Wanna know why mega-budget music sucks? - Page 2

Jeff, I'm not saying stop all advances altogether, but do something small like pay the band a salary or consulting fee for their work just like the VCs do. In fact I am advocating a venture capital-based approach. I just see this works very well in my business of software. The problem here is that the advances can be huge with too much of a bet on the future outcome. The other problem is that the artist receives little control or profit sharing in a typical record deal.



It's completely different because the artist does not own equity in the record profits like a software entrepreneur would. Again, pay them less upfront (but they can be comfortable) and let them benefit from their own sales. They keep tied into the music in terms of work ethic and productivity and artistic expression as well.



I wish I could agree but having produced around 12 albums I have seen up close "nefarious" plotting by labels. And I have seen friends get torn down by shyster accounting practices. In fact, this nonsense also partly led David Chesky to leave Columbia and start his own label.



Well, okay that's a good counterexample, but there have been fewer documented abuses than the egregious examples of the music world.



But this is not a good example. Only the top 5 or 6 stars get points (or really equity) in the box office receipts.



See above discussion. You also get equity.

Anyone familiar with the byzantine world of record deals knows the myriad ways the label has to not pay an artists and also not cede creative control.

I am suggesting that many artists would give up advance money (as long is there is some to subside on during the time leading to first sales and payback) to gain equity in future sales related to his catalog and have more creative control.

This all goes hand in hand with a few labels (five) really controlling 90+ percent of the market. The VC model works because local people can be better judges of talent and have lower overhead than a few big banks...

I guess my point is really that VCs and other industries take risks based on some reasonable expectation of cash flow and exit event. I am a capital markets business strategy kind of guy so I view music advances of what Vince perfectly (!) describes as an MTV Cribs mentality.

A book I have says that "hasty speculation brings pverty, but steady plodding brings prosperity". I am suggesting that it is all peoples interest to create long-term sustainable businesses, as opposed to short-lived mega riches where "every generation throws a star up the pop charts...". The musician can have a better future, the label has more steady annuity income, and the consumer had more dedicated and talented artists.

Really it is more about paying people for performance...

I agree, but there may be one more possibility. There could be so much pain that one label decides to buck its recent history and start working on a more local scale with smaller producers and lower costs and then make up for any perceived shortfall by creating a simpler, equity driven recording contract. Warner's music division is in so much pain, one wonders if they might consider it...

The recording costs have to be in there as well. From a realistic viewpoint, the huge advance is a blessing for most artists, since at least they can see the money. Having waded through the numbers on dozens of deals, trying to determine the actual net is a daunting task at best. Add to that the very creative accounting within the industry, and it gets near impossible to figure out what your equity position really is. 12% of 20% less returns and packaging allowance, less 50% for foreign rights, plus a holdback against breakage... just give me a half mil up front and fagetaboutit!

Back in the mid eighties when I was negotiating with one the majors, I had an interesting conversation with one of the 1970s biggest bands, who were in litigation 15 years after the relase of their record for royalties on sales that were being held back - to the tune of $30 million. There's your equity, in the record company bank, and you, the broke artist, have to come up with the money to plead your case in front of a judge.

With technology as it is, there is no reason why distribution couldn't get back to the source. The artist makes a product (self financed, a big problem for most), then sells direct to the audience. The sales numbers do not need to be in the hundreds of thousands to create a reasonable income, since the net profit from sales will be in the order of ten times what they'd get through a label. The big issue is exposure, and whether word of mouth alone can generate enough sales to keep the project viable. Getting column space in the mags may be a challenge, unless there is budgeting for ad space. Then there is video and tour financing, which again can be a pretty hefty proposition from a financial standpoint. While not impossible to do, it does require a great deal of work and a lot of reinventing the wheel, when you consider the labels already have these services in place. However, it is an experiment worth pursuing, since it should allow the artist to maintain complete creative control, assuming they can find an audience willing to support their efforts, and not one that just freely downloads their work for nothing.

This will probably only become a viable alternative if several fairly big acts decide to take a chance on it, and actually generate enough media and public attention that artist-controlled distribution becomes popular and profitable.

It will be great if it does come to pass, but it's likely years away.

That is what I touched on before - the accounting is needlessly complex. If an artist's output is treated like a company where the artist has equity and there is independent oversight, then progress is evident. You don't need much money for recording costs on an initial album. We did great work at Chesky for far less than six figures.

Would it not be better to let the artist and their accountant see how the money is being spent? Yes! Let's add transparency to process to do the following:

1. Eliminate waste at the majors.
2. Eliminate fraud at the majors.
3. Show artist what his works are producing for the label in terms of cash flow.
4. Provide additional work incentives for the artist. Anyone who has produced a record before knows how important this can be-many coast after their first success and the labels don't recoup the advance within an reasonable timeframe.
5. Artist has data to benchmark the economic efficiency of the record label.

Reducing the advance also takes guess work out of the music labels which reduces earnings volatility which benefits the label's shareholders - the prime goal.



This is what Buffett's label and others are starting to do. My twist in business strategy on this is that the majors have "music VCs" that seek out the talent and help guide their career and artistic development for a slice of the equity. The VCs remain a separate entity that packages the artist. They arrange/provide for recording expenses and salary and when enough sales are in the place (perhaps by direct distribution as you suggest), then the majors come in. That eliminates A&R expense from the majors, makes them more competitive, and returns a lot of feedback down to the consumer and local market music fan.

I see all sorts of benefits....think about the raping that occurs with Ticketmaster...would the artist allow such high fees if he knew more precisely what the total take of TicketMaster was? (a few already balk).

The contrast is that right now, the artist has complex record deals, has no clear path from huge upfront advance to unit sales, and has no way to track the value added from the label.

Finished reading the series as well... I dont know what Im gonna do now

Very entertaining read, who knows what is true and what isnt.

On another note cavein.net has to be one of the most annoying websites I have ever visited.

there was a post there by mixerman that said that they were down, but should be back up in a few days. however, that post had an original date of nov. 2002 on it, although it did say it had been edited on march 31, 2004. then again, every post in that particular thread said it had been edited on that date, so i'm not sure what's going on.

i do know that if that does get put back up, i'm saving that one to my hard drive.

I had read from another forum that the Mixerman account was pretty much a bunch of stories from different bands that he put together into one. I don't know how reliable it is.

I also read once on the forum that hosted the diaries that Mixerman's decription of the drummer was identical to one he had used to describe another a year before this took place.

The diaries did conveniently end when Mixerman was challeneged on the board when somebody claimed the could ruin his career for exposing what went on. It was a guy who said his dad was an industry big wig or something to that affect.

Matt

After years, the diaries have resumed. Enjoy.

Sweet! I was just wondering how this ended just the other day.

Day 6 has been posted.