Hardly a fad. Labels have operated imprints for 40-50 years for precisely that purpose.
Didn’t know that. Which ones? And who?
Try Apple Records and Swan Song Records for starters?
Oh. Thats what you’re talking about.
Indeed. But how did Apple start. NOT as part of EMI.
Can you explain what you meant by paying a “retainer”? Also this : " When I was shopping catalogs the lowest entry level investable portfolio that was $10m." ?
One more thing, when you say sales target, are we also including total streams? ( what encompasses sales? )
Can you name some established/reasonable successful/popular independent artists who are not bound by any label? Genuinely curious.
Led Zeppelin, The Rolling Stones, Prince, Gretchen Wilson.
Hi @cyril - Welcome to the forum, and thanks for reviving this thread from 3 years ago… Jeez - I had to re-read some of it to remember what was going on at the time I was reviewing revenue statements and business models from the majors which at 3 years ago had just made a turn into true profitability at that point.
Yes. Sure. In post #16… I assume (haha I had to search the page for the word to find where I’d said this).
So… most management companies are simply a team of entertainment lawyers working as a firm. Law firms are typically given a retainer. This is a sum of money handed to them up front, upon which indebts the group of lawyers to the client. This ensures that they can not provide legal council to an opposing party at the same time over a competing matter. (Conflict of interest). This is part of the US law, and falls under the category of ‘legal ethics’.
After a law firm is given a retainer, the hourly services that are provided to the client are billed against the retainer. You typically can not obtain the services of a group of highly experienced lawyers without providing a retainer. Think of it like a ‘deposit’ or ‘down payment’, but for a service instead of an item.
Other agencies such as marketing firms, PR firms, publicists, and tech work the same way.
Catalogs are investments. They cary an appraisal value, and a fair market value just like a house or car. To ‘acquire’ an artists catalog means buy the rights to the royalties and future earnings based on the intellectual property within the catalog.
Keep in mind this was six years ago, and I’ve been out of this game for quite a while. The lowest priced catalog for sale that had a chance in hell at earning any returns on the investment was about $10m to buy into. And that didn’t buy you all of it. Just controlling interest in it.
If you take a look at what catalogs sell for, they are VERY expensive. And you don’t acquire one song. They are bought sold and traded like mutual funds. Not individual stocks. Sometimes the cleanest way to buy them is to buy out the entire publishing company that owns the catalog. Aka… the record label.
Ok… so also from post #16.
That that means here is this. The artist I worked with on RCA was signed to a record deal. She had to achieve a certain amount of sales from each record or she’d be dropped form the label. That was what I meant by her ‘sales target’. In her case it was $250,000 per each full length album release. This was an extremely well known national-level artist. The record label would invest about $40,000 (or less) for production plus whatever the hell they arbitrarily decided to (or not to) put into marketing.
If she met the $250,000 minimum threshold, they would take a portion of that and finance her next recording. If not, they kick her to the curb and move on. After two (or maybe it was three records) they moved on.
In her case yes. This was total revenue, BUT ONLY that which was based off direct sales and downloads. NOT streaming. This was during a stretch of time before the major conglomerates in the industry had successfully adopted a way to monetize streaming.
Cyril, Though I’m happy to share - and I’m certain all of my numbers were accurate from the labels financial statements, I think much of it is obsolete here in the year 2020.
Haaa! lol. So true.
So, Jonathan, just so I’m clear: the artist you worked wth needed to generate revenue from album sales that were 6 times what the label invested in the recording, production and marketing of each record to keep them interested?
That’s obviously a one sided deal where the label wanted minimal exposure, but would you consider it typical?
If it is typical, and the artist was well known, why would she bother? I would assume her revenue stream would be mostly live performance. (Which is difficult right now).
It wasn’t exactly 6 times… that was only the budget for the creation of the ‘fixed’ salable asset. The collection of recordings commonly referred to as an album/cd/release/record (whatever you call it). On the business side (as in the shareholder documentation) this is back in the day (of 2012/2013) was called a ‘unit’. And the definition of a ‘unit’ was distinctly different from the definition of a ‘single’, and any other subunits that the label chooses to identify in the contractual agreements.
