All about record companies in the new world

Record labels: Survival Of The Fittest
By Chris Standring

We all know that the record business is in major transition, has been for a few years now. Still, major labels and independent labels are trying to figure out what the new model is. But the real problem with most labels is that they still want to be in 'big business'. This is the first real issue labels have got to deal with. Because CD sales are on the downturn, record labels are cutting back on staff (hence the EMI shake up recently). But I have my own opinion about this. I firmly believe any existing record label that has an office staff on salary is now doomed to fail. And the old model where labels had one or two successful acts in order to 'fund' 80% of their other failed acts, absolutely needs to go. Any label existing today thinking that this is something that even has a chance of working has its days numbered.

I would go further; a record label these days can barely survive on the concept of a 'failed' record at all. Harsh news I hear you say, considering CD sales are so bad right now. But I don't think so. Actually I've never been more positive about the music business because I feel like I have finally got a grasp on how to make it work. Let's talk about that.

So the question you might be asking is "Can a record company survive at all right now?" I say yes absolutely, but it has to be approached very differently. First, the concept of salaried employees has got to go completely. I am watching friends who have record labels sink right now. They have investors funding six figure annual salaries. They are signing and advancing new artists and consequently having failed records. But what is a failed record? It's completely relative isn't it? If a major label invests a million dollars into a project and sells 100,000 units, that record has ostensibly failed. But if an independent label spends $50,000 on marketing and sells 30,000 units, they are making a huge profit!

So the answer? A record company, in my view should be a partnership of no more than 4 or 5 people, none of whom are on salary but work through profit share alone. If this is a label starting from scratch then growth has to be a step by step process. If it's an existing label, the operation needs to be reorganized right now. Each one of those partners should have a different area of expertise. For instance:

Partner a): The Record Producer
Presents finished masters to the label. Understands the needs of the market and delivers killer tracks.
Partner b): Head Of Business Affairs
Deals with contracts, licensing, and royalty payments.
Partner c): Head Of Marketing
Buys programs at retail and online, solicits situations and creates opportunities for each project.
Partner d): Head Of Radio Promotion
Works radio in house and talks to promoters and agents about situations for the artists on the label.

Get the idea? Each partner absolutely must have their own individual area of expertise. One of the reasons why the old model is not working is because staff on salary have absolutely no incentive to make a situation work, save perhaps the fear of getting fired. But a partnership situation is very different. The very lifeblood of the label is at stake so there is EVERY incentive to get each project 100% right.

Labels need to be smart about each artist they sign. From here on there is no signing quota to meet. Why? because a failed record means way too much now. Bidding wars? forget it! Labels need to stop being sheep. That whole thing about signing an artist just because everybody else is jumping in. Come on! I can't tell you how many crappy artists I have seen that created such a buzz, got their nutty advances and were never to be seen again. Why? because those labels bought into nonsense and paid the price. Now should be about developing an artist, just like the old days.

Perhaps I am being idealistic but I don't think so. I finally set up my own record label "Ultimate Vibe Recordings". As an artist, I just couldn't face the idea of signing another deal where I was at the mercy of another bunch of loonies who got it all wrong. And the interesting thing is that now I have to get it right because my dime is at stake!

Another alternative way to set up a new label is via 'pass through distribution', where you ostensibly do a joint venture with another label. I did this recently with a company I know very well. They take a small percentage, something worthwhile to me as I now have access to their distribution pipeline. So I now have great national distribution through Ryko who have a great reputation for paying on time. That is comforting. I have the benefit of their marketing expert who of course is teaching me all about retail programs and effective marketing online and off. I have outsourced radio promotion and I have two managers who help me keep the wheels spinning. Theoretically it is a great situation. Of course I am pretty hard on myself about what track I send to radio because once again, it is my dime. But so far my new single "Love & Paragraphs" is having a tremendous reaction, so I'm thinking I might have done things right, but time will tell whether I lose my shirt or not!

So with all said and done, how does all this affect you? Well first, I want to drive home the fact that signing a record deal is not all it was cracked up to be. Keep in mind that you need to ask yourself "Do I want to be signed to a label that may be out of business next year?"

My honest advice to the indie artist right now is to build those grass roots and create as much as you can to attract the people you need to be on board with, and be very selective about what kind of situation you get yourself into. I also think that all this indie music marketing that so many of us throw out at you can be horribly overwhelming. It is rare that the creative side of the brain is as switched on as the business side. We are generally not right brain-left brain people. Most are one or the other.

And with this in mind I suggest you find a business partner to start building your career with. Find a tenacious smart person, possibly a friend you already know, who is fascinated to learn and figure out the busines side, and how to make it all work. Somebody who is not going to quit on you in six months. Someone who believes in you. Attack it together. Set goals, however small, and build your career. These people are not easy to find but they are out there.

The music business is waiting for that new guy to come along to present the new business model. Where is today's Richard Branson? My advice is to take the bull by the horns and build your own empire, piece by piece. Maybe that future entrepreneur is you!