CHAPTER C-1
What’s the Deal?
In Section B we discussed in some depth the idea of becoming a business and formally setting up a company or becoming a sole trader/freelancer and the various points you should consider and be aware of.
Our intention for this chapter is to raise your awareness of some of the deals that are made. We introduce some pertinent organizations you should be aware of and discuss, as an overview, the deals that most often occur.
We do not claim to be experts in this field and do not intend this chapter to be an in-depth or authoritative reference, as there are many books and websites out there dedicated solely to the legalities in the business, some of which are cited in Appendix F-1, The Tape Store at the end of this book. As a caveat, we would always recommend that you engage the expertise of a music industry lawyer if you are ever uncertain, and perhaps even if you are certain.
Although most people within the music industry don’t just “do it for the money,” it is obviously what keeps the music world turning and certainly you need to be able to earn a living from your work should you choose to fully immerse yourself in this career. As a producer, understanding what your slice of the pie could or should be and how you will receive it is no doubt of definite interest.
DEALS, AGREEMENTS AND CONTRACTS
We’ve all heard of those incredibly large deals that musicians sign to a label for. Many have indeed gone on to earn every single penny of it through good sales, making them a surefire investment for the labels again in the future.
For top artists this bandwagon, to some extent, can still exist. However, many artists have been gambled on and have signed such deals only to later not recoup the money banked on them by the labels. In the modern age, deals have adapted to reduce risk for the labels, and additionally to find new income streams for the investors in light of a reduction in record sales.
Deals and their associated agreement, or contract, are what make the industry go round. It is important to be clear from the start what everyone is entitled to. Making a deal and agreeing on it is not always difficult, but many do not do it as efficiently as they should. For some, making a deal seems formal and rather too business like, as they prefer to concentrate on the music at hand and perhaps go with the flow. To delay may seem fine, but could be unwise as these things are better negotiated as early as possible in the process.
The deal is the principle behind the working relationship, outlining what each party will get out of the album or activity. This will need to be agreed and contracted at some point either in a formal contract or by some form of written agreements (see Key Advice for Deal Making sidebar).
KEY ADVICE FOR DEAL MAKING
The deal you make is going to be different nowadays. The income from the sale of music is no longer just the sale of the physical product. There are now the digital routes to market, whether that be a cloud-based service such as Spotify or from a digital service such as iTunes. There is the use of the recordings in films or television and even computer games. The industry and possible use of any music can be larger than the obvious CD sales.
While the routes to market are more spider like these days rather than a straight line, so are the deals and the clauses one needs to consider. It is important to be prepared and to consider your position when making all deals. Here is some generic advice for you to get started with and consider.
- 1. Understand what you’re doing
Whatever you verbally agree to, evidence it in writing. Bind it! It can be the back of an envelope and as long as it is signed and adequately reflects the deal you’ve made, then that ought to be ok. It does not need to be formally presented.
Contracts are funny and fiddly things. Fiddly insomuch as they can turn friends into enemies if things go wrong down the line. What you agree in the studio verbally is also technically binding, but can be difficult to evidence in law. (See the section on note-taking in Chapter B-3, Being A Business for more information.)
So try to get everything in writing and remember it does not need to be a formal contract. Sometimes people will not be happy to sign things unless they absolutely have to, so best is to follow up with an email either confirming the agreement or encouraging a response saying something along the lines of the following:
“It was good to meet you at the studio today. Great room to work in and fantastic material. I look forward to making a start producing the album on January 5, 2011. Shall we start at 10 am? It will be tight that we have to record and finish the whole album by the end of February for delivery to the label, but we should work on the pre-production as discussed as early as possible.
“I am pleased we were able to speak about the deal and that we agreed X, Y and Z with regard to the royalties. I trust my recollection is correct? I understand we have a restricted budget to work with and as agreed I’d like X paid up-front as part of the deal.
My fee we agreed for this is $10,000 and I’ll get a credit on the album as sole producer…”
The ideal is to get all the parameters of the agreement in writing about where, when, to do what, within what time period, within the specified budget, how the payments will work, who will pay me, and how the royalties are to be calculated.
- 2. Understand the copyrights involved
Copyright is the key to many income streams in music and as we’ve mentioned, producers will need to know now more than ever the different activities that can be protected. We discuss these in the Collection Agencies sidebar later in this chapter. Ensure you understand how the mechanisms work, as this will help you choose your actions and negotiations.
