LABEL DEALS

In previous posts, I've eluded to working with a label from a few different aspects. Perhaps one of the most challenging areas to understand as a new artist or for parents of younger artists is what it means to get a label deal and the many facets involved.

First of all, in the world of music, there really aren't very many major labels left. Most of the industry has consolidated into a field of indie labels and the remaining big boys.

• Universal Music Group
• Sony Music Entertainment
• Warner Music Group

There are other well-known labels with market recognition, but many are just subsidiaries of these three major corporations. Labels like Atlantic, Capitol, MCA, Mercury, Arista, and Motown are all names I grew up knowing as labels of famous artists. All of these and many more are now under the umbrella of one of these big 3 companies. However, in the industry, these labels are considered a power in themselves in various genres. Also keep in mind that these labels have sisters and brothers in other countries and even some siblings in the USA market as well.

In a recent visit to Warner Music Group in Nashville, I was able to hear the history of Warner's maneuvers in the industry the past few decades and didn't realize how cross-pollinating some of the labels under Warner really were. For instance, some artists signed to one Warner label may actually work with a sister label on a project or for distribution to a different segment of the consumer market. Frankly, it's all very confusing until you sit down and draw it out on paper.

Then there are the Independent Labels that are "not" part of the big 3. Honestly, I know of many small indie labels that have launched the careers of some well-known artists that later moved on to the big boys or the labels roster was bought out by a big boy.

So, knowing that there are MAJORS and INDIES in the label business, there are some clear distinctions you should understand before starting a dialog with either, should you be fortunate enough to be considered.

WHAT IS THE PURPOSE OF A LABEL ANYWAY?

To simplify the role of a label, let's just pull away the glitz and glamor of getting signed. A label is nothing more than a business partner (bank) who is interested in investing in your small business (the artist). Having said that, stop thinking of yourself as a creative entertainer with spotlights and autographs happening and think in terms of being a mom & pop diner in your town. You have invested in your reputation, product, service and advertised with your own money. Imagine a banker or investor coming along and seeing you have a successful small business. There are legitimate investors to consider and some you should avoid. This is the essence of navigating your understanding of a label's role.

So to avoid picking the wrong "investor" you should consider some basics.

WARNING SIGNS:

• In general, an established label will NOT reach out to artists unless they have been touring a lot.
• The market is too full of talent for them to need to turn over stones. Most want to discover new talent, but rarely reach out to up and coming artists unless they intend to do a development deal... which usually involves the artist writing checks to someone for "development".
• The music industry is shrinking and many ex-professional executives are out of work.
• Sales and revenues for labels are very hard to come by today versus just 5 years ago. As such, many labels are laying off even the most experienced and talented staff members simply because they can't afford to keep them on payroll.
• Many of these former employees have launched management companies, development companies, bird dogging services (they find talent and set up intro meetings with their former associates for a nice fee), production companies, or even small labels. They use their resume to impress you with how they will help you get discovered or signed to a big deal. In the midst is the little issue of them needing to make money to transfer this wealth of knowledge they possess.
• What artists do they currently have?
• Many labels have a plethora of undiscovered talent on their roster and they use those artists small-market fame to build their label with other small-market talent.
• Many of these labels try to build momentum off their anchor artist on the roster, who may or may not be happy with their "contractual" obligation to stay with that label.
• Their website is plastered with self-promoting fluff that really doesn't point to any third parties to validate their track record. If they don't post record sales, tour photos, radio results, etc. it's a sign that they aren't doing much.

So suppose you get into a dialog with any of these labels who claim you (the artist) are the next big thing. The reality is that all their promises and delivery guarantees can be found in the fine print of that annoying and lengthy contract they present. Initially it's great to discuss theoretical outcomes, but get the contract into the hands of an "ENTERTAINMENT LAWYER" (not your family lawyer or your company lawyer). An entertainment attorney has seen all the tricks and knows the industry better than a general practice attorney. There are obviously black and white elements that will be easy to spot as an artist, but never sign a contract with anyone unless it has first been reviewed by an entertainment attorney.

