Flushed with success:
The record biz is making big money- so why is the music so poor?
by David Serchuk -Boulder Weekly 3/18/99
Many musicians get into the music business and expect to be broke.
There are reasons for this: touring is expensive, there is intense
competition, and it's expensive to make albums. The difference these days
is that when it comes to being broke these m usicians are not alone. They
have company: record industry executives. This is perhaps best signified
by January's mega-deal in which the Seagrams Company bought PolyGram and
merged it with their own record company subsidiary, Universal. The new
supercomp any, dubbed the Universal Music Group, now controls 23 percent
of global record sales, by their own estimates. Such celebrated labels as
Geffen and A&M were later acquired by UMG in the deal, and A&M was
summarily shut down. Universal now also controls Is land Records as well
as Mercury Records. Up to 3,000 employees of those companies are expected
to be laid off while hundreds of bands will be cut, according to UMG.
These unprecedented acquisitions and firings are signs of deep-seated
trouble in an industry that has steadily undermined itself with
short-sighted marketing strategies. Instead of investing in recording
artists for the long haul, nervous, out-of-touch labels gamble on one-hit
wonders like a dogtrack sucker who thinks the only way to riches is
playing 99-to-1 longshots. And the real victims of the industry's
go-for-broke approach, ultimately, are the record-buying public, who are
forced to choose from o verplayed hits and weak, unpolished work from
bands that have been pushed on the air before they're ready.
A Titantic year
Last year was a rebound year for the industry in terms of raw sales.
However, while the Recording Industry Association of America's assertion
that 1998 saw "very healthy growth," with sales of $13.7 billion, up 15.1
percent in dollar value from 1997, RIA A figures also show a dollar value
decrease of 2.4 percent in 1997 from 1996. Seen against the backdrop of a
largely stagnant market, sales growth in '98 was modest.
"There was an enormous boom in the '90s in record sales, and that really
hasn't sustained itself," says recording engineer Steve Albini, a
respected champion of the independent record movement as an artist and
engineer (Big Black, Shellac) even as he wor ks the other side of the
fence as an engineer for such major label bands as Page and Plant, and
Bush. He believes the reason for the less-than-overwhelming growth is
simple: bad music. "People within the industry are always looking for
reasons other than the dreadful music. They're saying, 'Oh, people are
using the Internet, people are becoming more shut in, more and more people
are invalid ...' They're always trying to find some reason why people are
not buying records other than the fact that the record s are awful."
The industry has remained afloat because of a few hugely popular songs,
some insiders say. "I keep being reminded by the trade publications that
it's a good year 'cause sales have increased," says Warner Brothers'
director of publicity Rick Gershon. "Bu t essentially I think sales have
increased for a very few artists. The field has narrowed."
"It's getting back to the blockbuster mentality where you make all your
money on the record that sells three million copies," says Geoffrey Weiss,
vice president of A&R for Warner Brothers. "Many of the articles I read
say if you back the Titanic numbers
out of the record sales last year that business was actually down." (Sales of the
Titanic soundtrack and Celine Dion's album Let's Talk About Love, with the hit song
from the film, "My Heart Will Go On," totaled over 16 million. Those two albums alone
in
creased album sales 4 percent over 1997.)
Driven by hits, the market has experienced healthy growth in CD singles.
In fact, CD singles in 1997 were up 54 percent over 1996. All told, CD
singles sales rose 200 percent from 1995 to '97, the RIAA reported. And
while sales dropped 16.1 percent in 19 98 from 1997 the RIAA reports "the
market was actually stable for singles-it was the previous year that was
an anomaly because of the impact of the Princess Diana tribute." The
single in question is Elton John's "Candle In The Wind 1997" which was the
wor ld's all-time biggest selling single, says the RIAA.
That singles are carrying the industry isn't necessarily good for music
buyers or musicians. With the business leaning so heavily on blockbuster
hits, acts are forced to pay hundreds of thousands of dollars to produce
records glossy enough for radio, sa ys Weiss. Then these acts are
discarded if they fail to immediately climb the charts.
You never give me your money
The financial losers of the above equation are the musicians. Most bands
on major labels almost never get paid any significant wages unless they
have a major hit. Why? Because bands usually have to pay back their labels
the vast sums of cash advanced to them so they can make an album.
"Every penny a major label puts into 'em the band has to pay back," says
Kyle Wofford production manager at Boulder's independent record label,
What Are Records? "What's even dirtier is that if a band gets 8 percent
royalties, only their 8 percent goes t owards paying back their costs," he
says. "So the label says, 'we didn't make any money from this,' ... but
they already got paid back by the band in all the sales," Wofford adds.