- 3. confirm your entitlements
Be clear with the client that if you play something on their record, you’ll want a performance fee and slice of the performance royalty. If you write some of the music with the artist, again you will need to agree in one way or another that you wrote it too and that it will be registered with the appropriate collection society. Whether you get a credit or not, you should ensure your work in this way reflected in a one-off fee or similar. Again, get it all in writing.
INCOME STREAMS
As we have acknowledged, the industry has changed and morphed over the years. But how has it changed from the perspective of income and employment? We’ve seen models such as that of our traditional producer working for a large corporation, and the producers and engineering staff working under full-time employment. Concurrently during this period there were mavericks such as Joe Meek who was in some ways ahead of the game. Meek owned his own studio, his own label Triumph, and later his production company Meeksville Sound. Meek engaged in considerable technological and production innovation but also the business side of things and was a fantastic example of an independent.
Over time many producers began to shift toward freelancing and utilizing income streams in a different way. While the label might receive a considerable amount of income, the producer moved toward percentage deals of the album’s profit. The opportunity to negotiate a fixed advance to get on with the project would be welcome in one hand while the other could enjoy points on the album’s royalties (if successful). The latter, to some extent, appears a little like modern performance related pay.
Making money in the music industry can be difficult. As we’ll discuss in a little more detail later, freelance producers, if just producing and depending on the deal, are likely to draw an advance from the artist’s label. In addition to this, a producer may be entitled to a percentage (points) of the royalties, which is dependent on the deal negotiated.
Strictly speaking, if the songs were penned by a professional writer and passed to a nonwriting artist to perform, then the songwriter would gain their income from royalties each time the song is “recorded onto any format and distributed to the public, performed, or played in public, broadcast, or made publicly available online” (PRS for Music; see PRS section later in this chapter.)
If we were to pigeonhole the income streams available to the producer, they’d just fall within the circle, usually containing deals made with the record company, which would include future royalty points. Similarly, if we were to pigeonhole the income streams for the songwriter (not performer), then these would be from songwriting royalties and perhaps a publishing deal. The nonwriting performer might only receive performance royalties and incomes from live gigs and merchandise.
Similarly, an artist who did not engage in the writing of the material they’ve recorded would be entitled to the performance royalties, live merchandise, and a share of the live performance sales.
In the real world, of course, these rather purist lines are blurred and some producers will write with their artists and as such will be entitled to a share of the writer’s royalties.
Toward the end of this chapter are brief descriptions of a few of the main organizations (in the U.K. and U.S.) that take on the responsibility for making sure that you (the producer), the artist, and others involved in the process
Of course in many cases the producer will be involved in much more than simply the production, perhaps performing on guitar on the track as well as cowriting it with the artist. In this instance other income starts to stream to the producer.
In reality, the producer could seek to become part of a wider source of income streams by expanding to become involved in all aspects of an artist’s activity into what is known as a 360° deal.
of making a record get paid. You will have to register with all of these organizations in order for them to collect the money due to you, but this is a small price to pay in order to ensure that it ends up in your account!
Royalties
The big issue to consider when discussing any type of deal is the percentage of royalties that the producer may or may not be given. On a “costs” deal, as described later, the producer may receive a lower percentage of royalties due to the fact that they have received more money up front. This may be quite prudent if album sales are not expected to be that high.
It may be that a producer’s fee will offer a greater amount of money than future album sales will yield. This is an unknown to a certain extent and if a record label intends to market and promote an artist’s album heavily, some producers may forgo larger production fees or advances altogether in favor of a bigger royalty payment from potential future album sales.
As with all things financial in the music business it is the power of negotiation (ideally via lawyers) and the professional standing of the individuals concerned (the relative clout) that determine the finer detail and financial specifics of individual deals.
1 point = 1%?
When discussing deals, agreements, and royalties the word points is invariably used. A producer may be given a point on an album but the percentage cut, or share this actually relates to, can vary from deal to deal. The producer’s royalties are usually taken out of the artist’s royalty share (the artist in effect pays the producer) which obviously varies in itself, meaning that what the producer will receive in royalty income will also be dependent on the specifics of the artist’s deal. Labels, producers, lawyers, and so on, now tend to talk in royalty percentage and therefore points (although a commonly used term in the industry) can be somewhat interchangeable nowadays.
