Record Labels React – The NASCAR Effect

*Writers note: In this article, I am going to be a little harsh on record labels. I work with wonderful record label people every day. Heck, I genuinely like most of them. They care deeply about their artists and work hard to make sure that those artists are promoted effectively. Please note that this is not an attempt to disparage these wonderful people from their genuine efforts. My beef is not with them, but the overall structure of record labels today.

The fascinating thing about the dramatic decline in CD sales is how the music business, in particular the record labels, have chosen to react. I use the word fascinating in the same way I would in describing a really bad NASCAR wreck – I sure hope nobody gets hurt, and I know I’m probably not supposed to feel this way, but the wreck is so spectacular in it’s destruction that I can’t help but watch.

Keep in mind that record labels were the Big Dog. Everything revolved around record releases. An artist’s only shot at getting heard was signing a record deal – usually a very bad one. The labels controlled pretty much everything but touring, and touring was directly linked to how many albums you sold. In responding to this crisis, the record labels choose to react in several very strange ways. Below, I’ve listed the major reactions and made some comments on each. Record labels:

1. CHOSE TO SUE THEIR CUSTOMERS, INDIVIDUALLY. Seriously. I’ll bet the PR team wasn’t invited to the meeting where they came up with this one. I don’t know who’s crazier, the guy that said, “Hey, I’ll bet we can scare the crap out of our loyal customers by suing some of them for illegal downloading. That way, our customers will be so scared that they will have to buy our overpriced product,” or the rest of the folks who said, “Gee, that’s a good idea.” The funny thing is that, as a manager, this tactic didn’t surprise me at all. I can’t tell you how many meetings I’ve been in on behalf of one of my clients where these types of arrogant tactics have been used. Sue your customers? Think about it. Labels have been strong-arming industry folks and artists for so long that they didn’t even consider that this tactic might horrify normal people. 

2. CHOSE TO LEAVE THEIR CORPORATE STRUCTURES PRETTY MUCH INTACT, EXCEPT FOR WHEN THEY WERE FIRING A PAINFUL PERCENTAGE OF THEIR WORKER BEES. I work in a particular niche of the music business – Christian music. Now I don’t know how other labels have done it, but I’ve got a serious birds-eye view of how a lot of the labels have handled cost cutting in our particular industry. Instead of lopping off the heads of senior decision makers who’s job it is to see the trends and steer their businesses in the right direction, or holding A&R people accountable for actually signing talent people want to hear, they fired many of the helpless people that make a record label work – marketing folks, support folks, accounting folks, etc. That’s not how it works in the real world. I just read about Stan O’Neil this week. He was CEO of Merrill Lynch. Those guys just had to write off $7 billion due to bad deals in the mortgage security arena. Stan didn’t make those deals, but Stan sure got fired. He got the ax because he was the leader. 

3. CHOSE TO SIGN THEIR NEW ARTISTS TO DEALS THAT ARE FAR WORSE THAN THEY WERE FIVE YEARS AGO IN AN ATTEMPT TO BLEED AS MUCH CASH OUT OF SAID ARTIST AS POSSIBLE. On the surface I kinda get this. If your business is in the tank one of the things you do is to try and maximize your income from the deals that you are doing. The problem is this – you can’t trump up deals in your favor while at the same time drastically reducing the services you provide because you’re firing a good chunk of your staff. You can’t have it both ways. At some point someone looks at the deal and says, “Hey, how can these guys take even more of the money when they can’t come close to providing the service they did even 5 years ago?” My take on this is simply that some labels forgot a long time ago that their primary customers are the artists they sign. It’s their job to serve them because they are the moneymakers. Artists are not a product. Artists are people. If a label thinks the person buying the CD is their primary client then they have blown it. 

