Majors, Indie or Neither

Part 1: Majors, Indie or Neither?

In order to decide which is the most suitable path to take the structure of the industry should be known. The music industry is considered ‘mature’ and a characteristic that leads to this definition is when a market is dominated by a small number of companies, a structure known as an oligopoly (Hutchinson et al, 2006, p280). As of 28^th September 2012, the four dominant labels (Universal Music Group, EMI, Warner and Sony BMG) became three when Universal Music Group acquired EMI (UMG, 2012). The major’s take up 74.8% of the market share, compared to the remaining 25.2% taken by the independent labels [as of the end of 2011] (Cole, 2012).

This is significant to the bands choice in label for many different reasons:

Major and Independent labels often operate similar business structures, the most important difference being the financial divide. The departments that might be encountered by a band are as follows:

·      Label President

o   Business Affairs

o   Accounting

o   International

o   Artist and Repertoire

o   Marketing

§  Artist Relations

§  Creative Services

§  Publicity

§  Radio Promotion

§  Sales and Marketing

(Hutchinson et al, 2006, p54)

There are many similarities between the way a Major label and an Independent label are run however one of the main defining differences is that Major labels tend to own its distribution channel (Hutchinson et al, 2006, p13). This means discounts on the associated costs across all products under the label for example:

Universal has four main distribution channels

-       Universal Music Distribution (Label distribution and sales)

-       INgrooves/Fontana (Independent sales, marketing and distribution)

-       Vivendi Entertainment (Theatrical releases and home entertainment)

-       Universal Music Distribution Group Digital (Digital Assets and Mobile)

(Universal, 2012)    

To be able to distribute all the company’s products at a discounted price automatically gives the Major label an advantage. However it is often common for Independent labels to have an ‘Administered Distribution System’ whereby there is an agreement in place with the distribution arm of one of the major labels (Hutchinson et al, 2006, p13).

· Record Deal:

There are various deals available with record labels that will have a direct impact on the income of a band:

· Development Deal: 

“Copyright of the recordings is assigned to the record company. Recoupable advances on a track-by-track basis”

 · Production Deal: 

“The productions company will try and attract a larger record company to license the recordings or sell the contracts to.”

  · License Deal

o   Exclusive: “Artist or small label retain copyright, but engage with the resources and expertise of a larger company”

o   Non-Exclusive: “For tracks that will feature as part of a compilation”

Development deals could be beneficial as they would provide a sense of ‘stability’ over a certain number of years in a multi-album deal. However it isn’t necessarily a good thing as was the case with the group ‘Jamiroquai’. The group felt that the record company imposed creative restrictions on them and that they were more concerned about marketing over the duration of their 8-album deal (Davidson, 2005).

A specialist legal expert should be acquired to check through the jargon that a contract is usually filled with and ensure that the artist is getting a fair deal in the circumstances. Contracts usually include the following sections:

·      Delivery and Release

·      Options

·      Recording Costs

·      Assignment of Copyright

·      Warranties

o   Indemnity

·      Additional Clauses

o   Video

o   Artwork

o   Merchandise

o   Touring and Tour Costs

·      Termination

o   Breaches in Contract

(Morey, 2012)

Contracts can be the make or break or a band, ‘Queen’ were signed to a production company who ‘sold’ the songs to a record company and as such the band fell into debt and nearly disbanded (TheHan003, 2012). The predicament has even been parodied in the cut-scenes from the ‘Guitar Hero III’ video game: A band duped into signing the contract by false promises (NoBillsOfCrashDamage, 2009)¹ and then paying the price for their naivety (NoBillsOfCrashDamage, 2009)².

Another key difference is that Independent labels don’t expect to bring in as much money and as such they may allow you to build on your niche appeal, rather than looking to convert you into a mainstream act; in essence they let the artist ply their trade (BBC, n.d.).