COLLECTION AGENCIES
The collection agencies around the globe are incredibly important in ensuring musicians and music production professionals receive performance and other royalties for their efforts. We have taken some time out to speak primarily of the U.K. agencies here, with a mention of those based in the U.S. Website URLs are listed in Appendix F-1, Tape Store which additionally includes agencies from around the world.
The U.K. perspective
PRS
The Performing Rights Society was actually the MCPS-PRS Alliance up until 2009 when it became the umbrella brand PRS for Music of which the MCPS is still a part. The PRS exists in order to collect and pay royalties to its members which are made up of artists, songwriters, and publishers. It is important to understand that this applies to the composition/material itself: the song.
If material you have written or cowritten is recorded onto any format and distributed to the public, performed, or played in public, broadcast, or made publicly available online, then it is the PRS that will collect the royalties legally owed to you. For example, if someone wanted to cover one of your songs on their album, perform one of your songs at a gig, play your song at a club (DJ), or distribute your songs online then they, or the venue, would have to pay the PRS royalties in order to legally do this.
The PRS takes an administration fee from the monies it collects and the rest is passed on to the songwriter or publisher, whoever controls the copyright on the material. If you are a songwriter signed to a publishing deal then the publisher controls the copyright to your songs and will therefore take its own cut before giving you (the songwriter) the remaining percentage.
MCPS
The Mechanical Copyright Protection Society is actually part of the PRS for Music brand and is the organization that is concerned with the licensing of the song for reproduction on a recorded product.
If someone wants to use the recording you have made of a song on a compilation album, they would need to license this from the original label. (If you have also written the song then money would also be collected through the PRS.) The MCPS takes an administration fee from the monies they collect and the rest will be given to the owner of the copyright for the song. This is usually the publisher.
PPL
Phonographic Performance Ltd. (PPL) is the organization (in the U.K.) that collects money due to labels, artists, and producers, for the public performance of recorded music such as radio play, playback of music in public places, bars, restaurants, shops, and so on. It distributes the money to record companies and to the performers on the recordings.
Up until the late 1980s a producer would not have been recognized for her contribution to the artists’ performances on the records she produced. However, members of the board of the MPG (Robin Millar and APRS’ Peter Filleul) sought to gain recognition for the contribution producers make to the artists’ performance on a recording. Subsequently, producers are now able to receive royalties via the PPL and are classed as “nonfeatured artists,” therefore receiving payments when records they have produced are played on the radio or in public. (In order for this to occur, the producer must be registered with PPL and complete a database form with the information regarding the songs they have produced; this is where the producer registers himself as a nonfeatured artist.)
VPL
Video Performance Ltd was established in 1984 and was created to carry out the same role for music video that PPL was already carrying out for recorded music. Therefore VPL is the organization that collects money due for the public performance of music videos, such as on MTV and YouTube.
Record labels tend to own or control the copyright of music videos and therefore normally receive any royalties owed. However, contracted artists often receive a percentage share of VPL income from their record company under the terms of their record contract. Record producers may also receive a share of VPL income from music videos of songs they have produced, but again this will depend on the terms of their contract with the record label. (A producer would also receive PPL income from a music video as the recording they produced is used in the video; this would be based on the producer being registered as a nonfeatured artist with PPL for the recording in question.)
The American perspective
In the U.S., there are more than one main Performance Rights Organizations (PROs) for composers.
ASCAP
The American Society of Composers, Authors, and Publishers, commonly referred to as ASCAP, collects royalties on behalf of musical copyrights just in the same way as PRS does in the U.K.
BMI
Broadcast Music Inc., like ASCAP, collects royalties for their composers and publishers.
SESAC
Society of European Stage Authors and Composers, no longer just collecting for Europeans, is based in Nashville, U.S.A. and unlike most PROs is a for-profit company.
International collection agencies
For a list of international collection agencies please see Appendix F-1, The Tape Store at the end of this book,
THE TERMS OF A CONTRACT: PRODUCER (VS. WRITER VS. PERFORMER)
If you’re hired as a producer, it is fairly clear what your role is expected to be, isn’t it? Many might assume a rather puritan view, such as someone who guides the creative process, acts as a soundboard, provides musical suggestions, and coaxes great performances.
