Record Labels

“The record company’s going to make me lots of money and everything’s gonna be alright.”

For everyone who ever dreamed of becoming a rock star there has been one thing that would prove to the world that they were going to make it. It’s the goal of every band that dreamt that they would leave their basement or garage and venture into the heartless world of the entertainment industry. The record contract is the pass that supposedly grants you a license to succeed. There are record companies out there that are granting wishes and making stars.

Now, back to reality. There are tens of thousands of records released every year on hundreds of record labels large and small. Only a tiny percentage of those records are ever widely distributed, and the dreams of the record industry are bestowed on but a few.

The record contract is just a piece of paper that defines a partnership between a band and a company. The document outlines and defines the act of creating and distributing recorded music. The record company tries to make a profit by selling as many units of recorded music as they can in an efficient manner. The band is trying to get their music out to a buying audience. Together they form a partnership.

This is an incredibly complicated process, and it takes an army of lawyers just to interpret how these deals are constructed In order to gain some understanding of this, I talked to Garret Vandermolen, who is the founder of Spinning Records, VP of the Fort Point Entertainment Group and Director of Label Operations for Catapult Records. He used to be Label Manager and Marketing Director for Heartbeat Records where he worked with Burning Spear and Sister Carol.

JBS: What is the exact role of the record label? What does the label do for a band?

GV: At the most basic level, the record label puts the record out..They act as the vehicle to manufacture and market the music of an artist. This can include manufacturing the album and plugging it into marketing and distribution channels to help get the record to the buying public. Each record deal is different, and what goes into the development and marketing of each record is defined in the record contract.

JBS: Let's talk about marketing and distribution channels- what exactly does that mean?

GV: Marketing Channels are the places that you present the album to the general public to raise awareness of the release. These channels can include fanzines, reviews, industry articles, radio, television, appearances, anything that you can do to exploit the opportunities available to the artist for this release.

GV: Distribution channels are specifically the agents used to sell the record to the public- whether it be a relationship with retail outlets, internet, a one-stop (a distribution center or sub-distributor, that caters to smaller market record stores, not chains- the mom and pop's) or an actual larger national distributor. Distributors are organizations that are the vehicles that deliver the physical products to sell to the locations that sell them. Some major distributors include Nail, DNA, BMG, V2, WEA (Warner Elektra Atlanta,) ADA (Alternative Distribution Alliance,) etc... They deliver product to the stores.

JBS: So the record label is responsible for the forging and maintenance of these relations?

GV: Yes

JBS: What are some of the little things outside of these general guidelines that record labels may be doing for their acts?

GV: In certain cases, record labels may provide promotional assistance that can include everything from radio promotion services, press campaigns and forging relationships with publicists for the artists, touring support, and occasional opportunity building in terms of booking or appearances. A record label may help to attract producers or guest musicians, or help to gain placement in film or on tv, or get a band on a national tour with another act on the label.

JBS: Tour support. That seems to be the thing that all developing bands are looking for. Can you elaborate on what that means to the labels and to the bands?

GV: Tour support is a partnership in which the label provides either cash or resources for bands while they are out on the road. Possible tour support could include hotel rooms, advance money, advertising co-ops, and the collection of supportive connections in markets foreign to the band. A record label may attempt to get sponsorships, or arrange for services for a band on the road.

JBS: With the provision of these resources and cash, what does the label expect in return?

GV: Labels expect bands to work hard, be out on the road playing, and for artists to embrace the opportunities as hard as the label does.

JBS: Does tour support money come back out of the album sales?

GV: Yes, bands repay the labels for the assistance that they provide. The label is to be the helping hand that gets them to the next gig and to the next place in terms of development. The label is aiding and abetting the artist in the pursuit of their success. The money is returned because cash is generated via record sales in new markets that are opened specifically because of touring. Touring creates opportunities.

Radio and print media are more apt to provide coverage for a band that is visiting their area. Therefore, as acts go on the road to support records, they are garnering articles and reviews and radio play in response to the record. All of these things help to promote sales, in addition to the fact that many new people will be exposed to the band. Relationships with radio stations can be encouraged through appearances and ticket and album giveaways, which spurs radio play for the band and record sales.

JBS: So when a band is settling up with the record label after selling albums, bands generally get a percentage of the after costs of the production and distribution of the record?

GV: Expenses generated during the promotion of the album and the support of the tour will be reduced from the total revenues generated to determine what bands get paid for their recordings

JBS: What are some of the things that you look for in new talent in order to decide which records to put out to the public?

GV: That is a really hard question to answer. It is very different with each band. You have to look at all possible revenue streams that are available for each artist. There are some artists that may not have huge record sales, but the label has the ability to license the music to movies and television, thereby increasing the revenue capabilities of the band without record sales.