Publishing

Artists usually sign a publishing deal or, for those earning a significant amount of songwriter royalties, should at least self-publish and form their own limited company in order to receive the publishers share (AdagioMusic, 2012). An artist will sign a publishing deal whereby the publishers administer the copyrights and can take anything from 15% – 50% of the royalties depending on the deal in place. (AdagioMusic, 2012).

The record company will usually pay mechanical royalties, generated from sources that reproduce the recorded music onto formats such as CD’s, and Synchronisation license fees, for television and film usage, to the copyright owner (BMI, 2012). This is where a publisher will take its cut for administering the copyrights; the exact figure depends upon the artist and their negotiation position (Jenkins, 2012, email correspondence’). As many labels insist on the artist signing a publishing deal it can be a disadvantage as they will exploit their position and charge higher rates whereas the artist is actually in a better position by controlling their publishing (AdagioMusic, 2012).

Tour Support

Perhaps one of the most overlooked areas in deciding between a Major or an Independent label is whether there is financial support for tours or live shows as a part of the deal that is offered. The live music industry is set to overtake the recorded sector over the next decade if predictions are to be believed (PRS, 2007). With more people being attracted to live music events it seems logical that a label would want to exploit the promotional potential and support the artist financially in this way. Tour support money is usually advanced to the artist, and is recoupable, (Hutchinson et al, 2006, p307) but again referring back to the financial divide between the major’s and the independent’s it is clear that there is a former has a distinct advantage (Hutchinson et al, 2006, p309). Despite this it is critical for independent labels to have their artists playing live events as it forms the very first promotional tool for an artist but also because “If you’re not touring and not present in the market, there’s no interest…no retail interest, no consumer interest, no radio interest, no nothing” (Haley, 2005)

There are other means of attaining funding for tours and shows, however large funding usually falls at the feet of the established ‘star’. In 2011, R ’n’ B singer Rihanna, signed to ‘Island/Def Jam’ a subsidiary of Universal (UniversalMusic, 2012), was sponsored by car manufacturer Renault for her ‘The Loud Tour’ (Renault, 2011). She performed 23 dates across the UK whilst she also appeared in a television advert for Renault (MusicWeek, 2011). It’s a two-way promotional device – the artist gains valuable funding for the tour and can further expand their reach to fans whilst the sponsor gains promotion through association with a successful artist.

Retaining ownership of material

Case Study: Alex Day, 23. – Musician and Video blogger, from the UK

There is a strong case for a band to retain ownership of their music in the current climate that artists find themselves. Having established that, by signing up to a record label and to a publishing deal, any income from material is split dependent on the deal agreed and doesn’t necessarily reach the artist for while (especially when an advance has been paid), there is an incentive to steer clear of Music industry labels altogether. With the continuing expansion of social networks and websites such as ‘Youtube’ and ‘Blogger’, it has become even easier for people (not just artists to reach an audience). Besides the obvious promotional benefits that labels already exploit, there is an alternative way in which an aspiring artist or band can manipulate this to their own advantage whilst bypassing the label system.

Look at the case of artist Alex Day: On the 4^th August 2006 he created an account on Youtube, to date it has amassed over 101million video views (nerimon, 2012). The importance here is that he started from scratch and built up a fan base through regular uploads of music and video blogs which has reached in excess of 594,000 subscribers. Having had two ‘top 20’ charting singles within the space of 4 months (OfficialCharts, 2012)² he had “completely outflanked the labels, radio, and distributors and went straight to the fans – putting the lion share of the earnings in the right pocket: his” (Forbes, 2012). There is probably the added revenue of the ‘Youtube Partnership Programme’, which began operating in Europe in 2008 (BBC, 2008), that pays out money to the creator from advertising revenues, with the figure received being in direct relation to the popularity of the videos uploaded. However he earned $200,000 (c. £125,000) from music royalty checks with little or no costs usually associated with labels.

As a ‘product’ his music succeeds, in a sense, through product development as:

·      ‘There is a market for the product’.

