WE NOW HAVE A NEW SITE AND LIVE PODCAST DEDICATED TO FEATURING DOPE ARTISTS.
CATCH UP WITH US @ WWW.BLACKMARKERBANDIT.COM

  • Home
  • About
  • Articles
  • Commentaries
  • Media
  • Resources
  • Contact
Sponsor Advertisement

The Music Biz

The Music Biz

Tuesday, February 8, 2011 • BSR Admin

One of the interesting unintended consequences of the trend away from albums and back towards singles is that there is now less mechanical income being generated for writers.

Originally posted at: TuneCore | Written by: George Howard
 
One of the interesting unintended consequences of the trend away from albums and back towards singles is that there is now less mechanical income being generated for writers. Remember, a label must pay the copyright holder of the song (i.e. the writer and/or publisher) for the right to "mechanically" reproduce the writer's song on the label's release (be it on CD, vinyl, download, etc.).
 
The current rate, as set by statute, is nine point one cents ($.091) for songs under five minutes in length. Labels often insert a clause into recording contracts that reduces this amount when the artist signed to the label is also the writer; this so-called controlled composition clause reduces the mechanical royalty that is paid by the label to the artist by as much as 25%.
 
Whether the writer receives the full-rate or a reduced rate, this mechanical income is very material. Typically, mechanical payments must be paid to the artist from the label from this first record sold, and these payments should not be cross-collateralized against the artist royalty. What this means is that, as is the case for many artists signed to labels, even if an artist's account is un-recouped (meaning they have not made back in sales what the label has paid to sign, record, and (often) promote their record), the label still must pay the writer of the song(s) a mechanical royalty. This mechanical payment is thus often the only money a writer sees from the label.
 
During the album era, if you wrote all of the songs that were released on the album - and for easy math assume the typical album had ten songs on it, and that you were getting a reduced mechanical payment of seven point five cents per song - this meant that for every record sold, you, the songwriter, were owed seventy-five cents (the reduced mechanical of $.075 for each song multiplied by the ten songs on the album). If you were to sell a hundred thousand records, you were owed $75,000. This is not chump change, and there is a compelling argument to be made that the true benefit to signing with a label was that they were the promotional engine that drove mechanical royalties.
 
The advantage of this for the songwriter during the album era was, of course, that there may have only been one or two songs that captured the public's imagination - the hits on radio, for example - but the writer still got paid for all of the songs on the album that she wrote, even if the majority of people bought the album just for those one or two songs.
 
Even during the 7"-single era (i.e. small vinyl), savvy artists and managers would make sure to put a song they had written on the b-side so that when the record was purchased because of the a-side, they made some (or double) the mechanical income. This strategy of putting an original on the b-side of a single with the a-side as a cover is in some respects the reason why The Rolling Stones, for example, began writing their own compositions.
 
Today, we've largely left behind not only the full-length album, but also the 7"-inch single. Customers download specific individual tracks. In so doing, this results in non-single tracks on the album not being downloaded, and thus not generating any mechanical royalties for the writer.
 
Certainly, there are artists who still sell "albums"; i.e. their customers either still buy the full-length CD (or vinyl) and/or download an entire album, but clearly the trend is towards à la carte downloads (or streams) of singles.
 
This impacts, of course, not only those performers who are signed to the label, and also write their own material, but also writers whose work is covered by a performer. Unless this writer's song that is covered is the single, the chances of generating the type of mechanical income that was derived from sales during the album era is pretty much nil.
 
It will be interesting to see how this economic reality impacts the creative output of artists. If there is less economic incentive to write material that is unlikely to be a "single," will artists write less or write differently? It's frightening to think that in today's single driven market (one without even b-sides) that the Stones might have contented themselves with being a cover band - never writing - and releasing records only so they could tour.
 
What are your thoughts? Does the "album" concept still matter, given the lack of economic incentives? Leave your thoughts in the comments.
 
George Howard is the former president of Rykodisc. He currently advises numerous entertainment and non-entertainment firms and individuals. Additionally, he is the Executive Editor of Artists House Music and is a Professor and Executive in Residence in the college of Business Administration at Loyola, New Orleans. He is most easily found on Twitter at: twitter.com/gah650
 
Tuesday, February 8, 2011 • BSR Admin

Before the record label consolidation, an artist would get signed, an album would get recorded, the release would get set up and distributed. The artist would tour as the label promoted the artist/album building up the fan base and credibility.

 
Sometime in the 90's, "artist development" for rock and alternative bands, got turned on its head. Gone were the days of a major label aspiring to propel an artist over many years to "rock legend" with multiple releases, tour dates, interviews and in-store appearances (Led Zep, Rolling Stones, Springsteen, The Byrds etc). Instead, new artists were given six weeks from the street date of their debut album to have a radio/MTV hit. If the first single from the album failed, the artist would typically get dropped; their career effectively over before it even began.
 
This change occurred with the consolidation of the music industry under multi-national billion dollar companies (many publicly traded). Gone were the days of patience for a "return on investment". Instead, the world boiled down to revenues earned over the last 90 days. Shareholders demanded quick growth, the value of a company lived and died by what was reported and booked every quarter of the year. If the company invested $1 million dollars into a band in January, it cared only about how quickly it could see its money back and how much profit would be made.
 
