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When I was a full time touring artist, I had endless conversations with signed artists about the details of their contracts. I learned a lot of interesting stuff to say the least. But now that I run a small label myself, I can clearly see both sides of the coin.
I currently have three artists signed to my label and I have separate budgets set aside for each of them. HOWEVER, I work with them and in exchange for my mentorship, I expect them to work their butts off – no free rides with me.
Since I’ve become a label owner, here’s the biggest lesson I’ve learned – making money means nothing if there is no profit margin.
Okay, so let’s break this down. Let’s say one of my artists sells 8000 records (at 10 bucks a pop), this would be an 80,000 gross income stream. But what if I spent $100,000 MARKETING this album? You got it, that would mean a non-existent profit margin.
Making money doesn’t always mean “making money” if you know what I mean. From a label’s standpoint, everything boils down to profit margins.
Many times, the timing and the conditions of the market will dictate how hard a label needs to work at marketing a particular project. So for example, if another artist – who happens to be the immediate competition of MY artist – is making a lot of buzz and headlines, as a label, this means I’d have to spend more money to “out-market” the immediate competition and win the public’s attention for my own artist. This will lead to a lower profit margin and inevitably, a lower recording or marketing budget for the next project. Not cool.
Sign Em’. Then Ice ‘Em: How Labels Eliminate Competition And Spending In One Blow
Labels face this dilemma on a bigger scale and will SIGN THE COMPETITION to kill their buzz. I call it “Sign ‘em and Ice ‘Em”
As a label, it’s CHEAPER for me to sign the competition to a $50,000 recording deal than to spend $80,000 to out-market and out-compete them.
The competition is signed and “put on ice” for one year – (i.e the artist’s upcoming projects are shelved for just enough time for their current buzz to die out). They’re kept busy (and out of my way) with the 50k they’ve been given to record an album, while my MAIN artist releases his project with little to no real competition in the market. After the year is up, I will then proceed to drop the competition and if in spite of all this, this artist manages to sell the record they made with my 50k, I’ll still be helping myself to a nice slice of the pie – this forces them to start all over and make new music from scratch, giving my main artist just enough time to release a deluxe version of his album before any “real” competition surfaces again.
Sounds evil doesn’t it? Well, it’s a reality. Just because a label wants to sign you, doesn’t mean they intend to make money from you. You know the old saying; it’s nothing personal; it’s just business. Labels are about their profit margins, and as you can see, selling records is not the only way to increase profit margins.
If you’re still looking to pursue the label route, you’ll need to learn what look for in the contract to avoid falling into their dirty traps.
+How To Avoid All A Label’s Booby-Traps And Come Out A Winner