·      It has appeal.

·      It sufficiently differs from other products already in the marketplace.

·      It can be produced at an affordable price.

(Hutchinson et al, 2006)

The obvious problem with bypassing the major and independent labels is the ties to distribution that prove so beneficial for artists. However there are alternatives available such as those used by Day to market his own music. Digital Downloads through online stores such as iTunes are a way of selling your music independently (iTunes, 2012) without the need for a physical distributor. The artist may need the services of an external company in order to ensure content can be uploaded in the correct format (iTunes Connect, 2012) however costs are greatly reduced as signing up to sell material is free (iTunes, 2012).  This is one example of direct-to-fan sales which include other sites such as Vibedeck (subscription fee), Topspin (monthly fee), get-ctrl (free except a small share from sales), Bandcamp (free but 15% share on downloads and 10% on merch). (Nicholls, 2012. Music Industry Lecture, 7/11/2012). Note theses sites act as a place for artists to sell their material instead of on their own sites as the costs involved make it logical to use an aggregator (bemuso.com, 2012). Bemuso.com also show the difference that having a label, which takes a share in the income, can have on the artist share (bemuso.com, 2012)

DFTBA Records (Don’t Forget To Be Awesome) was set up by the Green brothers, or ‘VlogBrothers’, and Alan Lastufka (DFTBA, 2012) to assist artists, who have generated their own audience and created their own brands, with distribution (Green, n.d.). This includes artists like Alex Day and other British artists like Charlie Mcdonnell (Mcdonnell, 2012) who have built up an audience on their own through the medium of online video.

Fan funding sites are often a way of generating vast sums to cover the necessary costs that means an artist can go through traditional methods without having to get caught up in the trap of advance payments. Amanda Palmer rose over 1000 times more money than was needed via a ‘Kickstarter’ campaign (Kickstarter, 2012).

Part 2: Songwriters Agreement

Agreements on songwriting are critical to maintaining harmony within the group and in some cases the difference between success and failure. There is an argument for and against who should get what percentage of the income from a song:

·      If the band contribute various elements to the songs and are seen to be working in a collaborative manner, it seems fair that the income should be split evenly.

·      However if there is only one main songwriter, such as Noel Gallagher was for Oasis (Allmusic, 2012), this could lead to disagreements of who should get what share of the income. Presumably the band would contribute but the main credits would feature the lead writer.

In situations such as this, an agreement between each member is needed to state who shall get what percentage. This can be verbal or in writing, but preferably in writing as the contract can be summoned as evidence in the case of any disagreements in court. A notable example of this is the Spandau Ballet publishing royalties dispute between songwriter Gary Kemp and the rest of the band. There was a claim that Kemp had an oral contract in place (since 1980/1981) to pay a share of the publishing royalties, however these stopped in 1988. A court ruling in 1991 stated that an oral agreement did not exist and the claim wasn’t valid (Bott, 2012). This underpins the importance of having a good written agreement that documents the commitment.

There have been situations similar where whoever wrote the majority of the song would get the full credits. Brian May stated that ‘Queen’ had that very arrangement in the early days and the extent didn’t become clear until the songs became hits (TheHan003, 2012).

Solutions

Conclusion

It all depends upon the artist but personally, setting up a well-planned ‘Partnership Agreement’ (Allen, 2007, p195) incorporating an income split based on contribution to the songwriting process would be the best place to start. In terms of ‘Major, Indie or Neither?’, independent labels are often more artist than business orientated than the Majors and have more connections to the industry channels than an artist who retain the copyrights of their music. Artists such as Adele have proved that you can be more than successful on an independent label (OfficialCharts, 2012)¹. A publishing deal would also be the first choice, with a bit of research, as any artist with the right attitude for success can’t surely have the time to deal with their own publishing and be efficient.

References

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Allen, P. (2007) Artist Management – for the music business. Oxford: Focal Press.

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