What happens later down the line when you find yourself cowriting much of the material with the artist in pre-production and yet you’re not considered as a cowriter?
Perhaps you’ve not written the track, but you may have helped arrange the track in a new and more successful way and perhaps taken control of when instruments are played. Is this a cowriting credit or just an acknowledgment of an arrangement? Have you created the drums, the synth sounds, and sequenced your client’s composition? If so, is this also worthy of a cowriting credit? These examples are probably not likely to gain a songwriting credit, but this will come down to a gray dividing line, one you will need to be firm and up-front about in negotiation. Be clear when you’ll expect a credit and a share of the songwriting royalties as soon as you enter into any of the actions above. Take advice from your lawyer as to how this might be best achieved.
Many a disagreement has taken place in and out of courts over issues such as these. Be clear about this from the start or as soon as possible as issues arise and ensure your terms are reflected in the contract. Take notes during the negotiation and be clear about how to circumnavigate things that people may have innocently forgot or deviously omitted from the agreement.
Should you be awarded a stake of the writers’ royalties, the writer’s publisher might wish to negotiate deals such as synchronization and any licensing on your behalf. This saves them having to come back to you for permissions each time a request comes through.
RECORD LABEL TYPES
Majors
Major labels have been the dominant part of the music industry for many years. Well, in truth they still are, but there are fewer of them. In the power play that takes place in corporate business, consolidation and economies of scale often lead to bigger profits and seem a sensible pursuit. Most large corporations work in similar ways and the major record labels are no different.
There has been a tremendous amount of consolidation over the past decades to bring the whole industry to the “big four” that we currently know at the time of writing (Sony Music Entertainment, Universal Music Group, EMI Group, and Warner Music Group). For example, back in 2004 there were the big five labels but then BMG was merged with Sony to make Sony BMG in 2005 (now called Sony Music Entertainment).
This merger became a topic of conversation in the European Commission and while Sony and BMG were permitted to merge, it was not without considerable conditions. Conditions that included BMG selling off its publishing wing to its rival Universal, reducing overall market share.
These big four labels remain and it would appear that future consolidation, while perhaps sought by many a label’s board, may be resisted in many territories because of market dominance and monopoly restrictions.
Consolidation, to some, might give the impression that there might be less business going on, or indeed fewer opportunity for acts. While this might appear the case presently, this is not simply because of the consolidation itself, but because of the new economic marketplace we find ourselves in.
Each of the four big labels has taken on a whole host of sublabels in mergers over the years and therefore have many subbrands, such as Sony’s Epic label, for example.
The majors still dominate the majority of the industry. Many cynically believe these labels have become nothing other than large marketing machines more interested in taking on television talent show winners from the X Factor than developing real talent. There is some sensible business strategy in this. If the record-buying public in their droves votes for an act, becomes involved in an act, they’ll buy the act’s music. So perhaps for innovation and profits, this is a real business coup?
Submajors
These labels are distinct brands that the major label owns and trades under as if it was a going concern. Many brands have simply come and gone, being subsumed into the larger conglomerate label. However, there are labels such as Geffen which is now part of Interscope, whose parent label is the Universal Music Group. These brands remain and are often useful tools for the larger group to keep faith within the particular genres they operate in.
Independents (Indie)
Independent labels, or indies for short, have become valued places for bands over the years. These smaller, often more nimble, affairs have sprouted up from the ground promoting their acts well to provide a powerful alternative to the major labels.
There are some large independent labels out there doing very well in terms of the charts and success. Consider the well-known label Beggars Banquet which has had some current successful acts in the British pop charts in 2010. It has been so successful that it almost resembles a major label’s conglomerate parent, insofar as it has become The Beggars Group and has brought together household music labels 4AD, Matador, Rough Trade, and XL Recordings all into one powerful collection.
An independent can be characterized by the fact that it owns its own business and is not owned or controlled by a major label1.
Any label that is created by an individual for their own purposes could be considered an independent label too, but the following types require individual mentions.
Production companies
Apart from the standard independent labels as described above, others will also set up their own labels to meet their own needs and releases. One popular way forward at the moment is for production companies who develop artists and so on to create their own label to provide a much-needed conduit. To some degree, these have become valued content providers for the larger labels as they take on, sign, and develop acts. They resemble an external A&R agency in some ways. These acts, once the music and artist are ready, will become extremely interesting to the larger labels. In some ways, the risk is taken by the production company, and not the major.
