Toward a new Record Label structure:
Part 1




Toward a new Record Label structure – Part 1
by Sue Basko
In this series of essays, I am going to explore the goal of formulating an “ideal” structure for a record label that works for both the artist and the label.

To understand the aim of creating a new style of record label, one should first have a basic grasp of how old style record labels were/ are structured. There is, of course, much more to it than this, but here is a crash course:

The basic contracts of old style record labels works like this, in a brief and condensed version: The record label provides money and services, connections, clout. The record label is basically a lender to the artist, but a lender that controls how the money will be spent. The usual contract gives the recording artist some upfront money (an advance) and sets out amounts that may be used for recording, promotion, tour support (for when a tour is losing money and needs help to continue), distribution, etc. ALL of this money is recoupable from the sales and royalties on the music. Some contract aspects can be reimbursable; I have seen more reimbursables appearing in contracts. (Recoupables are repaid from sales and royalties and disappear if the contract ends; reimbursables are outright loans and are to be repaid in cash. Great caution should be used by the artist before accepting a contract with reimbursables because these can be structured in such a way that they impede the artist from ever making money.) In exchange, the record label takes partial ownership of the royalties from the songs/ songwriting, takes ownership over the sound recording masters, has final creative control, has control over how the money is spent, does the collection and accounting and disbursements.
With such contracts, in most cases, most signed artists make no (or almost no) money beyond the advance and are let go after the first contract or sooner. The artist has then lost control over the songs that were part of that contract. The label banks on a few artists to sell very well and provide years of music and income. An artist can be top-selling and still paying back the money.

Under the old contracts, the record label did not involve itself in two aspects – concerts and merchandise. This was where the artist made money. Now, sometimes the contracts do include such things. If the label is helping to book and promote the show and / or is providing help in designing and making merchandise, it can be a fair trade-off.

One of the main functions of the old style record labels was/ is gatekeeping. The record label chooses which acts it considers marketable. Today, anyone can record their own music, have CDs made and sell downloads online. There is no gatekeeper. This results in the creation and dissemination of some splendid, eye-opening creative music. It also results in piles and piles of mediocre or even horrible music.

Ideas for a new style record label:

First, new style record labels are also gatekeepers, as are the traditional labels. A new style label must be even more of a gatekeeper, since so few can be let in. I have been told by owners of new, small record labels that they must deeply love the music and the artist; they must feel passionate about making the commitment to promote the music.

Second, new style record labels usually have very little money. Many or most cannot provide the artist with an advance. The advance was a loan anyway, but it was a loan most musicians direly need.

Third, new style record labels do not have the money to “break” a record into the broadcast commercial radio market. However, such radio is largely being replaced by music on youtube, online radio, personal music services, mp3 players, phones, etc. Airplay on broadcast radio is still golden; it is rarely accessible by the indies.

When a big record label offers a contract, many/ most artists jump at the chance. For most of them, it means a short ride on a fun carnival-like ride, and they are left none the worse for it. They lose their songs, which can hurt badly. They can be left feeling used, spit out, dumped, and out on the street looking for a new record label – or a new way to conduct the business of their music. But all in all, they generally have a few fun years, make some good connections, and have some very formative experiences.

The artists dumped by labels (which is the vast majority of them) are left in a situation where they have to either start a different career or figure out a way to restructure their music career so that it is longer-lasting. That is when many get the idea, “Hey, I think I will start my own little record label.” My observation has been that most have no idea what they are doing; the complex areas of music law, business, and accounting are antithetical to their creative nature as musicians. They could hire appropriate help, however, most do not.
Fourth, there are the considerations of what the artists want. My observation is that most artists today want these things:

1) To retain ownership over the songs that they write;

2) To retain the right to copy and distribute their recordings (masters), even if a record label refuses to or is unable to;

3) Creative control on what songs they write and record and how they are recorded and mixed;

4) Some control over how much money is spent and on what. A big example is that an artist that home-records may wish to keep doing so and may not want to be forced into an expensive studio. Another example is that most artists wish to choose their own producer or mixer.

5) Some control over their own image. Most artists do not mind input from a stylist. However, there are record labels giving male rock bands matching haircuts, turning natural-style women into sex kittens, and making suburban rappers look ghetto. Most artists want their performance persona to at least resemble their actual persona. Being oneself also leads to integrity in public appearances.

6) To make some MONEY.

