The Record Label Of The Future

02 Mar 2017

Credits: Klaus Hausmann

Speaking at a recent Music 4.5 event on the subject of the future of the record label, artist lawyer Robert Horsfall delivered a speech which in under ten minutes succinctly and deftly highlighted much that is still seemingly wrong with many artist/ label recording contracts.  Focusing on the positive, he champions a raft of good practice with some great examples, citing the importance of trusting the artist-label relationship,  simpler, shorter contracts, and space for artists to grow.   Whilst affirming that label services deals work for certain artists and genres, pop and dance acts tend to be best served by a progressive, 360 major label deal.  Evolution then, not revolution…

I have been a lawyer in the music industry for 35 years, mostly working with artists and managers but have also worked with and for major labels and indie labels.

My music consumption has moved from vinyl to cassette to CD to downloads to streaming and now back to vinyl.

I suspect the new worlds of AR, VR, AI and holograms are going to throw more complex challenges to us lawyers.

Our industry will always be about new technologies and new rights issues and involve debates about who owns the pie or how it’s sliced up.

Two of the first contracts I saw as a young lawyer were Cat Stevens’ 1967 contract with Decca and his 1970 contract with Island.

Oh how very simple things were in those days.

Is it a co-incidence that some esteemed critics consider 1971 the healthiest ever year for music?

Last year, I handled a 360-degree contract with a major label.  I was so physically and emotionally exhausted/ intellectually challenged by the process of reading and amending it, that at the end of that very long day, I did a word count.

The 74-page contract was 38,004 words long.

That got me Googling and I came across a site that gives the word count of famous novels.

Oh dear.

The literary masterpiece – the Great Gatsby – is 47,000 words and The Lion, The Witch and The Wardrobe is 36,000 words.

The Cat Stevens/ Island contract was 2,458 words.

What’s more significant though, is this: the Island contract was a three albums deal.

Cat released those 3 albums – all classics – in April 1970, November 1970 and October 1971.

He was out of contract, a free agent, within 2 years of signing to Chris Blackwell.

But… Cat happily and consensually carried on in business with Island, making 6 more albums for them, before he retired in 1979.

New contracts were put in place by grown up people being grown up – “if it ain’t broke, don’t fix it”.

What’s more, when Cat – now Yusuf – returned to making music in 2006, he renewed his relationship with Universal, the new owners of Island Records.

In May 2009, at Shepherd’s Bush Empire for Island’s 50th birthday concert, I happened to be stood next to Chris Blackwell, enjoying Cat’s performance as much as if it was a concert in his and Cat’s heyday.

Manic Street Preachers were signed to Columbia in 1992, probably on a 6 albums deal.

They have gone on to make 12 albums for them.

Other “lifers”, if we call them that, are Bruce Springsteen and Bob Dylan with Columbia; Dire Straits and Mark Knopfler with Phonogram.

Billy Bragg talks about his 11 albums with Cooking Vinyl, over a 24 years period under 7 different contracts.

Back in 2004, I worked on a book looking back at a 30 year long gestation of music industry contracts.

I wrote then about a mythical label called Harmony Records and its innovative 360 contract.

In a follow up book in 2009, I wrote again about Harmony and listed its business philosophy, as a Decalogue, which included:

  • we are in a partnership with you;
  • we trust the relationship and believe we will be in business together for a long time;
  • we will stick together in sickness and in health; and
  • our business model is about paying you royalties and not forever leaving you unrecouped.

The current buzzword in our business is transparency.

I suggest we adopt a new buzzword – simplicity.

The greatest partnership of all perhaps – a marriage – has wedding vows of less than 50 words – multiplied by 2, of course.

Simplicity might lead to greater harmony.

And if new business models can be calibrated differently then maybe our hit-miss ratio might improve with greater profits for investment in new signings.

I still get a kick when a client gets signed to a record deal; there are so many great labels and brilliant executives out there.

Artists need to surround themselves with the best of breed, a dream team.

It’s not about the money – it’s about getting muscle and validation.

Of course, labels take big risks with new artists and like any business they must get a fair return on their investment.

I have no problem with the concept of a 360 deal.  I welcomed them in the hope – perhaps naïve, with the benefit of hindsight – that it might help labels sustain more long term careers.

But the 360 deal needs to be fair and balanced.

Asking for a share of GROSS live income without, for example, some guaranteed tour support is difficult to accept.

Sadly, contracts are too long, too intricate, too overreaching and too prone to fostering resentment at some point or in some way.

The best way to achieve a greater balance is to have the contract limited to 3 albums.

If the relationship is a healthy one, the deal can then get re-calibrated.

The deal can be adjusted up, down or sideways, as it were, to reflect success, lack of success, new technologies, new opportunities or changed dynamics.

Beggars Banquet don’t ask for more than 3 albums. If it works for them then it can surely work for us all.