Producers
Producers, in their own right, of course, fit into this category and are also taking the time to invest in their own artist development and exploring the many income streams that are possible from collaborating more closely with someone they might sign. This becomes an attractive option to both producer and artist as there is a need for them to work closely and with dedication to create a successful product. The DIY/360° type deals surrounding this are covered a little later.
Artists
Naturally artists often create their own labels whether that is just to get the wheels working for their own music, or whether it is for the promotion of artists they like. Madonna’s Maverick label was one such business which successfully signed a young Alanis Morissette and launched her to the mainstream with Jagged Little pill. This is a more common option for the future of the industry and many people, with the universal shop front the Internet provides, consider this the way forward. This way they can manage their own affairs.
Other: Live Nation and Starbucks
In recent years some interesting labels have popped into the marketplace, and gone. One such label has been that of Live Nation, which has “signed” acts such as Madonna to its roster. Their agreements are not for recordings per se, so they’re not just a record label, but a more inclusive all-in style deal where all Madonna’s income is accounted for.
Another strange entrant to the market, which has since disappeared, is the coffee chain Starbucks which launched its label in 2007. Soon after its launch it signed Sir Paul McCartney. Again there was some market sense in this proposition as “…you can reach 44 million customers per week through Starbucks stores,” reported partner in the venture, Glen Barros, the president of Concord Music Group.2
The two examples above show something interesting. The industry is starting to look at new business models and ways of working. It is debatable whether both new labels have received the success they had hoped for. However, what is to be learnt here is that new business models may work, succeed, and break the mold. The industry will innovate and it will be interesting to see what transpires in the coming years.
Distributors
Distributors are the facilitators of the industry. They logistically ship the physical records through their networks to the shops or arrange the supply of music to the digital download suppliers. Many majors use their own distribution arm or have considerable contracts with an independent distributor. Independent labels can either make approaches to the independent distributor or make a deal with a major to distribute the records for them.
TYPES OF FORMAL CONTRACT
There are two types of formal contract that are of particular relevance to the producer: the producer agreement and the production agreement. The former could be described as the more traditional contract while the latter is a more recent, yet increasingly common, way of doing business.
In the next few sections we look at these agreements in their basic detail in order that an aspiring producer may know what to initially expect.
Producer agreements
Producer agreements are made between the record label and the producer for the production of an artists’ record. Essentially the producer is contracted or employed by the label to produce and deliver a set number of tracks from the artist. These can be referred to as master recordings or masters. (A master usually refers to an individual recording on an album.)
The specifics of the agreement can vary and therefore the financial implications need to be realized and considered. As previously stated, the most important thing is to finalize an agreement before commencing any work on the record. These agreements and contracts provide an essential means of protection should the record label decide to move the goalposts halfway through the project or even start using another producer. Should this become an issue, evidence of the written agreement between the parties will be needed.
The costs deal
The costs deal (or non all-in-deal as it is sometimes called) works on the basis that the producer will be paid a production fee for the project but the label will book the studio and musicians and pay the costs. The average production fee on a major label depending on the producer involved could be somewhere between £2000 and £10,000 per track/master (at the higher end of the U.K. industry) or £300 to £1000 per track at the lower end. Veteran or top producers may command an even higher fee depending how negotiations go with the label.
It should be remembered that the label is footing the studio and musicians’ fees and therefore this is not going to come out of the producer’s pot. In other words, the fee is theirs to keep. Again, depending on the gravitas of the producer concerned and the outcome of negotiations with the label, this fee may or may not be recoupable out of future royalties. In other words, if the fee is recoupable then the producer will not start to receive any royalty payments until their fee is recouped. If the fee is not recoupable then the producer will start to receive royalties from the sale of the very first record. We should perhaps spare a thought for the artists here, as they have to wait until the total recording budget is paid back to the label (recouped) before they receive any money from the record sales. (An issue that a new artist may not fully realize initially!)
The all-in deal
The all-in deal, as the name suggests, works on the basis that the producer will receive an overall fee or budget to produce the project; however, all recording costs such as studio costs, musician and engineer fees, and so on will be expected to be paid for by the producer and therefore come out of the same budget or pot. In this scenario the producer really needs to know how to handle a budget and costings for the various expenses that will be incurred during the recording process.