4. CHOSE TO ATTEMPT TO GET INTO THE MANAGEMENT BUSINESS WITHOUT HIRING ANY MANAGERS TO HELP THEM. For the past three years, we’ve heard the endless rumors about labels starting in-house management companies to manage their artists. I get this. If a business starts to tank, then it’s natural to seek alternative revenue streams that coincide with their current model. The problem is that many record labels have carried their same “king of the hill” mentality to the table on this issue. Management/Record Label relations have never been 100% on the same page. A manager’s job is to look at their artist’s career from a 15,000 ft. level and consider all the factors. A record label’s job is to sell records. Sometimes the mutual goals line up, and sometimes they don’t. Sometimes record labels look down on managers because they feel that managers get in their way, mess things up, or just plain suck. In many instances, I’d have to concur. There are some really good managers and some really bad ones. The trick is that a good manager or bad manager is not defined by his or her relationship with a record label. I think that many labels feel that managers don’t do squat. From personal experience, I can tell you that mentoring young artists, negotiating every aspect of their careers, and running point on everything from radio, PR, endorsements, touring, etc., is hard work. Any label that thinks they can sign one of these 360 degree deals and figure it out on the back end is going to get skinned, big time.

Wow. Makes you wonder whether any of the guys running these shops took Business 101 in college. From the looks of the list above, it would be pretty easy to suggest that the label folks were busy taking 500-level classes in Arrogance and Sidestepping Responsibility. The fact is that the problem faced by record labels is somewhat common in the history of business. It happens all the time – Changing Technology And Consumer Habits Renders An Industry Obsolete. How do you think the guys that made trains feel when someone introduced the airliner? How about the typewriter people when the word processor showed up? The list goes on and on. This is business and this is America. You adapt or you get to take your ball and go home.

The record labels are going to do what they want. Some will survive, many won’t. The good news is that this scenario has nothing to do with the death of music. People love music. Music is not going anywhere. It’s the way people consume it that is going to be different. 

My next article will address where Platform sees the future of music going, and what we are going to do about it. 

Chance Hoag
Platform Artist Management
11-2-07

It’s About The Artist, Stupid

 

The music business sure is tough right now.  Someone poured a huge bucket of acid on the entire industry, and it’s burned away everything not made of steel.  It’s quickly exposed the weak, the greedy, the fake, and the contrived – all that is being washed away.  But this is what happens in business – industries tend to take a hit at some point when the customer is not served well.  Invariably, something happens – a new model, a machine too big to change, a piece of technology that turns an industry upside down.  No doubt that all of the above has happened to the music business.  But I wonder if the above list is just the tip of the iceberg.   I believe that the root is much deeper, and I think it all starts with our industry asking, or re-asking ourselves one of the core questions of any business: Who is our customer?

 

I suggest that our primary customer is not a fan – it’s the artist.  We represent a product.  But that product happens to walk, talk, have opinions, good and bad days, etc. It is our first responsibility to serve the artist because everything flows out of them.  Within that artist, there are two areas of focus that trump everything else: 1. The personal well being of that artist, and 1.a the artist’s money. 

 

Do you know why 99% of artists hate their record label?  It’s not because of the people.  Most labels have some great folks.  They are nice and they care.  Artists hate their label because the deal sucks.  For decades if an artist wanted to make it they had to pay the toll of a record deal.  The toll is steep.  An artist gives up 88% of the proceeds for records, half their publishing, 100% of the rights to their work – forever, and they get to recoup the majority of the money out of their miniscule share.  Folks, that’s a middle of the road deal, and it’s just for starters.  Standard recording contracts suck.  Artists feel like they are subservient to record labels.  They feel like they work for record labels.  They see big buildings, nice cars, and well-appointed offices on the rare occasions that they visit their label.  Then they do the math and realize they’ve done a BS deal, and that deal will last their entire career, and it burns them up inside. 

 

It used to be that you had to do this deal to get a shot.  It’s not that way anymore, thank God.  A lot of people think record labels are about content.  Record labels aren’t about content, they are about distribution.  A record label makes about $4 a record – I get that.  But the kicker is that a distribution company makes about the same thing.  Therefore, when a record hits the store it already costs $8 without the store markup.  That’s already more than a CD is worth.  It’s the distribution fee that kills the deal.  Without that $4 charge, it’s pretty easy to recoup a CD – believe me, we’ve done it. 