SO WHAT ABOUT THE GOOD GUYS?

Yes, there are good guys in the industry that are fair and able to become your partner without you fearing the worst. However, the reality of what a good guy provides in a deal may not be what you expect or want.

In general, these are the things that the big labels do and don't do with a new artist, and what they are looking for in new talent.

• DON'T DEVELOP TALENT
• Most major labels will not sign artists who are still trying to find themselves artistically or finding a fan base. Simply, they want an operating business that they can blow up (in a good way). They aren't interested in having to train the artist "HOW" to be an artist. They assume that is already done.
• However, they may be willing to build on a good foundation and develop a better marketing strategy or brand image that will have a stronger market presence. For example, you may have built a fan base with your band being called "The Crumb Eaters", but the label may choose to rename your band and invest in a new logo and brand campaign because "The Crumb Eaters" doesn't fit their overall corporate brand strategy as a label.
• Although A&R staff still exists at major labels, most A&R roles aren't as hands on as they used to be in the past. They aren't necessarily spending a lot of time training artists how to be a professional artist. They are more interested in refining the product through strategic song writing and production. They are more hands on in creating product that sells. So consider them more R&D engineers.
• OPEN DOORS TO OPPORTUNITIES
• Unfortunately, many necessary doors to exposure are sealed shut to independent artists. Big labels have the relationships to get radio airplay, big tours, P.R. events, etc. Sadly, the radio industry, for example, will prefer music from major label artists before indie artists. Why? Because these major labels have the artists that consumers want to hear and advertisers on those stations will invest to have their commercials played between those artist's songs.
• When you're working with a major label, the industry quickly knows who you are and you will have first-hand knowledge of matters that may affect your career much quicker than being an indie.
• COMPLIMENT EXISTING ROSTER MEMBERS
• Labels have to deal with a whole team of artists and won't sign competing artists (necessarily) that an existing roster member already handles that area of a market. This may be hard to distinguish with 
• Conversely, a label won't sign an artist that is so far from the genre they specialize in that their infrastructure, relationships, etc. won't be usable. For example, if the label is primarily a Hip-Hop focused artist home, their radio contacts will likely be with stations that feature hip-hop music.
• TRACK RECORD
• A reality that is hard to handle sometimes is measuring the effort and sweat you put into a career versus what is noticed or considered "acceptable" experience by a big label's standards. At one point in the past 12 months, I had a candid conversation with one of Spencer's mentors and managers in Nashville who shared the harsh reality of the trek we've been on. He was first to compliment Spencer for the hard work he's been putting in and the overall work we've been doing as a team, but he said that the industry has some definitive bench marks they use when considering which artists are really on the radar. Sadly, he said as much progress as Spencer is making, he's not even a blip on the screen yet. That was hard to hear, but a good thing to understand. I asked what makes a BLIP, or how (when) does Spencer become a BLIP. His reply was both encouraging and depressing at the same time. Mind you, this man helped start the fastest growing label in the hip-hop industry 8 years ago and is now a multi-million dollar enterprise with it's premiere artist just having won a Grammy this year. In addition, he has negotiated several major deals with other artists and major labels, and has been in music distribution for a long time. He knows and understands the "business" side of the music industry. His reply...
• How many units has Spencer sold the past 12 months? (units=songs and or CDs)
• How many live shows has Spencer done in the past 12 months?
• How many top 10 radio hits has he had in the past 12 months?
• What is his live show attendance average when he headlines?
• My head sank when I realized the measuring stick of a major label is different than my "YOUTUBE VIEWS", FOLLOWERS ONLINE pride we've had for Spencer. He commented that unless his sales of units is in the 5 to 6 digit area and his live shows nears 100 or more each year with several hundred in attendance, he isn't really even considered a legitimate artist yet. Then radio needs to have at least 1 or 2 songs chart for him to be considered legit. The reality is that all of this takes time, resources, and PATIENCE. These criteria are also used by major tours to determine if an artist can even OPEN for a headliner. Either that, or it's a PAY TO PLAY scenario for an emerging artist wanting to get exposure.
• MULTI-YEAR DEALS
• Most major labels aren't looking to experiment. They are looking to invest in someone who is grounded in what they want to do in their life with music. They aren't looking for someone seeking fame and fortune, but rather someone who is seeking hard work and is "self-motivated" to work hard for very little initial gratification. They want to see that an artist is in it for the long-haul.
• WORK ETHIC
• When Spencer was 15 and we just started to seriously discuss his music career with the management team we have in Nashville, one of the more profound things I learned was the value of real-world experience over time for Spencer. While he had many tangible assets for a major label to consider, he lacked "LIVING" the life of an artist over time that most labels want to see an artist having done already. Why? Well, consider a bank loaning your business money in the first 12 months. It's highly risky to do so because you haven't really proven your staying power during good AND bad times. Statistically, most businesses fail in the first 36 months nationally speaking. It's usually after 36 months that an owner will either throw in the towel or stick it out because they've invested themselves and learned "HOW" to run their business.
• Most artists think if their sound is great that they deserve the big contract. Well, think about the perspective of a label who will be investing millions into launching that artists career. The risk is the money they spend to launch them (marketing mostly) and if the artist hits the road and fizzles out because of the rigorous schedule and limelight and constant scrutiny, the label risks losing an investment. So, as Spencer's current manager put it, they want to know that the artist knows what it's like to sleep in a van, slugging their own equipment from show to show and eating at Arby's at 2am in the morning. That 'experience' is worth MORE to a label than talent. A label wants to protect their investment and an artist must be able to demonstrate that they are fully committed to their career but not just fame and fortune seekers.

