Toward a new Record Label structure:
Part 1

Toward a new Record Label structure – Part 1
by Sue Basko, esq.

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.