"The band never sees a dime until they sell all sorts of numbers, like a
million albums."
In an article for Maximumrocknroll (June 1994), recording engineer Albini
outlined how the accounting works against bands.
Albini created an imaginary band that receives an advance of $250,000 to
make an album. Even if the album sells a respectable 250,000 copies, the
band will still be in debt. According to big label accounting, the
numbers add up like so: At a royalty of 13 percent (which is considered a
good rate) the band makes $351,000. From that they subtract their advance
of $250,000, $40,000 in producer's points, $25,000 for promotional budget
and the recoupable buyout from their previous label of $50,000. This lea
ves the band $14,000 in the hole.
"That article was written ... during a period when rock bands were being
signed really aggressively," Albini says today, adding that although major
labels are no longer going after rock acts with huge wads of cash in hand,
"the principles of the behavior of the music business are exactly the same."
Take The Samples for example. This local band went the major label route
twice-the first time with Arista in 1990 and then with MCA in 1996. In the
process, they learned first hand the pitfalls of the major label
instability.
According to Sean Kelly, lead singer/songwriter/guitarist for the band,
the deal with MCA went south not simply because of the expense of their
album Outpost ($350,000) but because of another trait common to major
labels: All the people at the label who signed the band either left or got
fired. "The very people that signed us, and were very enthusiastic about
our music, were all fired ... From Richard Palmese who was the president
... to Mitch Brody who signed us," Kelly explains.
Then when the new regime at MCA-which was headed by MCA's current
president Jay Boberg-came on, Kelly says they were less enthusiastic about
his band. For instance, the new MCA honchos refused to make a video for
them. Kelly felt a video was crucial to p ropel them from a popular
touring act to nationally known stars, as MTV continues to be highly
influential in determining popular tastes. The opportunity to make a video
was also a large factor in why the band had signed with a major label to
begin with, Kelly says.
MCA failed return calls seeking comment on the band's predicament.
Then, as the band prepared to make their second album, the label's new
regime bought them out, striking a deal that gave the band moderate income
for a year, says Kelly. But it was far less than the $350,000 that the
company would have expended to produc e a new album.
Mass firings like the one that occurred at MCA make it difficult for
bands to succeed. But, laments W.A.R.?'s Michael Bianco, such mass firings
as Kelly spoke of are common. "A lot of the firing is just placing blame
on somebody else," he says. "Like at a major label if the head of a
department gets fired, half the department under him could get fired at
the same time ... More people get fired in the record business than I've
ever seen anywhere else."
Geoffrey Weiss, vice president of Artists and Repertoire (A&R) for Warner
Brothers Records, Burbank, agrees that firings "happen a lot," especially
in A&R which is usually the artist's most direct link to the company. In
this department, a staffer's life span at a label averages three to five years.
Had enough of silly love songs?
These mass firings can also have a major affect on the music the consumer
hears-or at least that was Melissa Ferrick's experience.
Singer/songwriter Ferrick (also currently signed to W.A.R.?) was hot
property in 1991 when, at the age of 20, as an unsigned artist, she toured
with Morrissey. This tour included a big show at Madison Square Garden.
Soon a small bidding war ensued, and s he signed with Atlantic Records.
"I was fed the verbal promise that this was about making records for the
rest of your life, this was about building a career," she recalls. "What
happened was what happened all the time: presidents change, A&R people
change." She explained that eventuall y she ended up with the same A&R
person as Hootie and The Blowfish. When that band hit big with their album
Cracked Rearview she was basically forgotten. Next, Ferrick says, Atlantic
went on a spending spree and began to gobble up smaller labels and soon
found themselves with a surfeit of female artists such as Liz Phair, Tori
Amos and Juliana Hatfield. Then, when Atlantic found itself over-extended,
they started dropping acts (Ferrick says 30 to 40) just as quickly.
Atlantic also failed to return calls s eeking a response.
Atlantic picked up her option to make a third record to follow up Massive
Blur and Willing To Wait, which she had already recorded for Atlantic. Two
months later, she had a meeting with company executives at a coffeeshop
where they said: We're going to d rop you. "So I got bought out of my
third record," she says.
She got $32,000-significantly less than the $150,000 or so she was
allotted to make Willing to Wait.
Can't buy me taste
Major labels have proven unable to buy success. This proved true even as
they bought smaller labels that they believed were more in tune with the
breaking trends. "The labels that were acquired by the major labels in the
feeding frenzy of the '90s-labels like Sub Pop (Time-Warner) and Matador
(Capital)-had never operated as profitable businesses anyway," notes
Albini. "They were bought on the chance that they might figure out who
might be popular next. And it hasn't panned out."
