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| Is a distributor even necessary anymore? |
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| posted by Marty on Wednesday February 13 2008 @ 11:45AM PST |
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For the second time in the last few years we have been approached by an indie record label wanting to distribute our disc (Outlander II).
I indeed did ink one deal some time ago which produced mixed results, although in the end we sold hundreds of CDs we would not otherwise have sold, so it was a net positive. They key here is that this deal was as simple as could be, the contract was 3 pages, and pretty much said "we will sell your disc for 3 years".
Well, the new breed of indie labels are ready with 15 to 30 page contracts stuffed with legal-eze. Having already learned about these types of things the hard way, I of course had a contract attorney look at these contracts before I did anything.
I got 2 opinions from good attorneys who said (as formally and tactfully as a lawyer could put it) "you would be insane to sign this". Couched in the details were options on our next 2 discs, optional unilateral contract extensions by the label of up to 21 years, first rights to any and all live or studio recording we do during the contract period, ownership of our image & likeness such that technically we would be in violation of the contract if we put up a free video of ourselves on YouTube. (BTW none of these shadowy details was even mentioned during my 2 hour conversation with Pres/CEO of this label).
And that's just getting started, it was much worse. The label was actually not bound to exploit the license - meaning they could lock us in to an exclusive WORLDWIDE deal and then not sell the disc for 7 years. Some of the payment clauses were based on percentages of the label's NET (not gross) on our discs/MP3s, which means that if the label is poorly run and doesn't net anything, we could actually get ZERO on any number of sales. It was unbelievable.
When I had my attorney rewrite it in order to limit duration, options, clarify payment, allow us to post new music/video on the Internet, etc., I sent it back to the label and the Pres/CEO said he did not have time to review my changes as they were too extensive. So after I spent a week reading his 30,000 word legal dissertation he would not spend 3 hours looking at my changes. What ever happened to Label Sells Disc->Label Makes Money->Band Makes Money? It makes me think that some of these labels are actually not in the business to sell discs at all, but rather to try and find a group of promising bands and lock them up into bad contracts hoping just one makes it big and then using the contract as a way to extract large amounts of money via the shameful terms or perhaps from a buyout by a bigger fish.
Needless to say, the deal broke down since I opted out. But despite what 2 attorneys told me about the contract, this label guy was just adamant that everything in the contract was "industry standard" and his contract was in fact "artist friendly" in comparison (I'd hate to see artist unfriendly).
Is this the case? Is this type of usurious contract "industry standard" for a medium-sized indie label? And secondly, now that digital sales have overtaken physical CD sales.... is a relatively limited distribution deal even worth the entanglements anymore? Anyone have any experience or insight into this? It just kills me to pass up good potential revenue/exposure, but cripes the potential downside is massive.
Thanks in advance.
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CD sales have stagnated, but they have not been eclipsed by digital sales. And they probably never will. Its hard to compete with FREE. Inspire patronage like a door to door salesman.
I'm an indie DIY home recording enthusiast and I've run an indie label with a major label P&D deal with Fontana, we've also run physical product through Select-O-Hits.
Bottom line, its over as we knew it.
The value of a label is just that a label, and targeted brand image that stands for a particular niche. In our case, we serve the Asbury Park, NJ music scene made famouse by Bon Jovu and Bruce Springsteen.
So we all huddle together and try to stand for something. More of a 50/50 strategic alliance/coalition than a typical artist/label relationship.
Colie
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Myself, and moreover, my clients, have seen (and turned down) a lot of these so-called 'artist-friendly' 'industry-standard' contracts. They're designed largely to prey upon bands who are so hungry to 'get signed' that they'll sign anything. They count on many not bothering having anyone actually read the fine print...
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There are no longer any "industry standards". You did right by letting a lawyer go over the contract. Your control over your product is the most important thing in the end. With that maintained, you can present yourself to your fans on your terms. Keep approaching those contracts the same way you did this one. Get your music out to the masses but not by all means. Get it to them by the best means for yourself and them.
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There are so many different opportunities for getting your music
out to listeners these days. I do still believe that working with a
team that is organized, motivated and really likes your music,
can greatly assist you in increasing your audience and sales.
I do think many labels have a good idea of what they want to
offer each band and that is represented in their "standard"
agreement. As a label owner myself, I do like to offer 50/50
deals with an option for one additional album. The 50/50 deal is
based on the label fronting all/most of the
manufacturing/promotion/publicity costs and once those costs
are recouped, any profit earned is split between the band and
the label. Yes, it is easy for both parties to lose money on this if
sales aren't there, but if everyone works hard and smart and the
public reacts to the album, it can make everyone some money.
If you want to be more involved in the decision makings and
where money is spent, you can consider creating a situation
where you, as the musician/band, splits all costs involved in the
creation/manufacturing/promotion of your album with the label.
I think it would be very fair to retain ownership of your album in
this situation and license it to the label for a certain amount of
years that feels fair to both parties.
The idea of an album option can be good for both the musician
and label. A label wants to feel like they are building towards
something with a band. If they put a lot of energy and $ into the
first album - it is laying foundation for the next one to build on.
In most cases an artist likes knowing they will likely have a home
for their next album as well. I think in most cases that if the
parties didn't enjoy the working relationship, you could work out
details on them not exercising their option or licensing the
album to another label, or back to you.
There are a lot of labels (and managers, publicists...) out there
with good intentions. Much like any relationship, finding one
that has great communication, follow through and is highly
motivated should be the goal of anyone looking for a label deal.
Get feedback on the label from some of the artists they work
with before moving ahead.