In that case a record company may be willing to release a recording knowing that it won’t create a radio hit. Their motivations may be to generate revenue through the music’s usage in other forms of media, profit through licensing. GV: In some cases art circumvents the economics of record sales simply by virtue of its superior artistic merit, despite the fact that it may be extremely challenged in terms of record sale generation. This is where art and commerce collide, enabling the label to distribute music that needs to be heard. Unfortunately, those records are less plentiful, because everyone must stay in business.

JBS: Most of the people reading this article will be artists and fans, rather than record label people. What do artists need to do to insure that they are getting the best deal available to them from a record label?

GV: They have to have a reasonable set of expectations. What do they want out of the deal? How much service does the artist want? If you are looking for high royalty returns or commercial success, artists must be able to deliver the goods in terms of being marketable (sculpting their image and music to maximize record sales.) An artist must know what they want as an artist and be willing to seek out the relations of people that can provide those things.

JBS: Young bands are seeking the Cinderella story, a record label to deliver them from an unknown status to millions in record sales. How completely unrealistic is that, and how does that feed into a system in which stars are created but eventually screwed out of royalties? Are they really being screwed, or is the record label just collecting on services that were provided?

GV: Ultimately, it takes a team to make a success story. The record label is but one part of that team. The other parts of the team could include the band's management, publicist, booking agent, crew. There are a lot of elements that create stardom that all have to come together in order for success to be created.

JBS: In the case of a group like TLC, who sold 10 million records but didn't seem to profit personally, what went wrong?

GV: You have to look at what went into selling 10 million records. If people are going to put money down to create success, they are going to expect a return on that investment. If the major label involved laid out $25 million to promote that record, and the remaining royalties were divided between agents, lawyers, managers, etc, it could have created a situation in which even 10 million sold was not enough. (TLC’s video for the single from that album was rumored to cost $1 million by itself.) As an artist you have to carefully pay attention to what you are getting into with a record label.

GV: Every record label deal is structured differently. All of this goes back to the expectations of the artist.

JBS: So, in other words, if artists expect fame and fortune, they may have to trade the future of their record sales if it takes a herculean effort to achieve that?

GV: It depends on what its going to take. What are you going to be spending the money on? It also depends on the history and momentum that the band has prior to the record deal. What type of name recognition and record sales history does the band have prior to this release?

JBS: A lot has been said about bands having legal advise in dealing with record label negotiations. What advise do you have for young bands in this situation?

GV: If someone puts a contract in front of you and expects you to sign it, and you don't understand exactly what that contract says, you shouldn't sign it. In the long run, legal advice is cheaper than a bad record deal. It may not always be necessary, depending on the scope of the contract. There are plenty of deals that are being made with a handshake, but if you have defined stipulations in terms of the details of that agreement, its best to get someone to help you interpret the contract.

JBS: What do you see as the near future of the record industry in light of changing distribution channels like the Internet? How will the label's role change?

GV: I think that the label will still have the same role, but the way that they execute their functions will change. The traditional model of album/ record store/ radio may change to adjust to a new environment that includes song swapping, internet downloads and changing retail outlets. It's going to be freaky for awhile. Ultimately, it will all sort itself out.

JBS: Will the power fall back to the major players, and this jubilation that the independents are currently feeling subside?

GV: Perhaps it will return back to some of the major players, and some new major players will be developed. Traditionally in monopolistic situations, tiny spaces are created that open up opportunities for those artists who were previously neglected and enables growth. Perhaps the Internet right now is one of those spaces.

It was only a few decades ago that the only hope that a musician had was to convince a fat cat to take a chance on their music and launch their career. Artists depended on the record company to create the demand through promotion of the artist. More recently, bands are driving demand through grass roots movements like the Internet, and record companies want to see proven track records outlining product sales potential. But if you have significant demand already, what do you need a record company for?

Artists like the Grateful Dead changed the rules by defining their success with live concerts rather than record sales. Ani DeFranco changed the recording industry by abandoning the record company model and instead manufactures and distributes the products herself. The next generation of bands may skip the traditional route by directly communicating with fans and creating distribution channels through the Internet. There is no telling what the future holds in this rapidly changing environment.

We will return to this subject periodically, as recording contracts are a complicated subject, and the details change often. This article would not have been possible were it not for the contributions of Garret Vandermolen. Check out the record label websites at http://www.spinningrecords.com and http://www.catapultrecords.com.

Phil Simon is a booking agent at the Planetary Group, http://www.planetarygroup.com where he works with bands like ulu, Snake Oil Medicine Show, Jiggle, Uncle Sammy, and more. Email him at phil@planetarygroup.com