A budget will have to be submitted to the label to show the projected costings in order for an overall amount to be agreed on. A prudent producer will realize at
The all-in deal allows you as a producer to receive the money required to manage the production project. From this pot of money will come all the fees for studios, musicians, etc. as well as your own production fee.
this stage that some clever and careful financial management will enable them to save more money from their original budget, therefore leaving more to take home over and above their personal fee for producing the recording. A producer who owns his or her own studio facilities might opt for the all-in deal, as this may prove to be far more cost-effective. The same could be said for producers who have a good rapport and relationship with studio owners, as special rates can be agreed which will come in under the initial projected cost, which for budget purposes was based on the normal rates.
In terms of recoupable amounts the all-in deal would normally require that the personal fee or share taken by the producer from the total recording budget is the only sum that is required to be recouped from the future royalties of the producer. Any money that is left over in the recording budget outside of this personal fee is not subject to recoupment.
As with the costs deal, the recording budget and costs for the all-in deal have to be recouped in their entirety from the artists’ share of royalties before they will receive any income from sales.
Production agreements
In response to the changes taking place in the music industry, more producers are now taking on the role of A&R talent scouts, finding new artists and working with them to develop their material and sound. Some will also take on a managerial role, organizing showcase events in order to place the artists in front of industry insiders and label A&R and making contacts for the artist or band. In some cases the producer may work with an artist on the songs, rewriting sections, or organize a band or session musicians for the recording of the project, and possibly even spend their own time and money recording demo or master-quality recordings. Enter the production agreement.
Production agreements are made between an artist and a production company (and can often be set up by the producer). This acts as a form of recording contract between the artist and production company or producer to make a record. If the project is completed successfully the artist and producer will agree to sell or license the recordings to a third-party label for release.
Setting up a production company and creating production agreements is the main way a producer can protect himself and have a greater degree of security than a simple verbal agreement. The production agreement may also help protect the producer’s right to future income from her work.
The record labels benefit from these agreements in that the production company does most of the hard graft and develops the artist, leaving only the marketing of the album for the label to deal with.
The producer has a part to play in this. You could take on an act for a label on the understanding that you’ll get a budget to record and work with the band, but you’ll also get a point or two on the album. That’s all very well if you’re going to have a bestseller on your hands. Today you cannot always take the risk that album sales will make the income you’d like and therefore will need to spread it across other income streams.
THE INDUSTRY IS CHANGING
We were fortunate to spend some time in 2010 at a charity event with guest Sir George Martin. Andrew Marr was acting as interviewer for Martin’s interview and relayed a question delivered from the audience, “What advice would you give someone making it in the music business now?” The honored producer simply responded “Don’t!” to a hall of laughter. Sir George qualified his statement by saying “…that’s unfair as music is more alive now than it ever has been. There are a lot of young people out there doing some really great stuff… try and create something that somebody else hasn’t done… look for a different way of doing it.”
He is not alone in his views in this current climate, as the industry goes through a period of organizational change. As we’ve established, traditional record labels are amalgamating and are in some form of decline as their market share becomes smaller. Independents are feeling the squeeze and small labels still struggle to put material out in a crowded marketplace.
Richard Mollet, director of communications at the British Phonographic Industry, illustrates how the mass industry has naturally declined in the U.K. over recent times: “This year (2009) only six albums sold over a million copies, whereas 10 years ago it was 13.” Mass music purchase days are not over, but certainly lower than they used to be. Mollet adds that despite this, “trade revenues grew 1.4% in 2009, for the first time in six years. Part of that is because digital services got better organized and distributed… digital income is around 14% share of that.”
Music to so many is considered free. Spotify, while as a company has had a tricky, often challenging, inception to the marketplace, has provided essentially free, relatively up-to-date, music to the masses. Why buy the album when all you have to put up with is a few adverts akin to listening to commercial radio?
It would appear that this made a major conversion in the psyche of the record-buying public. They no longer see a need to buy music when it’s available free legally. And of course there are the illegal free copies (peer-to-peer file sharing, and so on). Surprisingly, iTunes does well from those people who want to listen to their music on their iPhones, iPods, and now iPads.
