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As one of my esteemed colleagues remarked recently, "There's only about three deals out there and two of 'em are going to the winners of 'American F%#@-ing Idol'!"
Well, it's not quite that
bad, but the "traditional" music business is changing very quickly in a number of significant ways that directly affect an unsigned artist's ability to obtain a "traditional" record deal via
"traditional" means (e.g., "demo shopping" and "showcasing", etc.).
The fact is that despite the number of really talented artists out there, there are fewer and fewer
"major" and "major indie" record labels and further, the remaining labels are only signing a small number of "major" deals with new artists. This is due in substantial part to the tremendous costs
incurred by the big companies in "breaking" new acts - one of my major label clients spends an average of between US $1.5 and $2 Million on each of its new bands (most of which the bands don't see except as a
"red" balance on their royalty statements!) including production, manufacturing and - most importantly - on promotion and marketing costs.
A big reason for these high costs is that today music is marketed not only through the "traditional" channels (e.g., radio and "live" appearances), but also through television (e.g., MTV, BET, VH1, etc.) as well as through major mass media corporate marketing campaigns. All of that adds up to a lot of money invested but despite the increased amount spent by the labels, most of them nevertheless continue with their historic (and not-so-great) ratio of only a very few successful bands out of the total number of bands signed.
Compare that to 20 some-odd years ago when I first started practicing entertainment law when the labels literally signed hundreds of artists each year to small "singles" deals - if you had 1 decent R&B
tune, for instance, you could get signed to a big label like Atlantic Records for about $5,000 and then they'd release your record in 1 or 2 regional markets and spend about $20Gs on radio promo, etc. The theory was that out of
all of those artists, something would "stick to the wall" -e.g., one of them would turn out to be Aretha Franklin - the labels could afford to do it that way and that model worked pretty well for them.
But
nowadays, given the millions required to be invested in promotion and marketing, even the biggest companies don't have enough money to sign 500 bands a year at those levels of spending. Couple this with the current general
malaise and confusion throughout the industry - losses in sales which are resulting in corporate shrinkage and implosions - mergers, downsizing, mass firings of staff, pairing down of artist rosters, etc. plus, add in on top
all of that the still unresolved problems surrounding digital downloading, piracy, etc., etc. - many execs that I know have that stunned "deer-in-the-headlights" look, not exactly sure where the whole shebang is
going and most of them don't seem to be much in the mood these days to risk their ever more increasingly tenuous job situations on signing lots of unproven acts.
In any case, one big result of all this is that the
labels are very, very selective - to put it mildly - about signing new artists. For example, one of my major label clients only signed 1 - that's right - one - new band during all of 2003 (versus over the past four or
five years, they were signing about 2 new bands per calendar quarter or about 8 -10 new bands a year to fairly sizeable deals). And they have a big A&R staff who see a lot of pre-screened very good bands....Still, they only
signed
- I'll say it again - one - new band all of last year! (P.S. - Rather than signing bands, they spend most of their time, money and effort "maxing" out their proven multi-platinum successes every which way they can think of for as long as they can - licensing masters by their superstars into movies, TV shows, commercials, "tie-ins" and other product endorsements (my personal contractual favorite - personal hygiene products), karaoke, computer games, other "new media" exploitations, whatever, etc. - the risk/reward ratio with an established artist is way more favorable in their minds than investing a couple of million dollars in a brandy new act - particularly in these uncertain times.
So you're in a great band...what do you do to get signed, given the ever-shrinking number of deals and the tremendous competition out there? (Quick - how many good unsigned bands do you know in your area? Probably a
lot!). The sad truth is no matter how good you are, just based on the numbers alone - lots of bands, hardly any deals - the odds are against any one particular project. But here are a few "real life" stories
that not only should offer a lot of hope, but hopefully will get you thinking:
LESSON ONE:
A small label client of mine in the "dance" music field signed an act and released a CD single which had a UPC bar code.
The VP of the label was one of the biggest DJs at one of the biggest clubs in New Jersey and a well known radio personality. He also was well connected with other top "dance" DJs in Brooklyn, Manhattan, Queens, etc. and with the program director of the main "dance" radio station in the NYC Metro area. Using promotional resources in a cost effective way in one key regional market for this genre, my client mounted a relatively inexpensive but highly successful marketing campaign that resulted in sales of about 35,000 units of the CD in less than three weeks. Shortly after achieving such sales, I received a phone call from the president of a "dance" label affiliate of one of the big "majors" and the conversation went something like this:
"Hey there, Paul, we monitor SoundScan and this hit our radar screens bigtime and we want the act. So what do you want?" Since I'm not a mind reader (but I'm a real good and very seasoned negotiator...), I
replied in partial jest, "What do I want? I want a billion dollars and I want to be your boss. But seriously, since you're interested in my client's intellectual property and I'm sure you have some thoughts and
potential plans in mind, why don't you make me an offer?" "OK," he replied, "How about $150K for the first album?" Having discussed this very possibility in advance with my client, I said, "Nope,
not enough." Then he asked, "How about $250K?" Again, I replied "Nope". Finally, he said, "How about $350K?" Then I said, "I'll speak with my client and get back to
you...." Just like that, in about 10 seconds, he went from $150,000 to $350,000 for album #1. Just like that....
LESSON TWO:
One of my major label clients
got into a bidding war with another "major" label over a band whose self-released CD within one week had "SoundScanned" 5,000 units. They also had obtained a UPC barcode on their CD and further, they
hired a well-respected and well-connected professional publicist to place some reviews in some key "brick-and-mortar" "fanzines" as well as in a number of "hip" "on-line" publications and
otherwise to "create a buzz" on the band. That band got signed to a very nice deal. (next page)
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