EMI faces being taken over by its bankers after failing to do a deal to sell the North American distribution rights for its artists to Universal Music Group or Sony Music. Any thoughts on EMI’s future?
I really don’t know. I would be surprised if it isn’t sold or merged with Warners. EMI Publishing is doing fine, but their house is built on the boat that is floating the record company.
Besides the majors being hurt by downloading on the internet in the past decade, they lost such marketing tools as radio and TV, and their dominance at retail has been diminished. They don’t have the clout they once had.
They certainly are not the gatekeepers that they once were. Originally, the record companies were the only way you could get into retail with any prominence—or at all. They were also the only way to get on radio with (the help of) a lot of independent promotion money and, as well as with, their relationships. It wasn’t even just the money. If you funded (a recording) yourself, you still needed the record companies’ clout, threats and things like that to get on the radio.
Now anybody can get their music out there. It’s not that difficult. And radio has become a very narrow channel so that you don’t have that much chance to get on radio no matter who you are.
But the problem is that every artist can now get their music out there. I think there are what 7 million bands on MySpace? So that means 7 million bands can do it. How do you break through the noise? The record companies are morphing into marketing machines--to help get your music above the crowd.
Artist managers have expanded into marketing as well.
Oh, I think that’s right. “Entertainment companies”—whatever that means in the future—is the way the business is going, whether (marketing) comes from the record label side, the manager side or some convergence.
Two decades ago, labels told an artist and their manager, “Here’s your marketing plan.” Today, managers may have their own marketing plans that can be developed in working with labels.
I think that’s right. Certainly, the good managers are doing that. Companies have cut back so much staff that the managers have to make it up (with services). A lot of them are doing it themselves. They don’t even bother with the record companies. It is a rough time for record companies, right now. For all of the obvious reasons.
Are there guarantees of marketing support anymore in a record deal, even with a major act?
No. Not really. That’s pretty well has gone. They (labels) are so scared these days because they don’t know what they are going to sell.
Are the deals coming though your office more varied today?
Yes. First of all there are few record deals because there are few players, and the companies are cutting back (on rosters). We are certainly getting into more interesting and more complex things as we deal with digital rights, streaming and artists wanting to put material on the internet. Everything is more complicated.
Have you done any recording deals directly with labels overseas?
I have done a few. An artist needs to have a lot of clout to do that in today’s world. But, yes, I have certainly done some. Usually, (with a deal) it’s North America, and the rest of the world. For new artists, it’s pretty hard to separate the world out unless they have done foreign first. Record companies don’t want to do that. For artists with some clout, you can say, “This is all you are getting.”
Are recording contracts more complex today? Or are they the same template?
They are somewhat the same template, but with the way the business works every time something new comes along they add another 5 or 7 pages to the contract. So contracts today are longer, and there are now provisions for dealing with all of these new medias. It is trickier, and more complicated (negotiating) because we are dealing a lot of times with things that don’t yet exist, and everybody is worried about being left out. It is more complex than it was. But the template is basically the same.
Well, there’s no longer charges anymore for breakage for records shipped.
No more breakage, and there are no returns on digital either.
There is more agreement today on how digital rights should be treated.
Most of the industry--not all--has moved over to a very simplified royalty structure which is the royalty rate applied against the pure wholesale price. Period. It didn’t change any penny rate because when they made the switch over they just adjusted the royalty rate to come out as to the same penny. It just makes life much simpler.
Lately, 360 deals have become the norm at all major labels. They want a piece of non-recording income. How hard-nosed are they being in negotiating the 360 degree clauses?
They are being pretty hardnosed. Like anything else if an artist has enough clout you can get around it or you can get it so minimal that it doesn’t mean much. But they (labels) are pretty tough about it for the simple reason that they perceive that their core business is no longer all that profitable. For them to put the kind of money into developing an artist that they need to (to be successful), they feel that they have to get other income revenue in order to justify the investment.
Does a major artist have some wiggle room in negotiations to say no to a 360 deal?
If they have enough clout, they can do it with some labels. But others will insist on something, even if it’s a small taste.
Are the 360 terms for the length of the contract or are they more ongoing?
They usually end when the deal ends. That’s true unless the company is taking active publishing rights which go on as long as the publishing deal goes on. They don’t cross-collaterize (income), but they may insist that you do make a publishing deal with them the same time that you make a record deal.
A singer/songwriter signs with record company, they have to sign with the affiliated publishing company?
That’s coming back to some degree under 360 deals.
Traditionally, recoupment provisions in record contracts had payback conditions so onerous and unfair that, in many cases, the amount owed could never be paid back. Are the clauses for recoupment today as onerous as they once were?
