Bob Leftsetz Weighs In On Major Labels
Monday, February 11, 2008 at 12:45PM Several years ago, people in the industry started sending me posts by a journalist/music biz maven named Bob Lefsetz. He writes a candid and informed music biz opinion letter that is challenging, intelligent and always entertaining and informative. 
If you like this article you can subscribe to his letters (which I have done now for about three years and I read him every day) at
http://www.lefsetz.com/lists/?p=subscribe&id=1.
This time Bob is addressing the benefits of signing with a major label. Hope you enjoy it as much as I did and for the record, Bob Lefsetz is neither of the above gentlemen. Here's Bob's post:
We can argue over the mechanical rate, and lament that whatever it is, the major labels will negotiate it downward, but one thing's for sure, in the future acts will own their records.
The traditional deal was we find you, we pay you a bunch of money, and we own everything. Is this fair? Maybe if the record stiffs, but certainly not if it's successful. The act pays for the album yet the label owns it? In what alternative universe does this make sense?
In the world of major label accounting. Which is also undergoing a transformation. Because of transparency. If there's no pressing, no manufacturing, and you just get a statement from your digital distributor, where do you perpetrate the fraud? That's how labels make their money, via fraud. They sell a certain amount of product and pay you..? Which is why powerful lawyers and managers extract such huge advances, because they don't trust the royalty system. But these big advances have brought EMI to its knees. For if the album is a failure, or doesn't meet expectations, the money guaranteed is out of whack. EMI wants a more equitable deal. And part of this deal will involve the act owning its masters.
Oh, that's not the driving factor, the huge advances, but the transparency is key. Today recording contracts are no longer a mystery. Even fans, business experts after Napster, know that the act pays for the record yet doesn't own it. Light has been shed on this heinous practice. And therefore, it won't be able to exist.
You write a book, you own it.
Direct a movie and you don't own it. Because the film is so damn expensive, there's such a risk involved.
Recording is no longer that expensive, it certainly doesn't have to be. Sure, if you're a superstar and want to spend a million dollars, be my guest. Then again, where are you going to sell all this product, in a world where no one goes diamond not because of piracy, but the inability to reach the masses combined with infinite choice?
Recording costs are coming down. In many cases close to zero. Which in this case, is under 50k. Hell, let's just say under 25k. And if you can't lay your hands on 25k, you don't deserve to be a successful artist. Go to your parents, go to your friends, your fan base, work on the road, your day job, if you can't figure out a way to buy the computer equipment required to make a record, and pay for basic tracks in a big room, you don't have the passion or desire to make it.
That's what records are made on now, computers. And I don't want to argue with engineers what is required for ultimate sound (interestingly, to be heard as MP3s via earbuds). It's just that everybody is making records for less money. The label wants you to record vocals in a home studio. So, if costs keep going down, what is the rationale for the label to own the record?
The rationale used to be that you couldn't do it on your own, couldn't make it on your own. You needed the label to be a bank. But now you can record on your own, and the label can't do much for you. Can't get you on television or on the radio. Why should you give up ownership? The business proposition just ain't that good!
Oh, if you're the new Alicia Keys or Whitney Houston, a high concept act requiring money and time to expose and break you, the label is going to extract concessions, you can't do it without them. But if you're a band and your tracks are on MySpace (which Universal won't allow), and you're playing club gigs, why take almost no money and give up everything to an entity that just can't do much for you? Other than take you to lunch and bill you for the privilege?
360 deals? Where is it written that the labels will be all powerful in the future? I just don't see it. They're desperate. They want to recoup income. Who says acts have to give it to them? And each act is an individual entity, negotiating on its own. There's no WGA forcing everybody to agree. You can't keep acts in line.
Which brings us back to mechanicals. If you own your own master, and you're the label and you're gaining all the revenue, who gives a shit what the mechanical rate is? Oh, if you get a cover you care, but do you write the kind of material that's going to be covered? But what about your publisher, and his big advance? Well, do you need that publisher? And, once again, if you own the label...
But publishers advance monies based on airplay, based on hits. Are there going to be hits in the future? Let's put it this way, will it be a hit-driven business? Shit, the Eagles sold triple platinum, and the success of "Long Road Out Of Eden" had almost nothing to do with hits. There was airplay on one song. But, a brand name and visibility and a cheap price. The Eagles didn't need the major label system.
And neither did Radiohead.
The new Radiohead wouldn't break on MTV. Utterly impossible. So what does the new Radiohead need to make a heinous deal with a major label for? Look to the U.K., where majors license product, for a brief period of time, just to feed the pipeline... That's more representative of the future than the all powerful label of the 1980s or 1990s.
I'm not saying songwriters shouldn't fight to get paid more. I'm just saying that the big label is no longer the bogeyman. The big labels are fighting ridiculous battles that don't matter. If you're a developing act you want your complete song on MySpace, and you want file-trading. If you're not on the radio, how in the hell else are people going to discover you? You want to give now to get later. You don't want people to have to pay a lot to get in on your scene, you want to develop.
The desires of the acts and the major labels no longer square, they're at odds. The label wants to pay little for an incredible upside, which it owns lock, stock and barrel. The acts used to have no choice. Now they do.
Will there be labels in the future? Sure. But they won't look like and won't have the same names as the big four companies today. Because the new labels will be about building acts and maximizing revenue in all areas of exploitation. They'll be about transparency. They'll be run by geeks as opposed to mini-mafiosi. There will be a level of trust between performer and businessman. All things today's majors abhor, which will contribute to their marginalization.
Don't give up ownership of your records anymore. You don't have to. Whether you license for a brief term or get the masters back at a certain sales level or both...this is now a negotiable point, just tell the labels you're going to go indie... They'll no longer laugh. They need you. They know indie can now deliver. They'll negotiate.
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