Richard Mollet ponders how new live streaming mobile music services might impact on current physical sales. “No-one knows what will happen with cloud music services and mobile devices. When this happens, perhaps in two years, who knows how this will impact on sales”.
Technology will lead the way and will inform sales moving forward, but if music can be streamed on mobile devices, how might this affect the relatively stable marketplace of iTunes and the iPod?
So what’s the deal for the producer?
What does this new financial landscape mean for producers and the industry as a whole? All the supporting machinery around the industry has taken a hit as the industry modernizes and consolidates. Many top-end studios that were once home to great acts and seminal, pivotal albums, have closed, while many struggle to stay afloat.
Why this has happened may be simply natural evolution, but not in the way that each generation seems to be a little bit taller than the last. Not in the way that one generation can prepare adequately for what is to come. This came rapidly.
The Internet and its websites and services such as Napster and other sites changed the whole concept of “free” music and the record-buying public bought into the idea, dispensing with the notion of the CD, and in turn perhaps even the duty of owning music. iTunes having been well-adopted, did fight to gain back legal market share, and continues to be a major player. However, so-called cloud services like Spotify now provide free listening.
The problem is that, for each CD an artist sells, they receive their royalty as contracted. Not a lot of money really, and the artist does have to shift a fair amount of units for it to count in this day and age. Then the producer has to get paid on royalties, if that’s their deal. For each digital download version of their album they sell (of course, many listeners just buy the track they want and not the full album), there’s a little less to earn per sale. Then of course the Spotify model is based on the amount of plays, and you need a colossal amount of plays to make it pay on an equal footing. For example, “Spotify users enjoyed more than 1m plays of Lady GaGa’s song Poker Face—which earned Her GaGaness the sum of $167.”3
The way forward
Given the changes in the industry, now the labels are wanting to see a finished complete product or at least a more rounded and developed one, thus offering them some kind of security that a risk (investment) might be worth taking.
This is why a new age of the production company is coming to the fore. If an artist has been developed, the material fine-tuned, and the rough edges knocked off, then there is far less for the label to have to work on (and therefore less investment of time and money). The production company may also have promoted the artist/band and developed a fan base, or following, creating the buzz that a label would want to see before taking a new artist or band on.
This new approach between labels and production companies is also starting to bypass the traditional role of A&R. The production company will now go straight to the label with their new artists and projects as they themselves are acting as A&R, essentially finding and developing the talent themselves.
As an aspiring or new producer, you might wonder where this leaves you. What is the best way forward for your work and career? Setting up your own or becoming involved in a production company may be one route that can really help bring in experience and work. You may not earn a great deal of money at this stage, but if you are able to work alongside an artist as part of a production company and produce good results it may pay dividends for future work. A production company may have developed a reputation with labels for producing strong artists for further investment, in which case being a part of that team will bring positive exposure and experience. Of course, the natural progression from this involvement is to go it alone and begin to work independently.
The alternative to this is for you as a producer to attach yourself to a band in the early stages, almost acting as their additional member. This may be the long route to take and require much investment or your time (and/or money). However, if you are involved from the very beginning and become integral to the team, a label may be more likely to see you as part of the package and therefore involve you in any deals that may be struck.
A production company may bring in a “big name” cowriter or co-producer to work with the artist in order to develop their material, in the hope that the big name will add the necessary magic in order to produce some hit material. However, even a big name might not truly understand or get an artist and their material, which means that the collaboration will not necessarily bear the fruit that all concerned were hoping for. This is another argument for a producer being involved right from the beginning with the artist, where they help create the overall vision and fully click with the project. If as a producer you are able to do this, then you are potentially in a strong position when deals with labels are being discussed.
DIY movement
“You become a one stop shop which you have to do because of budgets these days. You can’t afford loads of people… programmers and mix engineers, etc.”
Tommy D
So how are the producers earning now? As we discussed earlier, many producers are preferring, or indeed looking for their side projects, to find and develop their own artists, and tie them into a decent production contract or, one stage further, working with them toward a 360° deal. Some might say these appear to be sordid and exploitative, but in fact can be written into producer deals with labels too these days as a matter of course. As we established earlier in the chapter, the producer is now looking to find their earnings from somewhere other than the recording as record sales are not where the money is currently to be had.