This get rich quick strategy helped destroy the value of labels and the careers (and potential careers) of thousands of artists.
 
Before the record label consolidation, an artist would get signed, an album would get recorded, the release would get set up and distributed. The artist would tour as the label promoted the artist/album building up the fan base and credibility. The band would gain experience playing live, learn things in the studio and grow as musicians. About a year later, the next album would be released, this time to some anticipation by the existing fans, and the same cycle as with the first album would repeat - building, playing, learning, touring, gaining new fans - until the next album came out. It was the artist's later album, built on years of learning and credibility, that would go multi-platinum providing the final piece of the puzzle in defining them as a "legend". Once at that status, an abundance of opportunities and wealth would arrive for many years to come via gigs, merchandise sales, advances and band and publishing royalties. The label would experience a huge spike in back catalog sales from new fans discovering and buying old albums selling as many copies of a catalog album in a single week as they did over the previous year. There were no label marketing costs directly tied to these catalog sales thereby generating huge amounts of high margin money for their bottom line.
 
Or said another way, the value of a major label like EMI (or make that Citigroup due to its recent acquisition) is not from one new Beatles' album, it's from the entire Beatles' catalog. These older albums sell and sell and sell yielding huge financial returns that dwarf income made off of just one hit album.
 
In the old music industry, the true monetary value for the record label and artist was in the catalog of created and released works - each song, album, EP selling a little (or a lot) each day, week and year creating a large and steady recurring and predictable stream of income ("recurring and predictable income" is the holy grail for financial institutions). The shift to a new strategy of just six weeks to "have a hit or you're dead" flew not only in the face of artist development but also in the face of long term financial gain while radically changing the way the game was played.
 
A quick financial return strategy in the music industry could only be accomplished in one way, a mass-consumable commercial radio/video hit single. Bands began to be signed not for their current and future value, but for just the one hit they may have written. All label bets were placed on the one single as it was sent to radio and MTV with hopes of airplay, reaction and consumer sales. Radio and MTV gained massive power being the only outlets to allow this quick explosive growth, and the labels were willing to pay them whatever it took to gain the media exposure.
 
The music world went topsy turvy - debut albums became an artist's best selling album with subsequent releases selling far less (Spin Doctors, BloodHound Gang, Alanis Morissette, Hootie & The Blowfish, Third Eye Blind, Better Than Ezra, Marcy Playground etc etc etc). Gone were the days of development, catalog and box sets; in their place came the world of "one hit wonders" whose value dissipated as quickly as it arrived.
 
This is not to suggest that these bands or songs were good or bad, nor is this to suggest that the phenomenon of "one hit wonders" was not happening through the entire history of the music industry. What was different was the lack of bands being nurtured, supported and given time to grow and develop at the world's largest labels. Lawyers, calculators and quarterly profit and loss statements replaced the ears and creative passion of music executives like Seymour Stein, Ahmet Ertegun, Lenny Waronker and Mo Ostin.
 
Bloated artist contracts were an additional side effect of this new get rich quick strategy - understandably, artists, lawyers and managers were demanding larger and larger advances on future albums as a major label would only exercise the option due to the previous album being a financial hit. Percentages of these large advances went into the pockets of the managers and, in some cases, the lawyer's, incentivizing them to take the money and run. Marketing spends went through the roof as the labels tried to hit grand slam home runs. Albums selling a few hundred thousand copies that were previously seen as a success were now redefined as failures.
 
As more than 98% of the bands signed were not hits, the labels could not justify nor afford the huge advances previously negotiated and the bands were dropped, their careers stunted and ended before they even really began.
 
As this new shortsighted strategy progressed for over a decade, the labels woke one day and realized what they had done - for the past fifteen years they neglected to build up a valuable catalog of work that people would continue to buy over a long period of time. The older "legacy" catalog of Pink Floyd still sold, but there was nothing taking its place, nothing being incrementally added - even rock legends die, taking their chest of musical riches with them to grave. This left only one option, buy even more into the new vicious cycle, do even less artist development, spend more money on marketing, invest more in videos, up advances, swing like mighty Casey at bat for that elusive home run and hope to god something hit.
 
Had there been more patience, less greed, less focus on next month's bottom line the magnificence of the industry could have been perpetuated through its creativity. Not only would these media companies have been reaping far greater financial rewards, but the artists and the music fans most likely would have had a different view of the entire industry.
 
The good news is the cycle has been broken, artists no longer singularly need a label to have a career; there is now a choice. The lessons of the past combined with the technology and opportunity of today can quite possibly create a return to the true cultural and long-term financial value of music. Through new media outlets and social networking, bands and fans can connect in more personal and meaningful ways. Fans are now able to more directly and meaningfully support their favorite musicians over the long term enabling the artist to create a significant body of work through their lifetime. The control of a band's career has shifted from the label to the artist - be it the path of Vanilla Ice or Radiohead, the choice, success (or failure) is the artists to make.
 

Sponsor Advertisment

Sign Up Today For Updates!

Sponsor Advertisement
© 2013 - 2024 BootSlap - All Rights Reserved.