How is the increasing power of artists affecting the modern day record deal – and how will that dynamic shift in future?
Artist lawyer Paul Spraggon, co-founder of SSB with clients including Adele and The Prodigy, knows exactly how he’d like things to change.
“As a lawyer, the future of the record deal for us is transparency. There’s no transparency [today] in record companies; you haven’t got a clue what labels are doing with your money if you’re an artist.
“They don’t show you the figures, or what their deals are with Spotify. As an artist lawyer, you want to see it all – what are they hiding?”
Spraggon joined an array of leading music business executives on a panel in London earlier this month, presented by UK independent group Cooking Vinyl.
CV says that it prides itself on transparency – to the point of inviting artists who earn over a certain amount each year to audit its books.
But CEO Martin Goldschmidt doesn’t pretend he has all the answers to the kind of record deal that will answer the needs of both creators and his business in a few years’ time.
“Labels don’t show you figures, or what their deals are with spotify. As an artist lawyer, you want to see it all.”
Paul Spraggon, SSB
Others on the panel, hosted by MBW, included Mike Smith – President Of Music at Virgin EMI and an equalising ‘voice of the majors’ in the debate.
Smith has signed writers and artists during his label and publishing career including Blur, Supergrass, Arctic Monkeys, Mark Ronson, Calvin Harris, Kasabian and The Libertines.
He was joined by manager Phil Morais from Machine Management (Years & Years, Clean Bandit) and Billy Bragg – the articulate and persuasive singer/songwriter who has been signed to a ‘services’ deal with Cooking Vinyl for over 20 years.
Paul Spraggon’s second demand for future recording contracts summed up much of the debate.
“The other thing we want [in label deals] is 50% of everything [paid to the artist], not 15% or 8%; streaming income, all digital income should be split,” he said – zoning in on one often-mooted reason why some artists are unhappy with their current streaming royalties.
“If you’re Dire Straits, who don’t make records anymore, their back catalogue’s on a 50/50 with Universal – net profit. After 175m album sales, they’ve earned the right to that.”
He added: “A lot of artists ‘fail’. But for them, their record – their one or two albums with a major – is the most important asset they’ll ever create. That gets buried by the record company.
“So when something ‘fails’, I’d like labels not hold on to stuff. Not: ‘We put it out mate. It sold five copies but you can’t have it back.’
“Record deals should factor in failure and success.”
The idea of record companies handing back copyrights to artists after a set period, rather than the traditional setup of ownership in perpetuity, was something for which Bragg was passionately in favour – as you can see in the video of the debate below.
“I’ve always owned my back catalogue,” he said. “It wasn’t easy. My old record label, Go! Discs, when we were signing a new album deal… it would end up with me going in to see the MD of the record label, looking him in the eye and saying, I’ve written this record, I’ve paid for it. Whose pension should it be, should it be mine or should it be yours?
“To give him his due, he always eventually acquiesced and said: ‘Fair enough. It should be yours.’ That was just as well because he doesn’t own Go! Discs anymore. It’s owned by Universal; a faceless person who neither of us know would now be getting the revenue from my records.”
Bragg said that one reason artists accepted an 8%-15% royalty in the past was because “the record company had to do all the heavy lifting”, but that “in modern times, with the advent of [streaming], we should be ensuring that after a certain amount of time, or albums bring recouped, rights revert to artists”.
“In the modern age, we should be ensuring that after a certain amount of time, rights revert to artists.”
He also strongly argued for artists to be given the freedom to become their own retailers, and reap the fiscal benefits of a direct sale to their fans.
“[In the past, labels] had to physically make the records, physically get them to the record shop, and most important of all, physically collect the money and bring it back to us,” he said.
“Now that’s changed, [artists] can take that role on.
“Let’s say your standard contract allowed the artist to act as a retailer for their own records and have a deal with the label they’re signed to on the same terms as iTunes.
“As an artist/retailer, I’d be taking the retail cut for me, and my 8% – 15% [as an artist] and maybe the mark up. People would still [make money] but it would be a way to give much greater control to the artist.”
But will these changes ever really come to fruition – especially as some labels’ business models seem completely dependent on their ownership of copyright?
It’s possibly more likely than you might think.
Spraggon noted that Adele’s 25 album, out this Friday (November 20), is her last contracted LP on XL/Beggars (a company with a good reputation for artist-friendly deals).
