Tuesday, June 16, 2009

What’s the Deal with Record Labels?

Many of us sit back and wonder why it is that record labels act the way they do. I have written earlier about how the corporations law prevents them from making decisions based on morals and forces them to consider profits above all else. But what are the impacts for musicians and the music?

The Standard Deal
Typically record labels offer ‘standard’ deals to artists (especially the unknown ones) that have unfair and onerous conditions. Many artists, with the exception of those with a very savy manager or significant popularity, walk into a record label’s office prepared to accept any terms they offer. The artist believes that without their support they simply cannot create but the short term gains most often outweigh the long term benefits. Indeed it is not until sometime later, once the contract is in full swing, that they can really assess their needs compared to what they are being offered and by then it is generally too late.

All but the most successful artists are forced to work under terms which are financially unsustainable and grossly unfair, sometimes without access to resources that would help them to produce better music and without the ability to renegotiate.

With the exception of those that have an agreement that would be considered in law to be ‘unconscionable’, there is little that can be done but to find ways around the conditions that have been imposed.

Some artists seek the advice of organisations such as the Musicians Union but the contracts which already underfoot, are strict in their terms and there is little that can be done to negotiate a better deal.

Artists under standard contracts are left with little option but to rely on alternative forms of revenue – this has typically been in the form of concert ticket sales and merchandising which until recently were not part of recording contracts.

Those lucky enough to have a short term contract may have the opportunity to reconsider their options and look around for another label but this process itself is stressful with the old label looking over their shoulder.

For those artists that do have some success and are able to prove their worth, the length of the deal which often has clauses that enable the label to keep extending the current arrangements (option clauses) means they are trapped and must continue to work under the same conditions regardless of whether their needs or abilities have changed.

For others, those that are not as successful, the contracts may still be extended despite the fact that the label has no intention of supporting them in the future and yet they are not able to sign with another label or go out on their own as an independent.

Furthermore, even the most successful artists are forced to make ‘artistic compromises’ – in short this has meant that the labels can refuse to release music that they consider unworthy of financial investment or unlikely to be popular with the masses. For political music this is very problematic with songs deemed too controversial unlikely to be released unless they have an associated marketing angle.

One artist famous for a dispute with his record label is Prince/The Artist Formerly Known As Prince. Prince was in dispute with his record label, Warner Brothers, who had trademarked his name and owned all associated rights to the music marketed under that name. I remember well the jokes that many in the industry made at the time asking why he would pick the Love Symbol and such a silly name. The reason was that his record label could hold him to the contract if he used the name 'Prince'. By changing his name in this way he gained the benefit of both avoiding the terms of the contract he was in while negotiations were taking place and continuing to work based on the reputation he had already built.

However for most artists the results of ‘corporate patronage and indentured servitude’ are catastrophic. They are unable to plan their lives as they do not know from one day to the next what will be happening. They have terms that are financially unsustainable and demanding commitments that they cannot meet. Some struggle to work with the little that they have and others elect non performance. Pure and complete non performance of a contract is a breach of the agreement but by sabotaging themselves - writing poor songs, being unreliable, difficult to work with and generally uncooperative - some artists may be released from their deals. Others are retained, perhaps out of spite, and all lose whatever reputation they have developed to that point. They suffer career paralysis and eventually their popularity dies.

In all circumstances record labels control the recording copyrights and what was done in the past continues to be the property of the record label so the labels continue to reap the profits despite the ongoing frustration of the artist.

Enter the Internet
Up until the last decade this was the fate of the majority of musicians. However the internet has transformed the options for artists. They are much more likely to be able succeed without the support of major labels, for the most part superstar status still depends on it, but many more are able to connect with their fans and give them a reason to buy their music without having to enter into deals that are uncompromising and unfair. Those that were signed to a major label in the past, Nine Inch Nails and Trent Reznor being one such example, are refusing to get back into bed with the record labels knowing that they have the reputation, intelligence and experience which enables them to go forward without the help of others.

Indeed those that are signed to major labels can take advantage of this new form of communication. One recent example of this is DJ Danger Mouse who was prevented from releasing his new album because of a dispute with his record label. Instead he released a CD case with an extensive booklet of photographs and a blank disk, telling consumers to ‘Use It As You Will’ – implying that as the music was available on file sharing networks that they should feel free to download and burn a copy.

Some have stated that the digital environment creates a ‘competition issue’. Those that are familiar with trade practices law will know that many countries attempt to regulate markets to ensure that they do not become too concentrated – in Australia it is the Trade Practices Act 1974 (Cth) while in the USA it is the Sherman Act (1890). (Kazaa unsuccessfully argued anti trust grounds in an early MGM v Grokster decision [1]).

The internet means that record labels are in competition with the entire world. It has the potential to create a much more open marketplace where there is far less control and concentration. While on the one hand this alters the power of record labels to dictate the terms, it also dissipates the potential for artists to penetrate the global market place and for some forms of music, particularly the political, this may have associated consequences.

The New Deal
Record labels have not responded well to the digital environment and the competition that they are now faced with. The tendency has been to do as much as possible to constrict the competition – lawsuits against emerging technology are just one part of this equation – the move to 360 degree contracts where they control every aspect of a musicians career and can make money from all parts of their business has been another.

But not all labels are taking that approach. There are number of record labels, such as Magnatune (‘We’re Not Evil’), that are attempting to work with artists rather than exploit them. This has typically meant less financial investment but greater understanding for the uniqueness of some artists and the need to ensure that they are comfortable with their contractual arrangements. However many artists are scared and do not know enough about these labels to make the change, perhaps more time will help them to see that they do not operate in the same way as the record labels of the past.

