What They'll Never Tell You About the Music Business

by Peter M Thall

  Recording Costs

  What may seem to be incidental marketing costs can wreak havoc with both your marketing budget and your ever-growing royalty deficit. For example, is a radio edit a recording cost? If the royalty department codes a radio edit as a recording cost, the artist may have a surprise in store when the royalty statement arrives months later. Some singles have twelve different radio versions. At $5,000 per edit, that’s $60,000. At $0.80 per CD (see chapter 4, this page, for an analysis of the artist’s “rate”), an additional 75,000 albums have to be sold to pay for these costs. It will cost $10,000 or more to do an audit before the issue is even addressed and, perhaps (or perhaps not), resolved—usually through some compromise. And meanwhile, 75,000 albums that bear no royalty for you will have generated more than $525,000 in additional revenues for the record company, even as the artist’s royalty account remains in the red.

  Mutual Approval

  “Mutual” is an often-used contract word. Lawyers think they have attained something when an approval right (for example, tour support) is made “mutual” between the record company and the artist. In reality, even when a contract says that approval of certain matters shall be subject to mutual approval by the record company and the artist, the record company always has the last word. Further, many contracts provide that the artist shall not withhold approval “unreasonably,” whatever that means.

  Mixers

  Not the college kind. The studio kind. Often labels will force a mixer—or a producer—of their choice on an artist. The costs of hiring a fabulous mixer (and there are a few) for two weeks—which is what it might take to remix an already finished album—can equal the costs of hiring a producer for three months! And if you are an East Coast group and the mixer of the moment lives in Hawaii or Malibu, you have to add the cost of a trip to the other coast for the band (or two of its members) and perhaps the manager. Then there are the hotel rooms and per diems. And let us not forget that the mixer will only work in such and such a studio, which charges $1,800 a day for fifteen days. Total cost: $60,000? $70,000? $80,000? Why not? After all, it will help sell records to have Mr. X’s name on the back of the disc. Or will it? Some feel that Mr. X’s name will mean something only to Billboard addicts or other industry types. No doubt some fifteen- to eighteen-year-olds have heard of Mr. X—or can distinguish between X’s mix and others’ mixes—but most have not. Others will tell you that the mixer is the difference. The labels will call it marketing, but your royalty account will not reflect any difference between this and other recoupable recording costs.

  Maybe Mr. X is the only person in the world who can polish the record to the point at which it will be the hit it would otherwise never have been. I do not know whether this is usually, sometimes, or never the case. The artist and the artist’s manager usually go along with the decision largely because they, too, can’t be sure whether it will actually make the difference between a bubbling-under rating success and a major hit, and they themselves are susceptible to the “star” treatment. Who would not want Chris Lord-Alge or Mike Shipley to mix their record? But since so many factors enter into whether a record is a success, I am convinced that the added cost and time are of somewhat less value than the involved parties think they are. Whatever the reality, for the insecure artist and manager, not to mention the record company executives themselves—whose jobs are, in a way, on the line if the $500,000 or $1 million invested in our proverbial baby band is not earned back—what better way to cover oneself than to hire the supposedly tried…and true. After all, this cost, too, will ultimately be charged back to the artist.

  Videos

  Gotta have a video? Every band wants a video. Why? Is the money allocated to the band sufficient to produce the video and also do the other things that may be better ways to reach the artist’s goal—for example, to pay for two months on the road? Which is the more efficient way to spend the limited money? It used to be that the only issue was how to convince MTV or VH-1 to play the video. Nowadays a video can be distributed via innumerable means including, of course, YouTube. And a video can be produced inexpensively by someone with a Canon HD Mark II and some talent. Kiesza’s “Hideaway” was an inexpensive, one-take, video clip that went viral and helped to mount her career with an almost immediate #1 record in the United Kingdom. But the question remains whether one should be produced at more typical costs of from $50,000 to $100,000. The manager and record label of a client of mine insisted on producing such a video (although it cost $250,000), and it ended up being a really expensive home movie. Unfortunately, his royalties, such as they are, continue to be used to recoup these costs years later. Maybe the money could have been better spent? At the beginning of the 2000s, many record deals acquiesced in providing for a commitment of money to the promotion of the artist’s record that might or might not take the form of video expenditures. However, some of these deals provided that if a record company were to take the position that a video does not make sense in the context of the marketplace, it would be obliged to invest the same amount of money in other, mutually agreed-upon, promotions. Forcing a label to spend money on videos can be counterproductive.

