|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:
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….
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.
A band that I represent was the #1 downloaded band on several major Internet “download” websites for more than 2 weeks in a row. I received a call from a “major” label representative who told me that their staff monitors these sites and they “noticed” the band’s position (“We’re #1!”), and they were now very, very interested in the band. We’re still talking….
What’s the point? The point is that these labels called me – not the other way around. They called me because my clients were able to get their attention by creating real sales – both “brick-and-mortar” units that were recorded by SoundScan (because my clients got a UPC barcode) as well as through digital downloads recorded on major “download” websites - that were monitored by their “in-house” staff. They called me because today the labels are looking more and more to the “outside” for “test market” results (unlike the “old days” when the labels “test marketed” their own products through lots of small deals as described above). And when my clients demonstrate real results – real money generated - the labels call me, and then I’m much more able to parlay the situation into a more favorable result for my clients.
How did my clients generate their sales? Well, unfortunately, it’s not just about whether you have a good band. As I said before, there are a lot of good bands out there and not a whole lot of deals. A lot of it is about marketing and promotion which doesn’t necessarily have to cost a lot of money. But you have to expect to spend some money on promotion and marketing if you want to successfully compete – particularly with all the unsigned bands and “indie” labels who are out there spending money actively promoting themselves. On one extreme, a press agent colleague told me that any time any of my clients wants a 2 page article in a magazine like “People”, together with a nice color photo and any story angle you want, he’ll do it for a fee of about $35,000 and you’re in. Do you really think it’s a coincidence that Joe Blow & the Schmoes is on the cover of The Rolling Stone this week, on Howard Stern this morning, Jay Leno tonight, “Good Morning America” tomorrow morning, Letterman tomorrow night, etc. plugging their movie/record/book which will be released the day after tomorrow? Of course not… it’s the result of another mega-corporate advertising campaign to grab buyers’ attention and their cashish.
Can you compete with that kind of advertising? Probably not unless you’re independently wealthy. But scale it down a bit. After all, one of the great contributions of America to Western Civilization is: “Advertising Works!" The idea that you can simply start a band, write and record some good tunes, put up a website, submit a demo and then get signed - the modern equivalent of an old Mickey Rooney/Judy Garland teenage fantasy showbiz movie (“Gee, We’re All So Talented So Let’s put on a Play in the Barn and Get Discovered and Live Happily Ever After, Etc….”) - sorry if I’m dating myself – anyway, it’s exceedingly naïve – particularly in these uncertain times. But bands are still getting signed. And I’m seeing somewhat of a resurrection of “development” situations (read: “small”, “look/see” and - what-do-you-know - “singles” deals - once again illustrating the clichés “the more things change….”, and “what goes around….”). But, seriously folks, I’ve seen the best results – e.g, read: bigger deals - when a good band independently generates sales through not necessarily expensive – but almost always very, very inventive - marketing as illustrated by the final lesson for today - a true story from the very annals of rock ’n roll history:
The manager of the classic rock band “Kansas” got them signed to a “major” label by going around a college campus where the band was going to be playing and advertising “Free Beer” at the gig. Well, several thousand students showed up (most of whom had probably never even heard of “Kansas” before but who definitely heard about the free beer). Several hours into the gig, the manager brought an A&R guy from the record company into the club who witnessed a kick-ass performance by the band in front of thousands of screaming “fans”. “Kansas” got signed shortly thereafter. Now, I’m not advocating giving away alcohol to underage college kids - after all, I’m an “officer of the Court” in three states - well, the main point about that “free beer” is: it wasn’t “free” and it didn’t materialize out of nowhere. Somebody thought it up and, yes, somebody paid for it. Did it have to cost a zillion dollars? No. Did it cost something? Yes.
So the moral of the story is that you have to be more than “good” - you also have to be creative and willing to spend at least some bucks if you want to generate sales. And most important, those sales that you work so hard to generate need to be able to be monitored by the labels. So investigate getting a UPC barcode for your CD (yes, it costs some money, but not a lot…) and also investigate selling your CD through channels that are hooked up to SoundScan as well as via the “download” websites. Maybe instead of selling your album length CDs at your gig, you give away a promo CD single together with a coupon for $1 off your album if they go to “Mom & Pops’ Record Store” which is hooked into SoundScan and where you’ve got your product for sale at a special “insider” price. Or something like that….Then maybe you’ll get that call that could make your dreams come true. And maybe if they offer you a $200G advance and you’ve already sold 35,000 units at $7 or $8 wholesale a unit and you do the multiplication and then divide by the number of your new potential “partners”, you might find yourself “re-thinking” the whole affair anyway.
Please visit my website www.paulbungar.com for more information on my Entertainment Law Practice.
© 2004 Paul B. Ungar, Esq.
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