Wednesday, April 30, 2008

Industry Standard

Allen L. Johnston – The Music Specialist

In the music business “taking the money” is not always the best way to do business. During the course of my 40 years within the industry I have prepared countless contracts, witnessed numerous deals, and heard about horror stories galore. The normal term used in almost every one of these situations is the INDUSTRY STANDARD. The industry standard has created a major label monster that has hidden transparency, executive clutter and under accountability or no accountability.

Let’s take publishing for example. In the past publishing deals were approximately 2-3 pages long and had basic short clauses listing which rights were licensed and the percentage of revenue the publisher or sub-publisher was entitled to retain. There were one or two short clauses dealing with accounting (50%-100%) and territory (the world) and that was about it. Normally there was NO express termination date. So what happened? Publishers got a signed contract, placed it in a filing cabinet and waited for the money to start coming in. They never promoted the songs they had contracted or felt any need to even contact the writers unless they wanted additional catalog to license. This was the industry standard and horror stories abound based on these contracts.

The life of one of these “industry standard” contracts, based on copyright law, was the life of the writer PLUS 70 years, meaning that a company could easily hold a contract for over 100 years. Because certain writers took the advance from the publisher and signed a contract, they literally gave up ALL of the income derived from the music that they created.

Recently I have been asked “How can I get out of this type of contract?” The answer is not easy at all. The courts have no way of enforcing a contract without an express right of termination unless the publisher has been found to be so negligent in their duties that by their conduct they have indicated an intention not to be bound by the contract terms. As you can see this is not an easy thing to prove, for if the publisher is collecting money they are doing exactly what they need to be doing.

The other alternative is to reach a new voluntary agreement with the publisher based on some of the following concepts. Creation of a specific termination date established on a shorter time frame that sets specific duties and obligations for the publisher to perform centered on that specific termination date. This can probably be accomplished if the writer is still current and has new non-published material that can be offered for a new contract. Royalty rates should be the first thing to be renegotiated for “industry standard” contracts gave the lion’s share of the royalties to the publisher.

Record label and artist contracts are even worse. The normal INDUSTRY STANDARD contract only gives the label or artist a maximum 18% revenue AFTER taking out deductions for advances, marketing, promotion, video, studio and manufacturing. Once again artist and labels are “taking the money” up front as an advance and are not seeing any return on the real profit made on their creations.

Historically major labels have made deals with independent labels, ultimately taking their acts and doing with them as they please. After the initial advance and the marketing, promotion, video, tour support, publicity and packaging deductions are calculated many acts are left in a negative cash position. The new “standard” has become a label deal where the major funds the label startup costs. Very few companies have been able to stay afloat from this type of deal based on the inability to run successful office structures and the change within the industry itself. Artists get the label deals but in a majority of cases, the artists’ management created the direction, marketing and promotion that caused the major label to present a deal. Once this direction is gone so is the act.

Major labels created a system that was run by executives who promoted music to radio chains, sold music to record chains and utilized videos on television. This system made huge amounts of money for the system and NOT for the music makers. Today’s industry has almost totally eliminated this system for the majors and has absolutely eliminated it for the independent.

One of the first things I noticed as I ran my own label was that radio, store and television people ALL told me when they decided that my record was over. Many times I heard people tell me that the song I was promoting was off their list or too old for them to work. I never listened to any of this nonsense and continued to work my records to the public. I was extremely successful in building a story for my music and delivering sales for my company. This is where the industry has gone back to today. The advent of the Internet coupled with ALL of the new technology is making radio obsolete. Television audiences are drying up and we ALL know what is happening at the store level. Options are popping up at an alarming rate, via iPhone, iPods, DVD’s, mobile phones, online social networking, p2p, b2b and many others. No longer is it necessary to deal with an industry standard for the standard has disappeared.

Today you can now reach the consumer directly through a multitude of different avenues and ONLY the independent artist or label will know who their market is. Major labels will still be looking for that HOT independent label but now you no longer need them to be successful.

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