The Cat Fight Between The Music Biz Haves and Have Nots

The music industry is intriguingly divided on the artist side by those artists that already have a brand, and those that do not. The clearest divide is between the mega stars, and the unsigned. And though it would seem that both rich artists and poor artists play for the same team, in truth their interests are divergent.

Major labels have played and continue to play a critical role in the development of new bands. While that role is indeed anemic compared to how thing worked a decade or two ago, the label’s most important role is still as banker. They invest money in artists that typically don’t have any – both money for the artist’s pocket (profit), and money for the artist’s development.

Many new artist need this. We can certainly argue about whether there are some that don’t -- personally I don’t think there are that many. But there is little argument that to many, the per-record advance check, the validation of a label, the promotional budget, etc. are all critical. Despite the breathless arguments to the contrary, there are precious few artist that are anything close to successful (i.e. at minimum able to sustain themselves from just their artistry) without having had a label deal.

But what is really interesting here is that artists that are established enough that their touring businesses are substantively profitable don’t need the labels anymore. Many are excited at the idea of leaving. The reasons for this are primarily economic. If you can put out your own record, and you have a real fan base, even if you sell far less records, you can keep all of the money. So you can sell five or six times fewer records and still do better financially.

Of course the reason the label gets to keep so much money is because they invested early when no one else did, and the likelihood is that most artists are, as a business proposition, losers. This is not intended to offend, its just statistics. Most artists don’t make money for their labels, so economically, for most artists, a label deal is a windfall, because the odds are they were never going to make it anyway, and so that label advance really is pennies from heaven.

And just like all portfolio businesses, whether venture capital, or movies, or music, you make up for all the losers with the handful of winners. This is the Faustian bargain that artists make. If you have a crystal ball, and know you are going to be a hit, you still need to sign away most of your recorded music revenues because you need the label for exposure – and possibly to eat.

And so what is fascinating is to watch artists who don’t need the labels any more talk about them as though they never needed them. Whether its Joss Stone, or Lyle Lovett, or any of the others who proclaim to hate the system that has made them rich and famous, this tension is intriguing. Because the vast majority of new artists who don’t have a major label deal would indeed love to have one. Because, like it or not, there are few paths to fame and fortune for the unsigned.