Tommy D, the British producer, believes strongly in the DIY upsurge. “If you find a great artist, don’t bother selling it on to someone else. Structure it so that you can help them, so that they can get something great, which in turn will help you —it makes sense. [It’s like] we’ve gone back to the ‘60s again with people like George Martin and Joe Meek… they found artists and chose or wrote their songs with them and then developed them. It’s not like it used to be [say in the 1980s] anymore where you’d be sent some demos, meet the band down the pub and then spend three months recording the album with them, then see them play Glastonbury six months later. There just isn’t the revenue anymore. Producers need to start thinking like Jay-Z and Puff Daddy… they’re looking outside of the box.”
Setting up your own label and production company alongside merchandising, brand, and the live shows appears to be the vital way to make money these days. As a producer, you should consider very wisely how you might involve yourself in all these income streams. As we began our interview with Tommy D we’d caught him looking at clothing wholesalers websites for “good shaped T-shirts for merchandising purposes,” not in the studio as we’d have expected. Tommy suggests that producers might not be in front of a DAW most of the time these days, and might migrate that creativity to the social media web-sites to generate interest in their work and acts. Tommy adds though that “it [social media] will never take the place of the major as they have the marketing machine.”
360° DEALS
360° deals have started to become more common for artists being signed these days. A 360° deal is one where all income streams of an artist are split up in varying amounts. This is often justified because physical record sales and digital downloading and streaming have reduced the income available from the recorded product. As a result, live income and other aspects of an artist’s pot are being shared out.
In this type of deal, a percentage of the income take on the door on tour in addition to the merchandise could be sacrificed as a share of the distributed income. Similarly, any other income stream could be up for negotiation within the 360° deal.
360° deals (with a label)
While the 360° deal might seem incredibly unfair for the artist, it is an increasingly common and, labels would argue, essential way for them to recoup the investment in the artist and to bring future acts to prevalence through marketing and hype.
Much has been written about how unfair the 360° deal has become as the label strips yet more income away from the artist’s dwindling pot.
360° deals (with a producer)
Producers are, as we discuss in DIY Movement later in this chapter, becoming increasingly more innovative and developing artists under their own steam. In order to achieve this and for them to recoup any potential income, they have embraced the 360° deal. The producer’s choice to use the 360° deal is not one of greed or manipulation, but simply one to ensure they gain a return on their development.
Producers who are signing their own acts to their personal labels may be placing not only their time on the line, but additionally investing considerable money in ensuring the artist is developed. The 360° deal is discussed as an option to recoup this investment, so the wheel can turn for future acts.
Thinking about the 360° deal, producers that develop their songwriting skills, purely in focus of what will be a hit, partly because of their knowledge of the production industry, will place themselves in a better financial position. A share of the PRS income, MCPS and any synchronization those collaborated tracks might bring will keep the wolves from the door and keep his studio open. It’s all then cyclical: if the producer keeps earning, then he can continue to develop new acts, which keeps the wheels of new artists’ music flowing.
As we covered earlier, 360° deals might even be preferable for the artists, if they do not wish to have a large record contract around their necks for the future. Given that, it could be iffy that they will recoup any fees from record sales. A glum picture, perhaps? It has certainly got a lot of people thinking. What’s the new industry model? Is it cloud services or is it live performance?
Now is the time to think cleverly about the deals you make, the work you commit to and how you can make the career as a producer pay. If you’re likely to work with an artist who is going to be a guaranteed chart success, a normal points deal might work just fine. On the other hand, it is clear that if you stumble across talent and you think you can make it work, there may be definite benefits to keeping the work in-house—go for the DIY deal.
Musicians and producers will continue to have the thirst and drive for success and no doubt will sign a deal they should not have. It is important that musicians and music professionals do what they do for the love of it, but it is equally important that they are paid fairly for it. With the slices of the income pie being eroded from all sides, producers and artists should invest time and energy in getting the deals right. And again, we advise you to consult a lawyer.
See Appendix F-1, The Tape Store for links and resources about the legalities of the music industry.
Notes
1 www.musicindie.com/219.asp?sub=Join%20AIM accessed 13/08/2010//
2 http://news.bbc.co.uk/1/hi/entertainment/6445013.stm, accessed 18/07/2010
3 www.guardian.co.uk/music/2010/apr/18/sam-leith-downloading-money-spotify accessed 14/07/2010