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Originally Posted by Derwood
it all sounds great in theory, but i think the artists suffer in the end. Radiohead can afford to flip off the labels and invent a new business model because they're established. Madonna and NIN can follow suit because they also have enough money to experiment. "New Band X" can't afford those luxuries
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"New Band X" won't do well with the labels either. It surprises me how few people actually understand how the music industry in it's current form works.
Imagine that I have a band. And that, right now, my band catches the eye of some label suit (A&R man is the industry term) who decides that I ought to be signed. Standard procedure goes like this:
A&R man will wine and dine me. Image is everything for these guys and the competent ones practically
ooze success. The idea is to get me all hyped up and thinking that I have a shot at being the Next Big Thing. A&R man then waves a big fat cheque under my nose, typically around $1 million. And all I have to do, of course, is sign on the dotted line.
What most outsiders (and a shocking number of musicians, to their detriment) don't seem to grasp is the nature of that $1 million. It is not a signing bonus, nor a gift. It's an advance; in other words, it's essentially a loan. I as a musician must now use that money to buy new equipment (my old gear probably isn't up to the standards of the pros) and pay my bills out of that money. So we've got $1 million divided by the four (typical) members of my band = $250 000, - new equipment, recording costs, studio rental, production costs...
Wait, you didn't think the label paid for all that stuff, did you?
These are what are referred to as
recoupable costs. What that means is that the label will take a portion of the net profit from my album sales (packaging costs also get added to the advance) in order to pay off these debts, until the balance is back at zero. Given that the standard release schedule has gone from an album a year to one every two years or more and that the artist has to live during those intervening periods, the bulk of artists who sign to a label end up having to renegotiate their contract again and again in order to get more advances to live off of. Meanwhile, the label continues to pocket all the profits from the album and the artist, due to increasing debt, continually loses leverage. Something like 80-90% of artists
never manage to pay off their advances. This results in a situation akin to indentured service, with the artist being in a position where they basically do exactly what the label tells them when it tells and how it tells them. If the artist is unco-operative, the label may delay the release of their next album, basically holding it hostage. That puts the artist in a bind, because any and all music produced under contract to the label constitutes what's known as a work for hire; copyright on works for hire goes to the hiring party, not the artist. Thus, the artist doesn't even hold the rights to their own music. This is, incidentally, where you end up with bands like the Presidents of the United States of America, who pissed off their label and are subsequently not allowed to distribute any of the music they wrote and recorded, or even use their own band name.
The music industry as it stands today is not kind to artists. That's why I, like so many musicians, am thrilled to see this new trend. Should I ever become ambitious enough to release my own music, I can't imagine doing it with one of the big four, because I know exactly where that road leads. It's great if you're Metallica, who is one of the 5% who actually see success. For everyone else? Not so much.
Radiohead isn't incurring expenses by flipping off the labels; on the contrary, they'll probably net more off this album than any they ever produced under EMI. By releasing the album online, they bypass the whole packaging phase and turn all the money made here into profit. Once they recoup production costs, they'll be back in the green and without EMI dipping into any of it. Barenaked Ladies, having formed their own label, will similarly see much more of the profit from their subsequent albums. Granted, this is only possible because they're able to bankroll the production costs themselves and therefore doesn't work for the little guy, but even so it's certainly a wise move on their part.
The reality is that the old way of doing things is no longer valid. The internet and digital recording technology have made it possible for nearly anyone to record a professional quality album and release it to a worldwide audience, which makes the big record labels superfluous. I don't pretend to know what comes next, but I'm positive that it's going to be better for artists and fans both.