Music Industry Gearing Up With New, Flexible Models

Courtesy Nicola Slade, Record of the Day:

"There is no money in recorded music any more, that's why bands are now giving it away." That's according to Robert Sandall, who in The Times last month, made this bold, and rather false, claim under the headline "The Day the Music Industry Died."

Googling "the death knell for the music industry" brings up a long line of links leading back to a Wired piece, which predicted the 'looming' death of the industry as far back as 2000.

Recent moves by Radiohead, Prince and Madonna have re-ignited claims that the music industry (note the omission of the word 'recorded' in most of these exaggerated stories) is off to meet its makers. And we surely can't be the only ones who hear people chat rather flippantly about the death of the major record labels. Only last week one senior industry veteran told us: "I give them five years".

Evidence we've seen shows that certain companies, including the major labels, are already embracing future models - and that artist stand to benefit from re-shaped contracts and smaller companies launching innovative initiatives.

Take Sony BMG for example: according to reports, and "inspired by Rick Rubin" no less, Columbia Records in the US has revised the deals it does with new artists. The suggestion is that the label is striking deals for a maximum ten-year term, with the label receiving a cut of all income(records, live, merchandise and so on), with no reference to number of albums. We also hear that Columbia US have done their last conventional record deal, i.e. in future, they will not do deals where their only income stream is from records.

At In The City this year, music lawyer Sarah Stennett told a RotD reporter that she had signed an artist to Island (thought to be Vanessa Brown) and included a cut of non-records income in that deal. So, market leader Universal is also seeking those 360 degree revenues, where just a few months ago it seemed to be satisfied with records income alone. That, of course, is not to mention the fact that a cut of live revenues will also be derived from Helter Skelter, which it brought under its wing with the Sanctuary acquisition.

At Warner, reports suggest that My Chemical Romance split money earned from merchandise with the label. It's also widely known that Hadouken's deal with Atlantic is unconventional, with the label receiving a share of the profits from Hadouken's company, which collects their earnings from all areas.

Major labels grabbing a slice of all the pies will undoubtedly invite criticism - but it's unfounded and needless. In the old world, a major label would advance a band what often ended up to be an unrecoupable amount (something which new EMI boss Guy Hands only recently complained about). While bands were not forced to pay the unrecouped monies back to the label, this system often created resentment between the band and label.

Of course it's a necessity for the labels. A year ago at In The City, Ged Doherty said that a debut album would have to sell double platinum in the UK to be profitable for Sony BMG. Since then, hardly any UK-signed debut artists have sold double platinum in the UK. Meanwhile, there are plenty of companies prepared to invest in established artists like Madonna and Prince, but record labels are still the only companies investing serious money in breaking new artists.

Furthermore, over the past few years, major labels have marketed debut albums to within an inch of their lives - determined to make as much profit as possible, as quickly as possible. From a financial perspective - in a climate of diminishing revenues - this made perfect sense. From the perspective of a new artist and management company, this was a short-term move that maybe the likes of Franz Ferdinand, Daniel Bedingfield and Kaiser Chiefs are beginning to regret now. Many managers have in recent years complained about the amounts labels spend 'on their behalf' on videos, advertising and tour support. No longer were bands given room to develop at their own, natural pace and instead, were often shoved into the limelight too early.

So how will the 360 degree model benefit artists? First off, if the labels are taking money from live, merchandise and so on, then any advance can be recouped quicker. And, to some extent, the pressure to perform is not so strong. If the label is seeing a steady flow of cash come into the coffers, then hitting number one, or going platinum on the first album isn’t such a priority. A great example of the new industry model is Arcade Fire’s deal with Mercury. The group's first album was released internationally by Rough Trade on a one album deal. For the latest record, the band is using independent press and promotion, but is paying Mercury £1 for every album sold in return for using its distribution and marketing expertise. We gather every UK major and some large indies were prepared to sign up to this deal, with Mercury's aggression winning out in the end. Such activity isn't strictly linked to the labels. While the labels are certainly making moves to protect their futures, there are a raft of other companies committed to nurturing acts throughout their careers and taking a more left field approach to making cash. Online firms such as Artists First, Digital Stores and The Official Community Company are three great examples whereby they start by making tickets available first to hardcore fans via the artist's site. They then build a network, engender loyalty, and quickly get to the point where established artists can - if they wish- sell everything directly to their fans via their website without needing a record label or, potentially, even a promoter.

In the States, it was Wal-Mart who released the latest Eagles album, while UK act Jacob Golden, who is signed to Chrysalis, will be sold exclusively in the US through a tie-up with Barnes and Noble. And, we already know about the moves made by Paul McCartney, Joni Mitchell and now also lower-profile artists who have opted to put their releases through Starbucks Hear Music.

New details are also emerging of a new company set up by various ex-Warner International execs and a major media company The company will, RotD understands, approach established artists who are coming to the end of their contracts with majors. It will "represent" them for an approximate 18 month period and will then pair them with a brand for that duration. The brand will pay a substantial fee for this relationship and will have total access to the artist and their masters for that time, but won't get any cut of income or ownership of copyrights - which remains with the act. More details on that soon.

The end of the traditional record deal is nigh, and not before time - it's an outdated model that doesn't fit the modern market. However, clearly the music industry is gearing up with new, flexible models to suit what could be a very bright future indeed.

Nicola Slade