The Denver band Foreskin 500 got snipped by these major-label financial
miscalculations. Foreskin bassist Dave Moore recounts that the band was
signed to Basura, which was a subdivision of the rap label Priority
Records in 1993. At the time, Priority ha d signed many rock bands, just
as Atlantic did, in the wake of the grunge explosion started by Nirvana.
"They went on a frenzy signing bands," Moore says. "There was so much
crap on there-The Rugburns, ever hear of them? That guy was best friends
with the VP. Of course they went way over-budget and the head guy's like
'We're dropping the rock department.'"
Foreskin's third album, Starbent But Superfreaked, was no sooner released
in 1996 when the label decided to shelve it, Moore claims. The band faced
either buying the project back from the label or finding another label to
do it. The struggle and disappoi ntment of that process contributed to the
band's break up, Moore believes.
Melanie Tusquellas, who was co-president of Basura, remembers signing
Foreskin 500. She had begun working with Stephen Drath, CEO of Priority.
He helped her start Basura. But two months later, he left the company and
was replaced by general manager Art J aeger, a "notorious industry
bastard," Tusquellas recalls, who had no enthusiasm for Basura.
Basura floundered under Jaeger amidst a music market glutted with flannel
and fuzztone acts. None of the five rock bands on Basura was able to sell
more than 8,000 records. "A pretty low number," notes Tusquellas.
The aftermath of those mid-'90s marketing mistakes is still affecting the
industry, according to Weiss. "Grunge is finished," he says. "But all the
lawyers and the A&R people that it brought up are all in place."
Seeing what sticks
As their buying frenzies demonstrate, major labels often put little
thought or research into new bands and coming musical trends. More often
than not they simply throw a hundred bands against the wall and see what
sticks. Once a new band is signed, a com pany typically throws money at
the them. If their first recording doesn't hit big, they get dumped.
That approach angers Warner Brothers' Gershon. "I find it incredibly
frustrating that the term 'artist development' has disappeared from
everyone's vocabulary," he says. Gershon adds that major labels used to
create what were called "development deals" u nder which they would allow
a young act to mature, tour and develop. "It doesn't happen anymore and
(bands) are developed to burn (out) quickly," he says.
Gershon adds that if a band fails to sell at least 100,000 copies of
their debut album odds are they won't be resigned, due to the expense of
today's deals.
Weiss says there is fierce competition for unproven acts because as the
technology to make CDs has gotten much more affordable, more labels have
sprung up. Also, with more labels there are more A&R scouts to find new
talent, and that drives up the price of signing acts. "Doing nothing,
even if it's in the best interest of the company, is never in the best
interest of the A&R person," Weiss says. "You don't make a name by being
cautious."
Deal-hungry A&R reps have helped send the cost of major label contracts
through the ceiling. Just seven years ago a band could get signed-which
often included album expenses, and tour and video expenses-for $100,000 to
$250,000. Now similar packages run to $3 million.
The downside: "Unless you have some success right away you can't have a
career," Weiss says. "If your first record requires a $500,000 commitment
from the label and we sell 30,000 records, the math doesn't work."
Most bands know the large deals work against their longevity, according
to Weiss, but they sign anyway "because their odds of making that much
money any other way are equally slim."
Mike Jerk, president of Boulder independent punk label Soda Jerk, agrees
it is often a disadvantage for young acts to sign big major label
contracts because these contracts usually require them to pay back some or
most of the expense of touring. "They're all such new bands, they've never
really built up any sort of grass-roots fan base," he says. "So they're
going out there and they're hacking at it just like an indie band would,
but it's costing them five times more than an indie band driving around in
a van."
But Melissa Ferrick, disagrees that big money deals work against the
artist. "I don't think their investment has anything to do with whether or
not they drop you," says the singer/songwriter. "The people who make the
decision to drop artists are ... busi ness guys. And they print out a
sheet and it has a yellow line across it. And if you're not at 80,000
units, you're not at 80,000 units."
Music by the numbers
The mega-merger that formed Universal Music Group heralds an era of fewer
labels controlled by music people and more by "bean counters," according
to Frank*, a former executive at Universal who was laid off in the last
wave of firings. He compares the me rger and acquisition frenzy in the
recording industry with the conglomeration of FM radio in the '70s, when
large companies bought out smaller ones. "That kind of took them a step
away from being intimately involved with the music and the artists," he
say s.