What Does it Mean for the Music?
Music is and has always been intangible. It is non rivalrous meaning that it can be duplicated without loss of quality and in infinite quantity. The artificial scarcity that was created by the reduction to material form (the CD) has now largely been replaced with unfettered and cheap supply. It is only natural that music should want to be free, to explore and communicate with as many people as it wants, and yet it remains in an environment where it can be difficult to assess who will permit this and who won’t.

Some, those of the old school, get angry with those that seek to enable the music to live out its intangibility. Some seek to enable the intangibility but fail to consider the implications of the lack of financial support that is needed to sustain a professional sector of creators. Others seek the mid point. They know that there needs to be more freedom and are willing to give it but also seek to create an environment in which the music is able to have some support without being dominated and controlled to the point where it can no longer reach its true potential. Those in this mid ground advocate a collective licensing regime. Whilst requiring detailed planning and foresight it is nonetheless achievable and would make an enourmous difference to the choices that are currently in place.

A collective licensing regime has been advocated by the likes of Netanel [2], Fisher [3], Lessig [4], the Electronic Frontiers Foundation and The Songwriters Association of Canada. Experiments have taken place in countries such as Canada and China (Fisher) and in the USA recent steps have been taken to trial different versions in colleges as a means to reduce illegal file sharing by students (Choruss).

While there is a way to go yet, these developments are both positive and essential. While some forms of music, the emotive and purely entertaining forms, will be produced in most conditions due to their social function, they can be produced to a higher standard under better conditions. Other forms of music, such as political music, require greater attention. This form of music in particular has an important social function but under negative community conditions – capitalism, closed or structurally deterministic architecture, neoclassicist copyright law and prohibitive social norms – it cannot achieve its potential as an agent for social change.

If the major record labels are going to have a place in musicians' lives in the future, they need to act now because they are running out of time. It is impossible to unscramble an egg - things will never return to the way they were before. It is time the labels realised this and got on with helping musicians to achieve their goals.

Further Reading

[1] Metro-Goldwyn-Mayer Studios Inc., et al v Grokster Ltd et al 269 F.Supp. 2d 1213; 2003 U.S. Dist. LEXIS 11329; Copy. L. Rep (CCH) P28,634; 2003-2 Trade Cas. (CCH) P74,081

[2] N W Netanel, ‘Impose a Noncommerical Use Levy to Allow Free P2P File-Swapping and Remixing’ (2003-2004) Harvard Journal of Law & Technology, 1-84

[3] William W. Fisher III, Promises to Keep (2004)

[4] Lawrence Lessig, Free Culture: How Big Media Uses Technology and the Law to Lock Down Culture and Control Creativity (2004) 301

ArsTechnica, Canadian artists' new/old plan: $5 to share music legally (24 March 2009) <http://arstechnica.com/tech-policy/news/2009/03/canadian-songwriters-plan-5-to-share-music-legally.ars> at 29 March 2009

Electronic Frontiers Foundation, File Sharing: It’s Music to our Ears, Making p2p Pay Artists (2004) <http://www.eff.org/share/compensation.php> at 12 April 2006

EFF Deeplinks, More on Choruss, Pro and Con (20 March 2009) <http://www.eff.org/deeplinks/2009/03/more-choruss-pro-and-con> at 11 April 2009

EFF Deeplinks, Danger Mouse Releases a Blank CD-R (18 May 2009) <http://www.eff.org/deeplinks/2009/05/danger-mouse-inducem> at 29 May 2009

Future of Music Coalition, Major Label Contract Clause Critique (2001) <http://www.futureofmusic.org/contractcrit.cfm> at 16 June 2009

OpenContentAustraliaResearchReview, Capitalism and the Alcoholism of the Music Industry (18 May 2009) <http://ocarr.blogspot.com/2009/05/capitalism-and-alcoholism-of-music.html> at 16 June 2009

Open Content Australia, Year in Review: Recording Contracts (18 December 2008) <http://ocarr.blogspot.com/2008/12/year-in-review-recording-contracts.html > at 16 June 2009

TechDirt, My Keynote At The (RIAA Sponsored) Leadership Music Digital Summit (30 April 2009) <http://www.techdirt.com/articles/20090422/0407024607.shtml> at 3 May 2009

TechDirt, U2 Manager: Free Is The Enemy Of Good; And It's Moral To Protect Old Business Models (29 May 2009) <http://www.techdirt.com/articles/20090528/1919455049.shtml> at 31 May 2009

Testimony of William W. Fisher III before theSubcommittee on 21st Century Competitiveness Committee on Education and the WorkforceHearing on: The Internet and the College Campus: How the Entertainment Industry and Higher Education are Working to Combat Illegal Piracy (26 September 2006) <http://www.house.gov/ed_workforce/hearings/109th/21st/piracy092606/fisher.htm> at 17 October 2006

The Dues, “Record Earning” Deemed Oxymoronic (Issue 9 Vol 1) March 2006 <http://www.musicians.asn.au/ezine/archives/issue9/page2.html> at 16 June 2009

The Dues, How to Make it To The Top and Still End Up in Debt (Issue 2 Vol 1) <http://www.musicians.asn.au/ezine/archives/issue2/> at 16 June 2009

Wikipedia, Prince (musician) (14 June 2009) <http://en.wikipedia.org/wiki/Prince_(musician)> at 16 June 2009

Good Copy Bad Copy<http://www.goodcopybadcopy.net/> at 22 April 2008

Magnatune <http://www.magnatune.com/> at 16 June 2009

Musicians Union of Australia <http://www.musicians.asn.au/union/index.html> at 16 June 2009

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