 

What this industry needs are more people that place the best interest of the artist above their own.  A record label should not make more money than the artist.  The same goes for a manager or an agent.  Our job is to serve.  Yes, we work hard, but anybody that has a bird’s eye view into what it takes from an artist to make it, knows.  These artists and bands that are serious work harder than anybody.  Their lifestyle genuinely sucks.  It is just brutal.  If the artist happens to get rich, I assure you, they’ve earned it. 

This business is not rocket science.  The relationship between an artist and their manager is the key.  A manager must do three things well in serving his or her artist.  1. An artist must be put in the position to write good songs.  This is different for every artist.  You can build the base of a career without a big song, but at some point you have to have it to break through.  2. An artist must grow as a performer and tour wisely.  Look, in most cases, a new artist is going to not be very good live.  That’s OK.  You think Bono was a great front man out of the gate?  Wrong.  Heck, the two best artists I’ve ever worked with kind of sucked when they started.  They have to have the opportunity to get better.  In most cases this involves the manager biting the bullet, ignoring their agent and the label and forcing the artist to get on the road and suck in front of 100 of their own growing fan base instead of taking some big tour offer and sucking in front of 4,000 of somebody else’s fans.  That takes long-term vision and it isn’t going to bring in any cash.  It’s called artist development.  3. A manager must work to tap into an artist’s psyche.  This takes a lot of time.  Questions like; How are you doing?  How’s the girlfriend?  What is it about the show tonight that was good/bad?  Is the band getting along on the road?  These are critical questions.  A lot of times the artist is feeling something, but they’ve never been there before and they can’t figure it out.  It’s our job to help.  If a manager is not spending a serious amount of time mentoring – especially a new artist – then that manager is blowing it. 

 

Our industry has a product to protect, and that’s the artist, stupid.  Getting to the fans, using the Internet – that stuff is not near as hard as grabbing your gut and making the right decisions for your customer, and that’s the artist.  

Houston, Do We Have A Problem? A Very Brief History Of The Music Business And Reasoning Behind The Tanking Market For Music Sales

Most of us have read about the issue. Those of us in the music business are certainly experiencing the issue. The issue is that nobody wants to buy a CD anymore. Or is it? Let’s be clear – CD sales quickly going down the tubes is a tip of the iceberg problem. It’s the result of many self-inflicted injuries of the decision makers in the music business, including, but not limited to, greed, arrogance, and just plain clumsiness. It’s also the result of fast changing technologies, and a rapid shift in the attitudes of music listeners toward how they consume music. Notice that I didn’t mention illegal downloading, P2P, or increased leisure time spent playing video games. Those are obstacles, not problems. In one form or another, every business deals with some type of challenge to the way they do business or the way their products are sold. The real problem in this particular instance involves both the history of the music business and the inability of that business to recognize that the artist and the consumer, with a little nod from the Internet, were demanding that this business change course.

The media has provided us with all of the facts and figures with regards to declining CD sales, so I won’t bore you with all of that. Is it as bad as it sounds? You better believe it – like, waking up with a bear in your tent kind of bad. I can say, at least from where I sit, that the standard record label structure, and thus the record label conglomerates of the present are deader than a doornail. Please indulge me in a little history.

Modern record labels really started back in the 1930’s and 40’s. They figured out early on that they could take artists and their music and own a huge chunk of it. The artists weren’t prepared to do business with sophisticated organizations, and, in some cases, the mafia. Little know fact here – the mafia in Chicago and Detroit are the guys we have to thank for our modern day recording contracts. Anyway, these companies figured how to make a lot of money by distributing records through stores, and songs through the radio, which in turn helped to drive more records being sold in the stores. I’m in no way suggesting this was a bad or unethical move. As a manager, I have complete disdain for how much of a percentage the label takes peddling the creative work of it’s stable of artists – especially now. In reality, though, the record labels were just charging a certain ticket price for admission. If you wanted any shot whatsoever of your music being heard, then the marketing and distribution of those songs went through a record label. Period. The price of admission is around 88% of all record related proceeds and at least half of your publishing. You wanna dance – you get to pay the cover charge.