I do believe that with lower sales overall being the norm these
days, that artists do need to keep their expectations in check.
And anyone out there can be good at marketing their own
music. So, give it a good try first and build your own empire. If
you've built something you are pleased with and think others can
now take you further, you'll have the knowledge and ability to
have a strong partnership with anyone you believe in. Or, keep
it to yourself and enjoy your freedom. Just don't let the business
keep you from remaining creative and making music!
Cheers,
Dylan
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Thanks to all for your input.
To Dylan, I also appreciate what you wrote, it was informative and helpful. I think your attitude sounds like what I would expect from a label owner who is legitimately interested in profiting from the sale of the bands they promote as opposed to profiteering off the backs of the bands they shackle.
As far as I am concerned, unless you are talking about major label size distribution/promotion, you cannot make a reasonable case for why a label who is distributing a band should own any more license to the band or music than is necessary to promote and sell the music. Particularly since the vast majority of the time the band is not only obligated to reimburse the label for all or part of their promotional expenses, but many contracts I have seen extend the duration of the contract *in perpetuity* until the band pays back any debt they may owe the label.
I think it would be great for those representing these indie labels to have an attitude more like yours, wherein there is some negotiation to help both parties feel comfortable. The band may have to give more to get more, and vice-versa. There should always be risk for both sides. This is the nature of the beast.
That said, from my experience it is not uncommon to see simple distribution contracts that are so overextending in what they grant the label that one of my attorneys felt large parts of the contract I turned down would likely be unenforceable anyway (although you can't be sure until you litigate). This seems so counterproductive to me, and it certainly prevented what I think would have turned out to be a decent chunk of change for both myself and the label I was dealing with.
I think it speaks volumes that to the label I was dealing with it was far more important to have me under their (unaltered) contract then it was for them to make money.
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Cheers Dylan.. Well stated Sir!
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Thanks so much for feeling that the content of my e-mail was worthwhile. And I appreciate your kind comments.
I do think most lawyers do tend to make agreements longer/more detailed than they need to be -and don't realize that artists are scared off by this. I often ask my attorney to cut back on length and change language to lessen the potential scare factor that an artist might feel when reading through it. It is extremely important that all involved feel comfortable with all the elements of the agreement and gameplan for the album.
And retail distribution is still important! There are tons of music fans that still get their music fix at music stores. There are also listening stations and other opportunities to have your music noticed and purchased at the store level. As long as you are creating interest to pull in buyers - you should have your music available in stores. now, make sure you work with a reputable distributor. That is another conversations altogether.
Cheers,
Dylan
CD Baby/Badman
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On the surface, Marty, you're right. Most artists don't need a label. If selling a couple thousand units over the course of a few years is enough, then that's obviously working for you. But despite all the rhetoric about sales tanking, there is still LOTS of money to be made in independent music, and many artists want to be able to make a good living from making music. And many succeed!
Independent physical music distributors like Allegro and Koch had record years in 2006 AND 2007. Music is definitely still selling thanks to independent labels making wise business decisions in an ever-changing climate.
The short and the long about labels these days: it's all about the Benjamins.
In the case of my label, we are a production house as well as label. We invest time and cash up front and try to recover it all on the back end before we split profits with the artist. This is the only way our business can continue investing in new projects.
The cost of running a label (and studio) is staggering. If a label is investing upward of $30,000 in the direct costs of production, advertising, touring, cash advances, publicity, radio, etc. (to seriously compete in the marketplace), it would be counterproductive to ANY business model to not have certain safeguards in place to protect that investment.
Because of this risk, ownership of the Masters (jus the recording, not the song) is what adds value to a label's net worth and is something I personally won't budge on in my contracts. We receive money from, say, licensing a track, and that goes toward recoupment of our direct costs. If we didn't own the recording, we'd lose a very obvious source of revenue. By the way, the songwriter still retains ownership of the song in regards to publishing rights, and receives all monies in regards to such.
Labels are more than an angel investor fronting money. Good ones recognize the need to keep the artist making good music, therefore they make making the artist money to continue the cycle of of new product. They do this through having solid business infrastructure in place and applying smart business practices that benefit the entire organization, label and artist alike.
A good record contract explicitly defines what needs to be accomplished, by whom, in what amount of time, for what amount of money. It also details what happens when things don't go according to plan. Sometimes this takes 15-20 pages to make sure everything is covered.
Ever seen an homeowner's insurance policy? I"ve never seen a recording contract come even close... but I digress...
Bottom line: very few artists can find a successful career in the music business. Of those, only a small fraction have the financial ability or business knowledge to gd it alone. Thus, I definitely believe there is a definite, valid need for labels, and there will be for some time to come. However, labels also need to be able to adapt to a changing industry in order to better serve artists and customers alike.
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For the record, I've seen some really fair and honest contracts from labels, too. And labels that were totally open to negotiating and tweaking their "standard" forms. Just so no one thinks I'm just badmouthing here. :)
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the master recording from the artist as opposed to owning it in perpetuity - and get, for a reasonable period of time - the same benefits of owning the master. And in the end the artist gets to own their work. I have met people who will refuse to budge on a contract unless *this* is the case.
In an era of 360 degree contracts (talk about scaring artists off) more labels should look at term-licensing deals if they want to be considered artist-friendly.
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Yes Mikael, but ewhat did Koch make money on? A large portion of their business is DVDs, sponge bob, and a lot of other crap. Its not all music sales.
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In my experience and opinion any time a contract is more than 3 or 4 pages it is probably not a good one. Anyone that has to have that much ass cover has too much fear with No trust, no unity, and no mutual interest.
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