They are just as onerous as they once were, but the difference is that a: The companies aren’t spending as much so they don’t (need to) recoup as much; and, b: The records aren’t selling as much. So they hardly ever recoup at all.
No artist today is sacred even if they have just sold 10 million albums.
Well, nobody’s selling 10 million anymore. If the company sells 5 million, they are dancing on the roof.
Traditionally, an artist signed with a label deal for low points, and then renegotiated after a big selling album.
That doesn’t work anymore. Even if they have a successful album today, the companies are so scared that the next one isn’t going to be very successful that they are much more conservative about (renegotiating).
Under reversion of copyrights, are artists more able today to get back the rights to their masters?
No. It is actually harder today than it has been because the companies are so desperate to hang onto any kind of assets that they can that reversions are very difficult to attain.
The same in publishing?
No. Publishing reversions are still pretty easy to get if a songwriter has enough clout. It is directly related to how much money they want to take from the publisher.
The controlled composition clause on mechanicals—how much the company has to pay for each controlled composition-- known as a 3/4 rate—has been dropped in many territories, but not in the U.S.
In the U.S., for deals made after 1995, the controlled composition clause doesn’t apply to digital. It is becoming less and less relevant as the world moves more and more toward digital. It is meaningless.
While it has become harder to get physical CDs into stores--even for the majors--at least 70% of the business of some labels is still in physical goods.
It absolutely is. But so far there’s no movement to get away from it (the controlled composition clause).
Outside North America, the mechanical rate is a percentage of wholesale. American publishers have always refused to adopt something like that. Meanwhile, the wholesale rate continues going down which affects the impact of the mechanical rate.
Exactly. That’s all the more reason why they think they need the controlled composition clause. From the artist point of view, it absolutely should be taken out but, from the record company point of view—as I understand their position—as prices drop, and as mechanicals become a bigger and bigger piece of the wholesale price, they need to have some cap there.
Many in the industry are skeptical that ad-supported music services will work in any significant way. The services are still having a difficult time monetizing music to advertisers.
I personally believe in a subscription model, but I don’t think that we can deliver the kind of subscription service in order to make it really work.
Subscription-based services aren’t cross-platform nor convenient enough yet.
Yeah, cross platform. I have my iTunes player organized on somebody else’s server plus access to anything else that I would want. I can get that on my computer but I also can get it on my portable connected device, my stereo at home, my car and even, maybe, on an airplane. When I can get that with a (subscription service) then, I think, we will have a subscription service that people will actually pay for.
With the music industry still coming to terms with the digital world, it is hard for anyone to even start a music service other than as a niche player.
Well, I think that’s right. I think that it’s getting better because the companies are feeling more pain. But, it is still tough to get anything done if you are a new company.
Meanwhile, there’s the argument that artists and labels should give music away for free, and then pick up revenue from other revenue streams.
I don’t agree with that. That is essentially what is happening right now to a large degree, but I don’t think that (the music industry) is ever over. I just don’t think that we haven’t delivered the services that people want. Technologically, I don’t think we can yet, but I think that within a few years we will be able to.
At the same time it’s harder to find individual titles at retail today.
Certainly, the (brick-and-mortar music) retail business is going to be extinct. It is pretty much there now. Not really but it is going to be extinct in the not so distance future. The brick-and-mortar music retailing and physical CDs. I don’t think there’s any question about that. But, I don’t think that the music business is going to go away. The way I understand it is that there is more music being used and consumed now than ever in history. It isn’t being paid for, but it’s out there and very much part of the culture.
People still like to shop though.
There’s a generation of people that are used to shopping online. The experience of going into a record store hardly exists here (in Los Angeles). Amoeba Music is here, and it’s terrific. But most retailers are cutting back floor space (for music) because they are selling less CDs which means that they even cut more floor space.
In buying or downloading music online, an emotional component is missing...
I totally get it, and I agree with you. But kids have grown up with (the attitude) you get music by trading with friends.
How do you then monetize music?
As I said, I think we have a subscription service that delivers what is perceived as value. Then we can strip the pirates.
Are most of the contract disputes that arise with a label over, “You blew my last record?”
That’s sort of the standard argument. “Why didn’t my record do as well as I thought it should have?” The other disputes center around money. Royalty audits or disputes how much money someone is getting paid on publishing.
All contracts give artists the right to check the books of a label.
Virtually every contract lets you look at their books. Even if they didn’t, you could file a lawsuit and do it. The problem isn’t looking at them. The problem is what does the contract say. Whether they did what they were supposed to--even if it is outrageous. An artist, if they are successful, may send in an auditor to make sure they got paid what they were supposed to be paid. There may be some areas where you will have some dispute.