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  When all of the money is spent (or misspent) and the record company and the artist have the tour they do not need, the mixer they do not need, and the video they cannot use, the band members may have to return to their day jobs to survive, thereby relinquishing their one golden opportunity to work the record that took two years to make and twenty years to prepare for. The manager, the business manager, and the lawyer will also be off doing other things, since they cannot survive forever on the fumes of hope. They have overhead to pay and families to support. Their commitments can be stretched only so thin. So the implications of marketing and promotion decisions are very far-reaching indeed. The stronger the artist and the artist’s representatives are, and the clearer they are as to the goals of the artist and how to reach those goals, the more likely it is they will be able to apply the artist’s values to the task at hand in an efficient manner and at the same time keep costs in line.

  DO RECORD COMPANIES KNOW WHAT THEY ARE DOING?

  With all due respect to music industry professionals, with the exception of some A&R executives, not many of them have a clue as to how the record business really works—that is, how to make a hit record or a hit artist. Young (and some old) business affairs executives whose job it is to arrange the relationships among all the constituents of the record label often do not understand one iota of how their business works, nor, as often as not, do the artist’s attorneys and managers. They have never made a record, delivered a record, experienced the recording of a record in a studio, or applied the principles in the contract to exploit the record. They do not understand whether a radio edit is a recording cost or a marketing expense.

  I am not singling out young business affairs executives for any reason except to point out that while those in this department can—most impressively—dictate a fifty-page contract off the tops of their heads, it is the rare document that serves to assist either the record company or the artist (and manager) in choosing among the tools traditionally sought to “break” the artist or the record once the record has been delivered.

  But there is an exception. Among the most important young record company executives is the A&R man or woman who championed the act in the first place and was instrumental in getting the artist signed. While the A&R person’s job is officially concluded when the act is signed and the record is completed, no one can prove more of an asset to the common goal of breaking the artist and the new record than this particular professional. The A&R person is the conductor of the orchestra. The A&R person has to spot signs of weakness; cajole departments to focus on the artist; siphon off money slated for a different line item or different record; lead the participants—including the manager, lawyer, and business manager—toward understanding the common goal; watch out for people and political situations at the record company that may get in the way
of reaching the common goal; and persuade the record company to believe in the band as much as the A&R person does. The A&R person coordinates the record company’s worldwide efforts to bring the record—and the artist—home successfully. Conversely, the absence of an effective A&R person can have a devastating effect. The artist’s representatives must be sensitive to the strengths and weaknesses of the A&R person and be ready to compensate for these weaknesses and to exploit these strengths. Failing that, the effort to make the artist and the artist’s record a high priority at the record company—always an uphill battle—will be nearly impossible.

  VICTIM OR VICTOR?

  Most artists get one chance to make it. The days of multiple opportunities to click with the public are over. The Billy Joels, Bruce Springsteens, and Garth Brookses might have made it anyway, given their enormous talents and energies, but the fact is that they were given several albums’ opportunity to reach their goals. The situation an artist does not want to be in is the one the overwhelming number get into, the one where they say, “Okay, we messed up. We made a lot of mistakes on that first album. Next time let’s make sure we don’t make the same mistakes.” They won’t likely get the chance. We have seen some of the mistakes. Here are a two more:

  If the artist and/or the artist’s team do not concur with the label’s marketing people, and can’t find a way to diplomatically redirect the label’s focus to what they believe is the correct direction, the artist can be (1) written off as difficult, (2) avoided like the plague when subsequent marketing opportunities arise or (3) called an ass (or worse). Rarely will the artist be listened to with respect in the future.

  Here is a possible scenario, one that will resonate with many artists and their managers. An artist (seeking to achieve a personal goal of reaching fans through live performing and building a fan base over however many months or years it might take) is needed by the record company in Seattle. The only problem is that the artist is in South Carolina ready to perform before his fiftieth club crowd of two hundred people. (That’s ten thousand potential record buyers.) So she cancels the gig, loses $2,000, and flies to Seattle to make an in-store appearance and to stop by a radio station that has never heard of her and is doing a favor to the record company promotion person. But there is no direct flight from South Carolina to Seattle, so she has to fly to Atlanta and then to Denver and then to San Francisco and only then to Seattle. She arrives at 3 a.m. because heightened security measures have delayed departures from San Francisco and the weather in Seattle is stacking up the planes that wish to land there. She misses the radio appearance, but that’s okay because the record company has another in-store scheduled for Portland, Oregon, at midnight the next night, tying in this artist’s record with the crowded release event of the latest DVD of a hugely successful motion picture, one that is sure to draw hundreds of people who will, as a sort of captive audience, learn about the artist for the first time (although they could care less).