So included in the 1:6 budget was also the promotional and distribution costs. So the label actually risks a good bit more than that. I can’t remember the range of differences in the margins from total cost of brining the unit to market vs the total expenses. I had this memorized at one time but I’ve forgotten.
Honestly, I gave up on trying to grasp what was ‘typical’. I can see the income and cash flow data exposed to investors and the US security exchange commission, but you can’t actually see their accounting journals or the artists contracts. So you’re kind of left reverse engineering the mechanics based on the cases you do know inside details about, and what you can learn from speaking with various entertainment attorneys.
This artists didn’t have the capital, expertise, connections, or desire to go indie and try to sustain her career without investor (label) support.
Even back in 2012/2013 when this was all happening, I was never given any information on her actual cashflow. But yes, basic math can safely conclude she didn’t make much money off the sale of the records. Consider the following in sequence:
- The record label/investor company is also the publisher.
- The artists cash advance to make a product is a draw against her sales.
- The artist doesn’t get royalties until the publisher is profitable.
- After the publisher is profitable, they pay out a percentage of record sales to the artist.
- The manager takes their cut off the top
- The artist pays taxes on the income from those royalties
- The remainder is direct deposited into the artists personal account by their management company
Even with this oversimplified model, you can see how there’s nothing left by the time any revenue reaches the artist.
Thanks. I think the indie model basically presumes you won’t make your money on media sales, but if you can build a following you can do fairly well touring once you reach a certain level.
Attracting a major label comes with financial risks for both parties, and the artist really won’t have much leverage unless they’re hugely successful. Artist development is not part of the program for the most part.
I’m pretty well out of the loop at this point, but I do see the ‘indie’ model evolving and changing quite a bit - rapidly at this point. But I imagine this goes for any indie model that has anything to do with media. Movies/streaming videos, tutorial series, software apps. Of course with Covid playing its roll in these mass market changes too.
That seems to go for any business venture where you raise capital from investors. Proof of concept seems to carry the same weight in any area. You think?
I think this is a healthy thing. Artists need to develop themselves with their own cash. The same way any small business startup needs to cut their teeth on their own dime hustling, grinding, and learning their trade before their companies are truly investable
Artist development used to be a lot bigger investment for a label. Now they get involved after the artist is a proven entity that would benefit from their marketing program, and charge you for the privilege.
I know, but it seems like the modern model of lower corporate risk and faster profits make for an overall better economy. The labels not getting involved until what they bring to the table can add REAL value is seriously helping things in my opinion.
And don’t forget…the real upside for the artists: small business startups companies are forced to become much more business savvy and bringing real strategy to the negotiating table over a music deal. This is a wonderful thing for both sides. It means small biz startups have a lower chance of succeeding on the music end without first succeeding at the financial end.
There are definitely pros and cons to this. Music has to be much more calculated now. As much as idiot musicians are a pain to work with, there’s a little bit of magic that comes to a lot of music when the people that make it are mentally unstable. It’s a lot harder to participate in the music industry today if you have some screws loose.
The old record label model tended to take advantage of the artist. There are many stories of swindles and corruption, too many to name. But it allowed the artist to do their thing without having to get too involved in or think about the business end. Gene Simmons and KISS were perhaps a notable exception. The more that music gets mechanized and calculated, the more it tends to suck IMO. It bleeds the soul out of it. Not that it’s impossible to make good music these days, but there’s a tremendous difference between the ‘classic’ music that I still listen to and the new modern stuff. YMMV.
There were previous discussions about artists and mental health, i.e. “there’s a fine line between genius and insanity.” It seems to me that the creativity that inspires music is different than the type of creativity you might argue makes a successful business person and innovator. Perhaps different ends of the creativity spectrum, from emotional to mental. I would guess that much of the successful modern music uses psychology and marketing to make music more addictive, to enhance profitability. We’re being entertained to death.