Weiss at Warner Brothers fears that the Seagrams buyout will start a
trend that further alienates "music people" at labels. The new bosses, he
says, tend to come from industries like alcohol or electronics. They
demand steady sales increases in an indust ry that is inherently fickle.
"There's expectations of a certain level of profit," Weiss says. "All
entertainment business is cyclical. There's no way you can say we're going
to make 10 percent every quarter. But that's what stockholders want ...
When you have those kind of expectati ons the only way you can achieve
those kind of numbers is by firing people."
And fire bands. Good bands. One band that got downsized was Denver's 16
Horsepower, who got their pink slip last month from the now closed A&M. A
quirky band with an original sound, 16 Horsepower features the harrowing
Old West vocals of David Eugene Edw ards and such strange (for a rock
band) instruments as banjo and hurdy gurdy. Despite strong support from
music critics, the band simply wasn't a platinum act. Their 1998 album Low
Estate failed to sell big. Neither did their debut, Sackcloths 'n' Ashes.
However, the label signed a contract with the band before their third
album could be made, then opted out of the deal with a buy-out.
From this experience 16 Horsepower's drummer Jean Yves Tolla says he
learned that a band's health has a lot more to do with the health of their
label-and their contacts there-than he thought. "What's really important
is to make as many allies in the reco rd company as you can," he advises.
"Have someone you deal with not only on the A&R level but in publicity,
promotion ... Every department has a key person with whom you should
establish a relationship" to keep the band from going down when a key
contact parts ways with the label.
Charting the future
Melissa Ferrick feels that the future could herald the return of the
producer as the dominant figure in the industry with such
artists/producers as Puff Daddy and Wycleaf Jean filling the role that
Phil Spector or Berry Gordy filled in the '60s. That is,
a producer with a stable of artists, each of whom work a different aspect
of that producer's "sound."
Steve Albini agrees. He says that major labels will continue courting
"record producers who make dance-pop music." But Albini also notes that
the crazy chase-the-hottest-act trend will continue. "There was a period
where anything with a trombone called a ska band was getting signed," he
explains. "Now it's anything with a guy named Big Daddy that's a swing
band is getting signed."
This reinforces the trend toward more single sales, Leland Rucker,
managing editor at Blues Access magazine (and former editor of Boulder
Weekly), laments, predicting we just may be headed for the "end of the
album era."
This singles-only tact has contributed to the industry's losses in
catalogue sales, which had been a reliable source of income. Catalogue
sales, says W.A.R.?'s Wofford, could continue to drop as Top 40 radio
burns out listeners on newer artists. "With ra dio (listener surveys) they
have an actual burn-out question, where they call you once a month, and
ask you 'Are these songs that you're familiar with? Do you like 'em?' And
then they say 'Are you burnt out on this song?' When it gets up to 60
percent, th en the radio station will stop playing it.. (By then) 60
percent of these people can't stand this band anymore."
Melissa Ferrick adds that the industry will hurt itself if major labels
sign a multitude of bands but only try to "work" one or two-as has been
the pattern for most of the decade, she says-rather than sign fewer acts
and work each one more.
"You can't work 400 acts," she says. "It's impossible. Now the majors
have figured out if we have ten acts, and work these ten acts the way we
work Jewel ... that's a lot of records (sold). And if you have 100 acts
and you don't work 99 of them, but you work one of them, and (they) sell
14 million you're still gonna lose money."
Weiss adds that this so-called blockbuster mentality is "not healthy" and
makes it difficult for major labels to do "intelligent planning." Still,
he says this model is attractive to major labels because the blockbusters
are "the only way to give corpora te number crunchers the
numbers they want to see."
Hope for good music
Philip Walden is an Executive Vice President at Capricorn Records, a
family-run independent label based out of Atlanta that has tripled its
sales in the past five years with a roster of tour-heavy acts like
Widespread Panic and Gov't. Mule. Walden says Capricorn has indeed tried
to work with bands that have a steady audience. The la bel has grown, even
without a blockbuster.
Their successful bands, like Widespread Panic, have a loyal clientele
that buys their albums. In the case of 'Panic, they average 200,000 sales
per record.
Walden says the main thing Capricorn offers over a major label is
stability. This stability in turn helps give bands a launch pad from which
to build a career. "Whether you like us or not, it's the same people that
have been working here for seven years, " he explains. "For all the
supposed security that a major label offers, you only have to look at what
just happened at Universal to realize that there's no security there."
Perhaps if Capricorn can make a profit with bands that aren't
chartbusters, other labels should be able to do so as well. If they would
put down the latest Billboard charts and open their eyes, major label
executives might see the light. Or at least hear
the music.
-george