The lawyer suggested that with all of Adele’s influence, “She can now effectively rewrite the record deal for anybody else.”
(Rumours abound that the star has signed a new worldwide deal direct with with Sony/Columbia out of the US.)
Spraggon added: “When I started out in 1984, you never expected to get your rights back when negotiating for an artist. Then in the 1990s when the Britpop explosion happened, lawyers got quite a lot of power, and we were able to leverage that power.
“Firms like Statham Gill Davies, who had all the hot indie bands, would say to labels, you can sign X, Y or Z, but we want the rights back in 10 or 20 years time. That broke the dam open a bit.
“I’m about to send out a deal proposal which has a 10 year licence in its for a new act which has quite a lot of interest.”
Virgin EMI’s Smith argued that major labels were already responding to this trend – with artists who reach a certain point of sales demanding more favourable, revised contracts.
“As soon as an artist these days has any success, they’re in renegotiating their deals,” he said, adding that this wasn’t a simple matter because “every P&L for every artist we sign is different.”
“There aren’t strict rules in terms of what we can and can’t do,” said Smith of the majors.
“Adele can now rewrite the record deal for everybody else.”
Paul Spraggon, SSB
Smith was realistic about the priorities of his major label employer: as a subsidiary of a publicly-traded corporation, he acknowledged, Universal is of course always looking for deals that will most help its bottom line.
“The way you [counteract] that is by… saying, ‘This person over here is offering me a deal that doesn’t entail life of copyright.’ The [major] then has to sit and think if it’s willing to sacrifice certain principles in order to go into business with the artist.
“In the old days… you were so grateful to get a record deal from anybody, you would jump in and sign deals that could be brutal to you in later years.
“Now, to a degree, the control has moved back to the artist. And the more they can do themselves… the more they’re likely to be in control of the situation.
“As long as there’s a good reason to do it, if we can explain [to major label purse string-holders] that if we don’t do this we’re not going to get the talent, that they’re going to sign to Sony or Warners, then you’ll have the flexibility. We’re not a cartel.”
MBW asked Spraggon about his thoughts regarding ‘all rights’ deals, where record companies benefit from merch and live ticket sales, as well as branding deals and other income streams.
“By and large, major labels want to see things going on. They’d rather pay more money or back off from some rights for a surer bet.”
Mike Smith, Virgin EMI
“If your label becomes your partner, and you share all the information and income and the rights revert to the artist in a shorter period of time, then there’s an argument to bring in other income streams until the band has recouped,” he replied.
“But record companies don’t like lawyers building in success formulas – or failure formulas. If you sell a million albums, why doesn’t your deal radically change?”
MBW asked Smith how a major could justify taking an artist’s rights in perpetuity.
“You can justify it [the instances] that if it wasn’t you doing the deal, no-one else would be,” he said. “And when [the artist] is up for doing it and they’ve been well advised by a lawyer, who hopefully knows what they’re doing.
“It’s about the investment you’re putting into them and the effort you’ll make to break them globally. If they’ve got nothing going on and you just happen to have a wholehearted belief in their genius… no-one else is recognising their talent.
“But to be honest that happens very rarely these days. Major labels, by and large, want to see things going on and would rather pay more money or back off from some of the rights in order to get a better bet.”
Goldschmidt explained that Cooking Vinyl very rarely signed deals today which involved ownership of copyright, with many of the label’s artists agreeing to a Bragg-style services deal.
“Those deals [involve] a split of 75/25 or even 80/20 in the artist’s favour,” he explained.
“But it’s not necessarily as good as it sounds because the artist pays for all the costs. That means the label, if it recoups, gets… much less than a traditional record company margin.
“But then most [other] deals don’t recoup anyway, so a [services agreement] ends up being much better than a traditional record company margin!
“You’ve have to do it forensically because when your margin’s low, you’ve got to recoup. We all want to earn a living.”
Bragg agreed that his services deal with Cooking Vinyl left him with far more fiscal responsibility, but that, on balance, he’d rather own his work than take a big upfront advance cheque from a label.
“If a services deal recoups, it means the label gets much less than a traditional record company margin. But most [traditional] deals don’t recoup anyway!”
Martin Goldschmidt, Cooking Vinyl
“Over the years Martin and I have been able to change my deal to adapt to new technology,” he said. “How many people have deals they signed in the 1960s that don’t even have CDs on them?