As the business matured through the decades, the entire scope of the music business came to be defined by the release of a record, or an eight track, or a tape. You see, new music drove the machine, and the machine made the vast majority of their money from hyping new records. Labels marketed new records with radio, PR, media events, etc. Artists followed suit by launching tours to support their new records, and by crafting merchandise to sell at their shows around the theme of their new releases. Through the process a lot of folks made a lot of money – managers, agents, labels, lawyers, and the list goes on. Comparatively speaking, the folks that tended to get the shaft were artists. Their record deals were bad, and sometimes their lawyers or managers took them to the cleaners. Don’t get me wrong, some artists made a ton of money. I say “comparatively” because back then, and up until about 5 years ago, any artist making a ton of money had others around him/her/them that were making more – a lot more. 

Anyway, a funny thing happened on the way to the bank. The music business was trucking along just fine and then something happened that would ultimately bring an industry to its knees. Sometime around 1983 or 1984, the music industry released the compact disc. You see, this shiny, small CD that sounded so good had a little problem that nobody paid much attention to at the time – it was a digital recording that could be copied as soon as computer technology caught up to it. And catch up it did.

The second and final ingredient in this recipe of disaster for record labels was the modern advent of the Internet. Not only could you burn CDs on your computer, but you could also send songs to all of your friends. Man, talk about instant distribution. So let’s flash forward to the present. The number one type of file sent over the Internet is peer-to-peer, and those usually contain ripped content like music. Even if you feel bad about downloading music for free (that puts you in a serious minority, by the way), you can go to iTunes, or any number of other online store and buy music for .99 cents a song. All of this, plus other factors, devalued the price of a CD. I mean, seriously, 11 songs isn’t worth $16, especially when I can, and do, get it for free. You should listen to me on this one. Heck, I love music so much that it’s what I do for a living. I’m really skimming the surface here, but you get the picture. If CDs are worth somewhere between nothing and just a little, then the music business has a full-blown disaster on its hands. All of a sudden record companies are bleeding money, which causes the distributors of music to get killed, which causes music stores to go out of business, which tightens supply to the market, which benefits the internet and,………..well, the downward cycle kills an entire business. 

My next article will discuss the record label’s various interesting responses to the record sales crisis.

Chance Hoag
Platform Artist Management
10-31-07

Platform Report From The Front Lines Of GMA Week And The Dove Awards

GMA Week, the busiest time of the year for those of us in the Christian music business is over. Four solid days of meetings, schmoozing, glad-handing, showcases, food, three-hour nights of sleep, and unsuccessful attempts at herding artists around like a bunch of wayward squirrels. I thought all week about this blog, trying to mine a couple of useful thoughts from all of the activity. But the one thing that kept coming back to me over and over, and something that I feel is important to discuss is the proliferation of shockingly bad hair that I saw on male musicians all week. Let’s get it straight – I am no prude when it comes to hair. I’ve had really short hair, really long hair – heck, I grew up in the 80’s – I had a mullet just like everybody else. Plus, I manage Kutless, Disciple, and Stellar Kart. I can handle guys with hair that is not so much of a destination as it is a journey. Upon reflection, I’ve decided to break down this bad hair into three categories. 

