of the deal. There is no pretense of sentimentality. The VC is a capitalist institution from the rooter to the tooter. Their primary goal is to maximize their investment. The entrepreneur knows this and is counseled not to enter an agreement with a VC unless they are willing to comply with these written and unwritten rules.
Many artists enter deals with record labels blissfully blind and ignorant to the reality that the label thinks like a VC. Labels foolishly think because an artist shouts out their brand on wax that they are really team members. The truth is Labels are primarily interested in netting a10x profit. Artists are interested in no interest loans with no collateral and zero assumption of risk.
As much as people complain about record deals I ask where in your adult life can you find a business deal with these terms (outside of the VC structure laid out above). If artists want to own masters the answer is simple – assume some risk. You cannot be the boss without paying the cost, as the saying goes. The reason why you don’t own the masters after you recoup is you refused to accept the debt if you were not to recoup. When that record tanks (which 90% do) the artist is never asked to pay back that money. And I have yet to meet an artist who was willing to take that responsibility. The label is stuck with those bills. This is why they have the leverage. Business 101.
Think of a mortgage. The bank fronts the money and they own the property essentially. You pay back the principal plus interest. And it is the interest where they make their money. At the end of the term the house is yours. However, if you stop making payments the bank removes you from the relationship and you are on the street. That is assumption of risk.
If you don’t put your ass on the line like the bank is you will never be an owner.
In the age of new media where everyone claims labels, distributors and print mags can be replaced by iTunes, Myspace and Twitter I challenge artists, labels and faceless pundits who don’t even have a horse in the race to step up your game.
Want to own it? Put something on it.
http://www.brooklynbodega.com/2009/07/10/the-real-record-business/
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July 10, 2009 by Swift Rock Ski
Filed under Homepage Feature, Main
Leave a comment
The real Record Business
I was watching some chatter on Twitter from some individuals who I consider enlightened having the old age debate about the structure of typical recording contracts. You know the squawk about why do labels still own masters after an artist has recouped. I understand the underlying thought of the argument but it is time to move the conversation away from the land of disgruntled children and discuss the issue like real businessmen.
Now I get it. Even after running a record label for many years I am no fan of the system. It is a corrupt oligarchy built upon baseless inflated margins and practices that should come with RICO charges. But this old argument makes just as little sense. And as the old model dies we must move the dialogue forward less we stay stuck in the same mindless conundrum.
I believe the issue is the lack of proper definition of terms. A record label is really a venture capital firm. The artist is the entrepreneur. In that situation the relationship is clear. The VC funds the entrepreneur. Assumes all the risk and in return receives the lion share of the profit. Every VC has an exit strategy at the beginning of the deal. There is no pretense of sentimentality. The VC is a capitalist institution from the rooter to the tooter. Their primary goal is to maximize their investment. The entrepreneur knows this and is counseled not to enter an agreement with a VC unless they are willing to comply with these written and unwritten rules.
Many artists enter deals with record labels blissfully blind and ignorant to the reality that the label thinks like a VC. Labels foolishly think because an artist shouts out their brand on wax that they are really team members. The truth is Labels are primarily interested in netting a10x profit. Artists are interested in no interest loans with no collateral and zero assumption of risk.
As much as people complain about record deals I ask where in your adult life can you find a business deal with these terms (outside of the VC structure laid out above). If artists want to own masters the answer is simple – assume some risk. You cannot be the boss without paying the cost, as the saying goes. The reason why you don’t own the masters after you recoup is you refused to accept the debt if you were not to recoup. When that record tanks (which 90% do) the artist is never asked to pay back that money. And I have yet to meet an artist who was willing to take that responsibility. The label is stuck with those bills. This is why they have the leverage. Business 101.
Think of a mortgage. The bank fronts the money and they own the property essentially. You pay back the principal plus interest. And it is the interest where they make their money. At the end of the term the house is yours. However, if you stop making payments the bank removes you from the relationship and you are on the street. That is assumption of risk.
If you don’t put your ass on the line like the bank is you will never be an owner.
In the age of new media where everyone claims labels, distributors and print mags can be replaced by iTunes, Myspace and Twitter I challenge artists, labels and faceless pundits who don’t even have a horse in the race to step up your game.
Want to own it? Put something on it.
http://www.brooklynbodega.com/2009/07/10/the-real-record-business/
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