7) To tour and do appearances in a way and on a schedule that is at least humane.

8) To have a music career that lasts and grows with them.

I am going to take this list and see how it might be made workable by a record label with a new structure. I am exploring; I do not have any pat answers.

Please look for the follow-up posts where I address these things. Thanks.



Limelight:
Cover Song Licenses


Limelight: Cover Song Licenses
by Sue Basko
Interview with Alex Holz of Limelight

UPDATE:  LIMELIGHT will stop taking new orders in March 2015 and the website will close after that.  There is a different company that would like your business -- Easy Song Licensing, which can be found here: http://www.easysonglicensing.com/

To record a cover song, you need to obtain a license from the songwriter or owner of the copyright on the song. This is called a mechanical license. You also have to pay royalties per song copy that you create. For each copy on a CD, for each download, etc., you must pay royalties. Even if you are giving the songs away for free, you have to pay royalties. For detailed information, please read:

In the past, you had to obtain the license either on your own or through Harry Fox Agency. Now, there is a new player on the cover song licensing scene -- Limelight, which is part of a bigger company called Rights Flow.

Limelight gets you the song license on their easy-to-use website:

Update: Limelight is closing its service in March 2015.  
A different service, Easy Song Licensing, would like your business.


I have checked out Limelight and asked lots of hard questions -- and I think this is a great service. Several of my clients have used Limelight. They say it is a good service and that it takes about 2 weeks to get the song license. I have not heard any complaints.

Limelight charges $15 to get you the license. In addition to the $15, you also pay royalties for the number of copies or downloads you plan to make or allow -- which is 9.1 cents per copy for songs under 5 minutes; for songs 5 minutes or longer, the rate is 1.75 cents per minute, rounded up. The $15 fee is an incredibly good price to have them handle this hassle for you. The licensing process happens via their website and takes about 2 weeks.

This is what the folks at Limelight say about their company. Below this, I then ask them some really tough questions:

On the enterprise level at RightsFlow, we represent over 12,000 licensees (artists, labels, distributors and online music clients like Rhapsody, The Orchard, Ingrooves, Muzak and many, many others) and help them pay songwriters and publishers, the licensors. We specialize in obtaining bulk physical, DPD, and ringtone licenses including streaming, tethered, and limited download rights. Our proprietary “FLOW” system and 23.5 million song database allow us to license, account, and pay royalties on behalf of our clients quickly and accurately while ensuring that rights-holders are paid for the use of their work.

One of the advantages of Limelight is that it is very simple to use for any artist to clear any cover song: we will do all the research, notification, accounting and payment as per the law and as per the specific need and sales information supplied by the artist user.

Powered by the RightsFlow engine, Limelight offers advantages:
  • Very simple to use (truly designed by musicians for musicians): just some basic song/artist release information is needed
  • Cost and time savings: a license is secured for just a $15 service fee plus calculated publishing royalties which are paid 100% to appropriate songwriters/publishers
  • Covers 100% of the publishing spectrum (including publishers who are HFA members as well as those thousands of independent publishers who are not)
  • Discounts are available on the service fee beginning at three tracks/configurations
  • Strong emphasis on customer service through a variety of means (online chat, email, phone, social and site options) to help any customer
  • We recently have partnered with ASCAP, CD Baby, Disc Makers, MEIEA/MEISA and many others to share the service with the musician community. The service was launched earlier this year and is growing quickly with artists in all 50 states and 79 countries using it to secure licenses. We have been accounting and paying out hundreds of thousands of dollars to publishers and songwriters with continued growth as the awareness and word of mouth has broadened our community. Been very exciting.
Also, our co-founders Patrick Sullivan and Ben Cockerham are involved with on-going conversations in Washington and elsewhere and take a very active approach in representing our clients, the licensees.

AND THEN I ASKED some very hard questions, which were graciously answered by Limelight's Alex Holz, Senior Director of Artist and Community Relations – RightsFlow.


Sue: The limelight application asks the time length of the cover song recording. How would this be known if the musician is getting the mechanical license before recording?
Alex: Since the time for each recording directly impacts mechanical royalties (as recordings over 5 minutes are assessed a higher royalty rate than those under 5 minutes), a musician would need to record (but not manufacture or distribute) in order to find out track length of their version.

How does Limelight handle it and how much is charged when the song rights are owned by more than one songwriter or publisher?
Limelight licenses with the appropriate copyright owners -- the same service fee applies regardless of the number of different publishers/songwriters involved.