There are always questions over collection of foreign income.
All of the time. You can insure (collection) in the contract but whether or not they do it is a different issue.
Labels usually have term options that they can cancel or modify a contract. It’s hard for an artist to open up a contract before it runs out.
Well, it has gotten more difficult. If you are an artist who has really exploded, and had success for a couple of albums, you are going to be able to renegotiate. You might not get what you would have got 10 years ago. You won’t, but you will certainly be able to renegotiate. If you are an artist who has had only one successful album, it is much harder (to renegotiate) because (the labels) are scared that it was a fluke. There are a lot of examples these days with artists with huge albums, and the next one sells nothing. They are very worried about things like that.
A decade ago, there were numerous high-profile joint venture deals with artists. But labels seem to have shied away from them since. It’s very difficult to get any kind of deal with a major label where they are going to take the risk, spend all the money, and get half of the assets.
I think that’s right. They (joint venture deals) are much harder to come by these days. But they are still around, if an artist has enough clout.
[While major labels may have viewed artists' imprints a decade ago as little more than as an investment in keeping a performer happy, deals were negotiated for: Shaggy's Big Yard (MCA); Busta Rhymes' Flipmode (J Records); Backstreet Boys' the Label (Interscope); DMX's Bloodline (Def Jam); Wyclef Jean's Wyclef Records (J Records); and Madonna's Maverick (Warner Bros).
The most successful joint venture artist deal has been the Maverick Records co-venture by Madonna with Time Warner in 1992. I think that’s probably right though David Foster has a pretty successful label too. He’s done quite well with it.
[Despite a colorful two decade production and songwriting career, Canadian Foster made his mark as a bonafide industry mogul in 1994 with the founding of 143 Records, his joint venture with Time Warner. He has since discovered, developed and successfully launched the careers of the Corrs, Plus One, Kevin Sharp, Renee Olstead, Josh Groban and Michael Bublé.]
Not all artists understand the business responsibilities they have when they start their own label It depends on how big it is. Not all of the (companies) have employees. Some are just pure A&R sources. They (the artist) just find talent and turn it over to the (bigger) label. It just depends on the size of the venture (what their responsibilities are). But, you are quite right. It’s not just a casual vanity thing to do, particularly these days.
JV deals used to be a way for the major labels to keep a major artist happy.
For the most part, the artist-driven (joint ventures) haven’t worked that well. The ones that have worked are the ones driven by someone like a producer; or someone with a management or an executive (business) background who can make sure that if great records get delivered, then someone, ideally, is running the company like a business.
Many of these operate more like production deals than true joint ventures.
Exactly. JV can be a production deal, and still be a profit share. It doesn’t necessarily mean how much they take out of it. Normally a production deal will be (with) a royalty, as you are suggesting, but there are others that have others things with it. I was trying to draw the distinction of whether they were really starting a label or if they were just trying to find a couple of artists.
You represented Mariah Carey when she moved her publishing catalog in 2004. When a songwriter of that stature moves their publishing, what are they generally looking for from another publisher? More aggressive working of the catalog? Wider exploitation?
Yeah, I think that’s right but at a high enough level, you are mostly dealing with a banking deal. A lot of people think that publishers—a number of them—don’t do as much as they say they are going to do. But, at the highest levels (of music copyright owners) yes, they definitely want someone who will exploit and work the catalog. They are also usually looking for a large check, and for better splits. Just an overall better deal. A lot of time, they can get a fresh start with people (new publishers) who come to the party that are enthusiastic. That can be boost.
[In 2004, Mariah Carey left Sony/ATV, and signed a long-term publishing deal with Universal Music Publishing Group. The worldwide pact included 135 copyrights, including 14 of Carey's 15 No. 1 hits on the Billboard Hot 100 (her remaining No. 1 was a 1992 remake of the Jackson 5’s 1970 No. 1 hit, "I'll Be There.")]
Have you handled any deals for estate catalogs?I haven’t taken any. I have been asked to do a couple but, for various reasons, they didn’t seem like a fit for what I was doing. It is a different dynamic. You are not dealing directly with the artists; you are dealing with heirs. It's just a very different dynamic. It is not something I wouldn’t do if the situation was right. With the ones that I have been asked to be involved in with there were problems within the camp. That’s primarily why I didn’t do them.
Other than on net neutrality President Obama has said little about copyright.
No. I don’t think that there’s much movement to do any sweeping changes in copyright at this point. We can’t even get a performance right for masters done. It is just politically very difficult.