They had Adele for 3 albums and I imagine they are quite sanguine about her deciding to move over to Sony as she is now in the “blockbuster” world, better suited to a global powerhouse.

Beggars, by the way, don’t ask for 360 rights.

If you ask around about the meaning of the word “partnership”, people often say “a relationship of equals”.

The word also evokes trust, respect, transparency, loyalty and fidelity.

Let’s please trust the relationship more.

As a publisher, Kobalt is just like Airbnb, Uber, Amazon, Facebook – it OWNS nothing.

Kobalt “trusts the relationship”, typically signing writers up to short 2 or 3 year deals but, they say, most usually go way beyond that.

BMG Masters are happy with 2 album deals, “trusting the relationship”.

Agents normally work without contracts and managers typically get appointed for 3 years.

All these people are investing time, money and resources, but they are “trusting the relationship”.

No other creative or sporting sector signs up the talent for as long as some major labels sign artists for.

As an aside, industry executives typically sign 3 year contracts.

And here is some more food for thought: I recently signed an emerging Jazz act to a world renowned Jazz label.

The label offered the act a 3 albums firm deal.

The label weren’t just “trusting the relationship”, they were trusting the talent.

This was not a boom or bust deal.

The advances and recording budgets were sensible and, guess what, within 2 years the band are recouped and everyone is happy.

I suspect the band will be with the label for life.

Other than this, the single most important change we need to see is a better streaming royalty for artists.

If the label is making a big cash investment I don’t expect 50% but I would like to see around 30 to 35%, potentially escalating on break even or recoupment or after a period of time.

Of course, many indie labels still work off a 50/50 profit sharing model.

Other hot potatoes are:

  • copyright ownership – if publishers can give reversions can labels too?
  • Product commitments, in a track driven business, the contracts still call for albums.

Publishers are converting from the old 3 or 4 albums contracts to a simplified Term of just 3 or 4 years.  They seem to be beginning to:

  • take a pragmatic attitude of “we take what we are given, when we are given it”; and
  • “trust the relationship” to win contract renewals.

Fundamentally though, we must move to more simplified documents, otherwise the system is in danger of collapse.

I just handled a 3 album/ 360 deal with a major label in Germany, in around 5,000 words.  If they can do it there, why can’t we do it here?

To some extent, the rule book has been torn up and we do now have a greater variety of business models for our artists to look at:

  • DIY set ups
  • EIS set ups
  • Label services deals
  • Distribution deals
  • BMG Masters type deals

We are seeing the emergence of a service industry model, as compared to a rights ownership model.

But the reality is that if your act is a new or emerging pop act or dance act, wanting mainstream support from radio, TV, press and streaming services, then that act most probably needs some kind of 360 deal with a major label.

But other types of artists need different models better able to manage the economics, the expectations and aspirations.

This more diverse landscape needs to flourish for us to have other methods for gauging success vs failure.

Otherwise, we will carry on with a high attrition rate of acts getting dropped, great executives and managers getting fired and vast sums of money getting lost.

More and more artists, especially those with empowered management or with support from brands, are bypassing the major label system altogether.

The Big 3 are responding to this with greater flexibility in their deal models.

We need indie labels to flourish too, even if as a feeder system to the Big 3.

Back in 2010, Martin Mills talked about  ‘the new middle class’ – someone like Calexico or Midlake, who can sell 100,000 plus records every time they put out a record; they can play to 3-4,000 people in 30 or 40 cities around the world.

And they can make a pretty good living out of that, doing what they love doing. They can do it on their own terms and that’s fantastic.

We’ve got a bunch of bands like that, they’re not necessarily seeking stardom or riches, which is incredibly healthy.

I recently read Billboard interviews with top label executives in the States, saying that the majority of their new signings are now artists on their second deals – i.e. with artists who got unceremoniously dropped after a “stiff” record.

That surely shows that something is wrong with the business models currently being used. Are our expectations too high?

Remember:

  • Kid A was Radiohead’s 4th album;
  • Born to Run, Springsteen’s 3rd album;
  • Thriller, Jackson’s 6th album;
  • Dark Twisted Fantasy, Kanye’s 5th album;
  • Jack Savoretti had 3 self-released albums going back to 2007 before his big success with BMG.

David Bowie started making music in 1963, had his first proper hit in 1969 with Space Oddity, then hit the big time in 1972 with Ziggy Stardust.

I suspect the likes of Laura Marling, Michael Kiwanuka and Kate Tempest will be making music for many decades yet. Ed Sheeran says he has forged a 10 album plan.  I don’t doubt him.

As their label, wouldn’t you want a lifetime relationship with them?

Finally, ponder on this…Laura Mvula has just been dropped by RCA

Robert Horsfall, Sound Advice
23.02.2017