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So you wanna be in a rock band?: Industry execs maintaining monopoly on music

Rose Cora Perry | Interrobang | Lifestyles | November 24th, 2008

The face of the industry, moreover, the face of the record deal is changing.

The monopoly that major labels once held because of their exclusive ability to offer artists worldwide distribution, and unmatchable promotional opportunities simply cannot compete in the age of the internet in which artists, because of their newfound accessibility to unlimited online resources and opportunities for networking, are able to become self-sufficient. Put blatantly, what's the point of signing with a label when with the simple click of a mouse, one is able to access both exposure to a worldwide audience and dissemination of one's products across the globe free of charge, or at the most, for a nominal fee, while maintaining complete songwriting ownership and control over one's image?

Though some will argue that traditional record labels still provide superior retail distribution attesting that indies are unable to get shelf space without having both a huge following in the area which will guarantee sales and a large promotional budget, which will allow them to do store tie-in events. This argument fails to acknowledge that many majors, such as Koch for example, because they can't afford the risk of taking up shelf space unless the product is guaranteed to move, have actually gone strictly to catalogs for their up and comers. So, they are once again unable to provide you with anything you cannot get on your own. As a result, the music biz's business model, which has ruled the day since the 1890s, has had to change with the times.

In order to maintain relevance during this state of transition that is rattled with illegal downloading (and hence, fewer profits to be made off of disc sales), label scouts and business professionals alike, needed a new plan not only in order to stay in business, but also to ensure that “the suits” would not lose their position of privilege and power. The plan: to zero in all efforts towards the one domain in the biz within which artists can only go so far on their own; that being, booking, and the secret weapon: a little thing called, “no unsolicited materials” (ie: you cannot submit any promotional materials without prior request or without an inside connection to the firm in question).

The leader of the pack in this venture is a little known company (note the sarcasm) that goes by the name of, “LiveNation” (originally a subsidiary of Clear Channel Communications, a highly influential U.S. media conglomerate), a brand that any regular concert goer will recognize as gaining increasing omnipresence on just about every advert for any major event.

Generally speaking, traditional deals with major labels allow musicians to strictly focus on being performers (ie: publicity, management, and booking is all taken care of for you), however, these gratuities do not come without a hefty price. Though details vary from contract to contract, artists are conventionally signed for at least a few years in which they are required to release a specified amount of works, and the vast majority of profits (in some instances, upwards of 90 per cent) earned off of all sales relating to their musical compositions are awarded solely to the label. The artist is expected to tour and attend promotional opportunities in order to market their works, and any profits earned from touring (which are, at best, only about five-to -10 per cent considering the high costs associated with funding transport, stage crew, special effects etc.) as well as any monies earned from the sales of merchandise belong wholly to the artist. Additionally, if licensing opportunities should be presented to the artist, the label's commission on said negotiations is usually about 15 — 20 per cent.

So up to this point, it may seem as though these deals are somewhat mutually beneficial - there is give and take on both ends of the bargain- however, there's an all too often undisclosed catch that cannot be understated in terms of its importance: in these deals, if the artists' musical compositions fail to achieve commercial success, any upfront resources that were granted to the artist in order for him/her to partake in recording, and/or marketing his/her products will be owed back to the label in full!

So how have deals changed due to the infiltration of companies like LiveNation?

Well, as previously explained, traditional major labels primarily focused their energies on pushing units (ie: records, cassettes, compact discs) in order to generate profits. Because fewer and fewer music consumers are actually purchasing legitimate copies of musical works, profits in this area have, understandably, greatly subsided. Consequently, deals with companies like LiveNation not only demand a substantial chunk off of sales of musical works (however, in most cases, without the catch of loss of songwriter ownership), but as well, now infringe on territory that used to solely belong to the artist: that being, touring and merchandising because as noted by Fortune Magazine, the majority of earnings achieved (over 75 per cent) by current major artists come strictly from these two domains. However, it's important to realize that LiveNation's cash flow margins on tours average a slight “4.3 per cent ”, and it's not surprising that the company is continually seeking to expand its horizons in order to bolster its profit making potential.

In an effort to eliminate the need for record labels and/or just about any other external company that has traditionally been required to properly launch and manage a major artist, in its contracts, LiveNation has sought to gain control not only over its artists' touring arrangements, and catalogs, but as well its artists' web presence, publicity, merchandising and videography. There have also been recent talks discussing LiveNation's involvement in negotiating licensing and publishing deals on behalf of its artists in order to get a cut off of their royalties.

In order to seem as though the deals they are presenting are “fair”, those artists specially selected to be recruited for LiveNation's roster are often offered obscene amounts of upfront money, like that of Madonna's 10 year contract estimated at a cool $120 million. Despite all of the signs which indicate LiveNation's totalitarian aspirations, the company's President and CEO Michael Rapino, maintains that they merely fulfill the duties of a music promotional company and nothing more.

So what does this mean for the indie musician? Moreover for the music consumer? These are topics that I will tackle next week.
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