  Do you see how an artist can become the victim of a goal-less label? Ironically, the record company itself is no less a victim of its own indiscriminate, injudicious application of the tools that are supposed to enhance an artist’s acceptability, not to destroy it.

  Sound exhausting? It is. Sleep deprivation is a leading cause of craziness among recording artists. They are forced into taking stimulants in unhealthy amounts—whether coffee, cigarettes, drugs, or all three. Welcome to the ozone that surrounds too many of our young artists. Before they know it, they’re on the proverbial merry-go-round on their way to rock-and-roll hell. Their inexperienced young managers, lawyers, and business managers often have no idea how to stop the spiral, and the rest is history.

  I am not suggesting that a misguided promotional trip to Seattle (or even a wisely chosen trip to Seattle) will send the artist into drug addiction. But the insanity that surrounds the period that record industry professionals call the “album cycle” is real and is fundamentally dangerous to careers and to lives. There is a saying in the record business that today’s buzz is tomorrow’s hangover. Nothing could be more true.

  TELEVISION CAMPAIGNS

  Mostly in Europe, but also in Japan and in other countries, record companies have discovered the value of television advertising for their products. Of course television advertising campaigns are very expensive, and record companies have decided that, rather than charge artists for all or a part of the cost of this form of promotion, they should reduce artists’ royalties to, say, 50% of the otherwise applicable royalty during the period in which the campaign is running, or for a period of months afterward. Now it is the artist who finds that this can be very expensive.

  Here are a few ways that artists can get some relief from this recent intrusion into the royalty calculation:

  • Limit the effect of the provision to “substantial” television campaigns.

  • Acquire the right to exercise veto rights over either the campaigns themselves or the extent and coverage of the campaigns.

  • Limit the application of this provision to the locations where television campaigns have proved to be effective.

  • Limit this provision so that it applies only to records sold in the specific territories reached by the television campaign and to no others.

  • Try to get some handle on the projected financial impact of the promotion. As your career expands from using bounce-back cards to having your records featured in television advertisements, your manager will have to accumulate knowledge pretty quickly about the efficacy of such campaigns. The information is available, but much of it is overseas. The telephones and email servers to foreign affiliates are all operative and should be used in order for your manager to make decisions on the basis of what, for example, television advertising has done for other artists, where, at what cost—even in what seasons.

  RADIO PROMOTION

  What good is a good record if no one ever hears it? These days, it is easy to produce a wonderful recording in the confines of one’s own home studio. But what to do once you have completed it? How do you get potential buyers to actually listen to it? The best way is for your record to be played on the radio. Really. I know, it sounds somewhat obvious on one level and ridiculous on another. But can you conceive of another means? Snipe (sticker) every city and small town and college in the world? Play every city and small town and college in the world? I don’t think so. Just as television was the catalyst behind the success of Andrea Bocelli, Josh Groban, and The Three Tenors (and even The Irish Tenors), so radio is the only catalyst we know behind the success of most recording artists. Sure, the Internet is beginning to have an impact and Ani DiFranco has figured out how to sell records out of the back of her van, but for most of us, the only way we will hear about a new act is through radio performance—and possibly summer festivals. Say what you will about the power of YouTube clips gone viral, that is a very low percentage way to hope to grab peoples’ attention to your record. It is in this atmosphere where the opportunities—and the headaches from radio promotion lie. Much of the remainder of this chapter is devoted to radio play and the means to obtain it. Before you read those portions, you will have to first come to terms with the fact that radio is not the be all and end all for an artist’s success as it used to be. The reason is that radio has become so genre specific and yet so diverse at the same time that effort made and money spent no longer have the same impact as in former years. Add to that the diminution of popularity of certain genres (for example, middle of theroad, top 40, and rock and roll in all of its manifestations) it is indisputable that radio promotion has diminished among the menu choices that an artist or record company can utilize. Even as top 40 radio changes its spots from a pop song aggregator to an urban and country source, even that genre, which has survived cultural and societal changes over the years, has itself changed its form. And top 40 radio will no doubt change again. Nationwide programming by Clear Channel and other station owners and, while welcome on some level, satellite radio genre-specific programming, ha
ve all contributed to the homogeneity of music today making it even more difficult for a unique artist to be heard via what remains the most effective marketing device known to the music business: radio airplay.

  With this in mind, I move on to discuss the often unsavory means by which airplay is achieved in the music business.