How does Limelight handle it and how much is charged if the song rights are covered by one songwriter/publisher under U.S. copyright and another who is with a foreign publisher?
Since Limelight is specific to U.S.-based distributions, the publisher(s) who control for the U.S. territory are licensed and paid the royalties.

Limelight, as far as I know, is the first company to try to engage in mechanical licensing, along with Harry Fox. I read a legal paper talking about the monopoly-like hold Harry Fox always had. I always though that hold was part of a government-based mandate or a contract with the NMPA -- or something. But it's not?
Mechanical licensing is a non-exclusive right – users have long had the compulsory provision built into U.S. Copyright Law for some time now. In fact, since no one copyright entity controls the world’s repertoire, there really wasn’t a monopoly. Limelight was created to enable users to license ANY cover song, regardless of who controlled the publishing rights.

I read that your founder was previously a researcher for Harry Fox? Is there a conflict in going on to form Limelight?
Patrick Sullivan has held a number of executive positions in the industry, with HFA being one stop along the way to forming RightsFlow (which was around as a parent company for 2+ years before Limelight started).

Limelight represents the musician seeking the mechanical license, right?
Yes -- Limelight works on behalf of the artists, record labels, school groups, and worship groups who are looking to clear cover songs for physical or digital release.

I think a lot of musicians think that if they make a cover and give it away, they do not need a license, which is incorrect. Does Limelight engage in any education to let people know how this goes?
Absolutely - we believe education is 80-90% of our work here given the complexities involved in licensing. Being an educational resource is a significant part of our goal. We gear our editorial content around customer FAQs (both written and video), while also providing a video walk-through, blog posts, and live chat on the site during work hours. We also dedicate significant resources to marketing both to the artist and musician community directly as well as with our partners (like CD Baby, Disc Makers, ASCAP, Copyright Clearance Center, Christian Copyright Solutions, Alfred Publishing and others) developing outreach tools with them to help educate their communities.

Truth be told, $15 seems like a really low price for the service you offer. But -- it is the same that Harry Fox charges for Sound File -- but they only offer that price when the song is in their collection or database. If finding the publisher is more complex, do you charge higher?

Limelight makes no delineation between the number of publishers involved in a specific request. Actually, users see a price decrease per license if they request multiple licenses (such as multiple songs or configurations). Our site www.songclearance.com/page/pricing contains more details re: that price savings.

Why should a musician come to you rather than to Harry Fox?
Simplicity and ease-of-use of the site, coverage of 100% of the publishing market + ability to license ANY cover song, and no expiration date on digital licenses are some of the key advantages of using Limelight over any licensing agent today. We also work hard to provide timely, knowledgeable customer support, act as an educational resource (or point in the right direction if it’s not our expertise), and engage our audience across all social media. Finally, we love cover songs (and share the stories behind them on our blog – www.songclearance.com/blog)! We also want to provide marketing support to the Limelight users by offering platform for them to share their music and their stories.

I think this is the most exciting time in musical history, with huge changes happening in how music is recorded and distributed and listened to. I suppose Limelight is mainly working with independent musicians and small record labels. I know, because I work with these people, that there is a HUGE information gap. What would have been handled at a big record label by an experienced attorney is now being handled by a musician or indie record label person, often with no knowledge of copyright law or of how things work. I find I am doing great amounts of educating people. Is Limelight also, and if so, how and in what ways?

We lucked out in the early stages of RightsFlow -- our staff is predominantly made of musicians (amateur and professional alike) and can relate to the needs of independent artists. Whether they’re a hobbyist just looking to enjoy their first CD release, or a professional who’s spent years on the road and is starting to helm all aspects of their business, we can help outline the best process for each.

On a macro level, we’re creating FAQ videos, podcasts, and blog posts that help educate. More importantly though, we’re communicating with individual artists one at a time. Word of mouth is an incredibly effective marketing tool, but it’s also a powerful resource for education within creative communities. Artists will share with other artists. Worship and school groups will continue to share with their communities. Over time that information gap will close. And as stated above, we are constantly creating content – written articles, presentation collateral, sponsorship support, videos – that can be shared and syndicated easily.


Thank you Alex, and special thanks to Michael Kauffman of Limelight! t

To my Readers - If you use Limelight, please email me to tell me about your experience.

--- Sue