An Unlimited Supply

We're reinventing the music business because we have to - but we may as well get it right this time.

I’ve been obsessed with record labels since I was a kid. I was that slightly off eleven-year-old who read every word on the album jacket. I learned to associate my favorite artists with their labels, from Casablanca to Warner Brothers to Asylum to I.R.S. to Slash to Dischord to SST. I always noticed, always wondered what it all meant.

When I was offered a president job for a label I truly cared about—Rounder Records—I couldn’t pass it up. I’d probably make more money if I'd stayed the course as a music lawyer, but I felt I owed it to that kid, to live that dream.

The problem is by then I’d become cynical. I’d seen too much. The label business wasn’t what I hoped it would be. Labels weren’t great for most artists. In my idealized music industry, artists are the priority, the owners, the biggest earners, and those of us lucky enough to work with them get paid based on our value creation. In the real world, money is the priority, and artistry is the product that the marketers purport to understand better than the artists themselves.

It’s hard for young people learning the business now to understand just how brutal the business used to be for artists. If you look at early recording deals, royalty percentages are in the single digits. It’s a major miracle that terms have improved in recent years, but it’s only because of technological disruption. The old, brutal model died because it doesn’t work anymore. Values have changed because the business and culture require a different approach, from different people with different incentives.

If you’re curious about just how terrible deals used to be, I’ve written about Steve Albini’s early ‘90s essay, “The Problem With Music.” It’s an incredible if somewhat hyperbolic piece that made a huge impression on me when it was first published. Sure, it’s a little exaggerated, but it isn’t fiction.

Albini’s essay is a time capsule into a flagrantly anti-artist era when the money was pouring in from massive CD sales. When the first crush of tech disruption came at the end of the 90s, the major labels responded by suing their own customers and trying to squeeze money out of artists’ most lucrative revenue streams they didn’t really help create. Executives told us we needed them to exist, so we needed to underwrite their failure to maintain a business model in recorded music.

After witnessing the business practices of the ‘90s as an artist, my move to the business side came at a time when major labels were fighting to survive by any means necessary. It isn’t a coincidence that I worked on the artist side of the industry for over five years before I negotiated my first major label deal. I had successful clients, but they were all on independent labels. Why would a creative artist risk losing their creative control just to give up a quarter of their live business? For a six-figure advance that would be recouped from their royalty? It didn’t make sense. For the most creative artists with the most commercial upside at the time, it just didn’t make sense.

I’m grateful I came into the industry during a time of crisis, because I didn’t mourn the loss of what came before. I’m glad I wasn’t practicing law in the ‘90s, when over 90% of major label signings failed. Sure, I’d have made money closing all those deals, but I didn’t want to feel any responsibility for an artist’s failure. I didn’t want to have to look an artist in the eye when I’d approved a deal that ruined their career. I wanted to advocate for artists, to help build careers, to help them make good choices. As a former full-time artist with the scars to show for it, I wanted to help artists avoid that kind of shit. I wanted to help build a future where the mainstream industry would have to prioritize artists to stay in business.

When I think back on all the scenarios I’ve watched play out from record deals I’ve handled, there’s one bad outcome that stands out as the biggest flaw in the model: regime change. Record companies have revolving doors; people get fired or move companies constantly. I remember telling people in pitch meetings that I hoped to have my label job for twenty years. In my heart I knew I’d be lucky to make it five. Still, artists get attached to the people. They sign with the people based on emotional connections, and labels encourage it. Then the people leave, but the contract remains.

I’ve seen a lot of this sort of thing, but I’ll share my worst regime change story to illustrate the risk. From the ‘70s through the 2000s an iconic genre focused independent label was known for having the most diabolically anti-artist deal structures in the business. Who had the worst deals outside the Christian industry? These people. Still, artists wanted to be on the label because it carried prestige within certain genre communities.

I negotiated a deal with the label for a client. It was a typical terrible deal—long term, low royalty, no real creative autonomy. But my client was excited to sign, hoping the deal would be a step into bigger venues and more international touring. I approved the contract on a Monday, they sent the final contract on Wednesday. They demanded we return the partially signed contract by overnight courier by Friday. If the contract didn’t arrive by Friday, no deal.

On Monday, I got a call from a very upset manager. How could I let this happen? How did I not see this coming? I asked, “See what coming?”

Band and manager had been notified that the label’s corporate leadership fired literally everyone, from the label president down to the marketing team to the product staff and the entire back office. They shuttered the office and moved the company to a new state. On Friday my client signed with a fully staffed label, on Monday the label had a staff of one, with a promise to rebuild better than ever…eventually.

Eventually the label rebuilt a staff and sold to a private equity firm. Now it’s just a catalogue, which is for the best. It was a great coup for the private equity company because they barely have to pay any royalties to the artists. That’s the sort of thing that makes catalogue even more valuable and attractive to traditional capital investors. Catalogue buyers love those terrible old deals.

When we read contracts, we’re thinking ahead to everything that could go wrong. And yes, we do think about the possibility of regime change. There’s a deal term that addresses the issue we call a Key Person Clause, and they are as rare as hen’s teeth. We ask for them, but we almost never get them. I’d have loved to put a Key Person Clause in every one of the Rounder deals I did. Obviously that would protect me, and the larger company would never let that happen. They want to be able to fire anyone they want—including the CEO (assuming there’s a Board of Directors or corporate owner). In traditional label structures, regime change is inevitable because it’s good business.

Of the many flaws of the model when it comes to creative artists, I’d say the risk of regime change is the biggest problem. You want to sign with music people, folks who love your music and intuitively understand how to connect it with an audience. But you end up with a bunch of spreadsheet people who see your contract as a monetizeable asset, and they’ll squeeze any money out of it they can. Music people understand that spending the time and money to develop great music is good business. Money people understand squeezing every penny out of an asset. These approaches are not compatible.

Regime change is especially awful for developing artists. If you’re in development and the label changes out the leadership, you hope to get dropped and to leave with the record. This has happened to my clients, and it’s a helpless feeling. Any contract that gets approved isn’t going to help the artist much. Sometimes the best we can do is to ask—and sometimes beg—to get dropped.

I don’t romanticize labels anymore, at least not frontline labels that operate today. They’re still lucrative businesses, but they’ve been humbled. They know they’re not good at development, and they know they’re competing with compelling alternative models for distribution and marketing. In a sense, those brutal companies that routinely ruined careers don’t exist anymore. Those models don’t work because a label that tries to do it the old fashioned way couldn’t sign a decent artist unless they wildly overpaid—which clearly defeats the purpose.

This essay is a bit of a wind-up for next week’s essay, which is the one I’ve been setting up for the past couple years. I have a big announcement to make about a new venture, and there’s a fantastic story to tell. I grew up obsessed with labels because I saw them as cultural hubs that helped to create my favorite music. The old label model is dead, but the dream of labels as creative communities is very much alive.

Even though I’ve been completely disillusioned by the business, my obsession is very much alive. My career has been a constant effort to elevate real artists in this shitty business, to find ways to help them make their art on their terms for an audience that craves substance and meaning in music. Stay tuned for next week’s episode.