1. Bi-polar jet-black hair – I saw this hair on most rock bands. This hair is primarily categorized by being short in the crown and very unevenly shore – as if the offender was attacked by a weed-eater. In the front, though, the hair smoothes out and swoops down the side of the face, completely hiding one eye. It’s short on the sides but slightly long in the back. I’ve got a news flash for all of you guys with this hair. Boys, if it’s kind of short on the sides, and just a little long in the back – that is a mullet, a mud flap, a straight-up Kentucky waterfall. I don’t care how dyed it is or how unevenly it’s cut. A mullet is a mullet, and mullets are bad. Side note – this hair seemed to always be linked to a white leather belt. 
2. Bi-polar jet-black hair with bleached leopard spots – Basically take everything I said above and add uneven blond-bleached spots. Good Lord.
3. Chris York – This is a risky move, but I’ve got to give this guy his own category. Chris York is a young A&R guy at Sparrow Records. Chris’s father, Peter York is President of Sparrow. Now, in the EMI building, they scoff at saying the name Sparrow – they now prefer EMICMG, whatever that means. Around Nashville, though, it’s still Sparrow, or, in industry lingo, The Bird. I digress. Chris York has the biggest fro I have ever seen, period. I mean Ben Wallace, in his prime doesn’t hold a candle to Chris. Seriously, this thing has got to be a full 44 inches around. The mere thought of walking outside with this thing probably earns him at least one tick. I hadn’t seen Chris in a long time, but I caught a glimpse of him at a showcase, and I was so floored that I completely forgot about the band I was there to see. The real show was on Chris’s head. Give him credit – the A&R kid at Nashville’s most conservative label wins the strange hair award hands-down. 

Seriously, I’m not trying to make fun of anybody. I’m just disappointed. This is, after all, rock-and-roll. Can’t we mix it up a little bit? Why does everybody have to look the same? Why does the template have to look so silly? I’m throwing down the gauntlet right now. Next year, the hair award better not go to a label guy. Bands – you have been challenged.

Chance 
5-3-07

Lessons From The Newsboys “Go” Tour

Welcome to Platform’s first blog. This is Chance Hoag and I will be writing all blogs. My business partner, Darren Tyler, is too busy to mess with stuff like this. I will be writing from time to time when I see something or learn something that bears repeating. All of this will come from an “inside the music business perspective”.

I’ll admit it; I said the Newsboys were dead – six years ago. One point five million records, countless tour dates, two jets, a ton of eyeliner, and who knows how much money later, the Newsboys are in the midst of their most successful tour in their long history – despite a record that is, comparatively, not selling well. I’ve watched this from the front row, because two of our artists – Stellar Kart and Kutless, are direct support on this tour. How does this happen? I mean, how do four relative geezers pull off a handful of 4,000 – 8,000 seat shows? I know exactly how.

1. Bring the show. Regardless of the type of entertainment – this, in particular, being Christian entertainment – you must entertain. Sounds easy, but a lot of folks in our industry have forgotten this. The Newsboys don’t just bring a show; they bring a circus wrapped up in the 4th of July. Big lights, huge video screens, confetti cannons, rising catwalks, and spinning drum sets – this thing is a spectacle. I mean, I hate Breakfast In Hell, but this is pure entertainment by any standard. 
2. Bring the ministry. Peter Furler is a new man. Every lead singer in the Christian music business ought to be required to watch this guy. He is our industry’s perennial entertainer. Most importantly, he’s also serious in talking about God. Peter takes a lot of time to encourage and exhort the body of Christ. He does it in a way that’s fresh, passionate, and sincere. And it works, BIG TIME. Not only are people encouraged, but also they knock each other down trying to get to the Newsboys merch table. 
3. Bring a “no-fluff” package. There is no way for this not to sound like I am bragging on some of my clients. So be it. The Newsboys understand that the concert market is brutal. To put together a successful tour date, you must have what agents call 1+1=3. That means that the sum of the tour package must be greater than it’s individual parts. The Newsboys are wise enough to know that the only way jr. high and high school kids are going to their show is if their youth pastors make them. Kutless brings rock kids and don’t tend to offend parents, and Stellar Kart brings girls. The Newsboys bring families. Add that up and you’ve pretty much covered everybody. 

The Newsboys, Wes Campbell (manager) and company have built a longstanding career by being smarter than just about everybody else. These guys “get it”. You won’t find me predicting the Newsboys demise ever again.

Chance 
4-5-07