While having a lot of cyber-fans can mean popularity, it doesn't always translate into revenues. Proving the financial value of an artist to a label is the most significant "business" side of what a label considers. The indie labels are usually anti-big-label minded. They tend to shy away from the traditional model that big-labels look for, but in the end, it's still about making money.

So, when considering a label or label deal being presented, make sure you do your homework on how income and expenses are shared between the label and artist. Most deals are backend loaded with artists having to PAY BACK up front monies and reimburse expenses. Be sure to understand how the accounting of those expenses is done and what percentages are going toward whose account. 

Many labels today want 360 deals (that means they get a piece of every revenue stream an artist makes) in order to get the return on their up front investment as quickly as possible. In the past, some artists have signed multi-album deals and labels have been burned when sales of the first or second album don't exceed the investment. So, to offset the risk, they find ways to bring in money from an artist through things like merchandise, concert revenues, licensing deals, publishing, etc. All these revenue streams are "taxed" by a label and the artist must pay a portion of those back to the label. This is very common in reality TV shows like American Idol and X-Factor. In exchange for being catapulted into the market, the artist surrenders a lot of future revenues they would have been able to keep in the past.

This is why the Indie label or Indie route for an artist can be much more appealing. The publishing, merchandising, concert revenues, record sales, etc. are all revenues that you get to keep. The trade off is that you rarely get the marketing budget for people to find out about you and if you do, you spend hundreds of thousands of dollars getting that notoriety... which of course, would have to be made back in revenues at some point.

So it ends up looking like this.

Invest your personal resources into the career of the artist as much as you can. Hope the market likes your stuff. Build a loyal fan base over time and someday realize a revenue (income) from the investment. This method is usually slow growth and long, long time to come to fruition.

OR

Sign on with a big label when possible, short cut the long term, slow growth model, give up revenues, but have a bank paying to make you known (in the short term). You're essentially signing a promotion deal since the biggest payment you will get is exposure in front of a larger audience.

When you're dealing with a young artist, the long-term exposure route through self-promotion usually takes the artist into their adult years, in which case they become a needle in a haystack of talent.

While this post isn't all-inclusive of every possible scenario, for the most part, inexperienced artists and/or parents should take it as wisdom to avoid getting excited over the first dozen "industry" people that make a pitch to the artist. Chances are, you are one of hundreds on a list they are hoping to earn some fees for sharing the secrets of a successful career in the music business.