“A big problem today is artists from the 20th Century, thinking they’ve got to be paid the same way in the 21st century. Having a new deal every ten years isn’t a bad business model.”
Bragg added: “The definition of success is earn a living doing what you like doing. If you can do that, you’re so far ahead of everyone else.
“That’s the fortunate thing I’ve had with Martin [and Cooking Vinyl].
“It’s not all great stuff: I made my last album at the beginning of 2012. It was finished, mastered and ready to go. It the took me a year to build up a warchest to promote that record. But that’s the responsibility… When it’s your money [being spent], you work your arse off for it.”
You can’t discuss the record deal of tomorrow without discussing the record industry of tomorrow – and that means dealing with YouTube.
Virgin EMI’s Smith admitted that he wasn’t “entirely convinced YouTube as an organisation is committed to music… it’s peripheral to what they do”.
“Obviously we need to recognise what they’re doing and make sure our artists are properly compensated for the music being consumed through YouTube,” he said.
“YouTube and vevo are an enormous part of the way we break acts. But it obviously brings me concern.”
Mike Smith, Virgin EMI
“[But] then YouTube and Vevo are an enormous part of the way we break our acts. So we need to deal with them… but it obviously brings me concern.”
Cooking Vinyl’s Goldschmidt added: “I’ve got very mixed feelings about YouTube. It’s interesting how healthy the physical market – and the general market – is in Germany, where there’s been a massive dispute between YouTube [and GEMA].”
He added: “I started a record label because I wanted people to hear [our] music. YouTube’s brilliant at that – it’s the biggest way people consume music on the planet. But in terms of monetising [CV’s records], it’s tough.”
Machine Management’s Morais made the point that for an artist to get the very best deal from any label, the smartest move was to develop independently as far as you could without outside help.
“We’re spending 18 months to two years developing an artist [before signing a deal] because that’s what it takes,” he said.
“[That allows an artist] time to find their sound, understand their audience and create a buzz.
“Occasionally there are artists that break relatively quickly. But Years & Years are a good example [of the opposite]. They’ve been a band for five years.
“We’re now spending 18 months to two years developing an artist.”
Phil Morais, Machine Management
“Their career has taken so many guises and transitioned into the beast it is now.”
Smith jokingly hinted that not all managers were as principled – or always have the artist’s long-terms interests quite so much at heart.
“Maybe you’re managing a band, and you’re thinking, ‘This band aren’t very good and it’s all going to fall apart in six months time’,” he said, playing devil’s advocate.
“Then maybe that label over there is offering me £100,000 more than that one…
“There are unscrupulous [managers] out there who are probably seeing it as: ‘Let’s grab what I can now, because most acts don’t work.'”
The most repeated word of the debate, however, was the one at the centre of Spraggon’s vision for a better record deal: transparency.
“Recording contracts will be totally different in five years time with [artists able to build their career using] outside funding,” said Goldschmidt.
“The biggest issue, though, is transparency. If you’re honest with people’s money, they trust you – and they make better business decisions.
Smith added: “So many of the problems we have in the industry have been people being not entirely sure [labels] are telling the truth. If we have nothing to hide, we should be completely open with them.”
“If you’re honest with people’s money, they trust you and make better business decisions.”
Martin Goldschmidt, Cooking Vinyl
The one thing perhaps even more important than transparency, though?
Making a crust.
Goldschmidt stated: “One of the best ways of getting loyalty from an artist is sending them royalty cheques of a decent size, regularly.”
He’s obviously coming good on that mission with Bragg, who quipped in affirmative reply:
“Yep. Floats my boat.”
Following the success of the first Cooking Vinyl Presents: ‘The Future of…..’ debates, which looked at ‘The Future of ….The Record Deal’ the second in this series of panel discussions entitled ‘The Future of…..Fan Engagement – How to Motivate and Monetize a Fanbase,’ has been announced for early December.
- Dave Bianchi – Various Management
- Bruce McKenzie – Townsend Music
- Lucy Jordache – Marillion Management
- Paul Barton – Pledge Music
- Rob Collins – Cooking Vinyl
- Sarah Slater – Ticketmaster
To apply for a free ticket to this event please click on this link and enter your details. The closing date for ticket applications is November 26th and successful applicants will be notified by November 30th.Music Business Worldwide