Record labels of the future must empower artists, say Music 4.5 speakers

MUSIC/COPYRIGHT: Today’s music companies should empower their artists by giving them more creative and commercial freedom, if record labels are to survive in the recorded music industry’s future.

That was the key advice from top executives during debates at a recent industry event called The Record Label of the Future?, part of the London-based Music 4.5 series.

After years of watching CD sales nosedive, record companies have been in danger of being side-lined in an increasingly tech-centric music business.

Disillusioned artists, from the late Prince to 2017 Grammy Award winner Chance the Rapper (his new album’s image below), have shown how digital tech, social media and streaming platforms like Spotify enable music acts to record, market and distribute their own recordings.

Record labels should be prepared to treat signed artists as business partners who have an equal say in their career development, the Music 4.5 speakers concluded.

Geoff Taylor, CEO of British music industry trade organisation BPI, declared: “We’re seeing a more patient approach to artists development because that is what the streaming era demands. It is about managing complexity and maximising opportunity. (Recording) deal structures are getting very flexible.”

Gone are the days when aspiring artists would sell their soul and all their music rights for the advance cash, plus the distribution-and-marketing services supplied by the record companies.

Times are also changing for labels, which have traditionally relied on only the sales of recorded music for revenue. They have accepted they need to be more accommodating about artists’ contributions to their business.

A 21st-century label needs to consider offering services linked to a signed act’s concert tours, public performance rights, sync deals with TV/radio broadcasters, and develop sophisticated playlist and other digital marketing skills.

Moreover, artists should be offered the option to retain their copyright; draconian contracts are no longer hip, whatever the perks.

“Labels are taking a long-term approach to artists,” Taylor added. “Labels will back an artist during a few single releases,” even when the artist may not have plans for an album.

He said taking that flexible position is beginning to pay off in the UK, where streaming revenue increased five-fold in the past five years, and 70% in 2016 alone. In 2015, more than 17% of albums sold worldwide were by British acts.

It has required solid financial commitments such as the estimated 25% of annual turnovers that British labels invest in A&R (artists and repertoire), compared to 17% at the global level. A further 20% of British labels’ revenue is spent on marketing the artists and their music.

Other Music 4.5 speakers emphasised music companies’ need to treat artists as working partners with a vested interest in the labels’ creative and commercial growth.

“That partnership means providing flexible services to meet the needs of the artist. There needs to be an alignment of interests between the two parties,” said Paul Hitchman (pictured below), President of Kobalt Music Recordings, which launched in 2000 as a label-services alternative to traditional labels.

“Artists are always looking for as much information as possible about what’s happening to their music and with fans, and how they can use that information for marketing and touring decisions,” he added.

“We add value to that data with insights because you need to be able to operate, think and plan globally these days.”

Alistair Norbury, of Germany-originated global music group BMG, confirmed several traditional labels are dropping old practices that in many cases enslaved artists.

As Executive Vice President International Artists, Norbury recalled how BMG used to be part of the multinational record label Sony BMG, until its parent company Bertelsmann sold its 50% stake to Sony Corporation in 2008.

Since then, BMG has restructured its business to serve artists, not own them, Norbury said.

“We’re not a traditional label; we started as an artists-services company and do not use the old (business) model of successful artists bailing out struggling artists,” he said. “Our business is driven by digital tech. And our standard model is a 75-25 split, with all our artists getting 75% of their digital revenues.”

Investing in a creative sector like the music business has never been easy. Compared to physical properties, intellectual properties have always been more difficult to define and protect.

With more accessible DIY (do-it-yourself) digital tools in the market, some artists have chosen to go it alone, and some are reaping the rewards.

In February, US act Chance the Rapper became the first artist in history to snap up Grammy Awards (he won three) without having neither a label contract nor any of his music available in a physical format (CD or vinyl). His mixtapes are either free or rely only on streaming platforms for income.

Regulators are also wading into the controversy surrounding artists’ contracts. South Korea’s Trade Fair Commission recently ordered the country’s powerful talent management agencies that also own labels to drop the unfair “slavery” contracts ambitious trainees are forced to sign.

Some Music 4.5 audience members noted that the newfound freedom could see artists signing directly with streaming music platforms. In fact, Chance the Rapper has disclosed that he was paid US$500,000 to make his new Coloring Book album available exclusively on Apple Music for two weeks only.

However, BPI’s Taylor reminded the event’s delegates that artists would always need labels, even if their relationship changes. “Streaming services have their hands pretty full to be taking on other complicated activities. We can’t be complacent. There are numerous systematic challenges.”

Also speaking at the event was Paul Pacifico, CEO of UK independent labels organisation AIM, who noted that the complexities of investing in music are not going away any time soon.

“We’re in an emotionally nuanced industry. We’re looking at an increasingly complex market. And artists need someone to help them navigate an emotionally fraught landscape,” he observed.

“There are even some of our members who believe artists could be better off with the old system. But every artist’s career is different, and services need to be tailored to that.”

The Music 4.5 event took place in February. The next one is in New York.