Traditionally, when you start to make music you’re looking for three things:
- A manager
- A record deal
- A publishing deal
Of course, that third one is only if you’re a songwriter or composer. But these are the three ways you, as an artist, will look to turn your IP into profit. We’re currently moving through a paradigm shift in music – and the internet more broadly – when it comes to creation, ownership, fandom, and monetization. As this process accelerates, the previous traditional deals and contracts will also shift, adapt, change, and potentially subsumed by other types of agreements. But let’s start with some recent history on those traditional deals.
The Manager
As the music industry’s bible puts it, the single most important thing is the team an artist puts around themselves to help them grow. The first person they usually find is a manager. Together, the artist and manager work to put the music out into the world, attract fans, go on tour, build a brand, etc. Because the manager and artist should have a complete alignment of interests, the manager usually gets a flat fee on all the revenues that come through from the artist’s IP. Unfortunately, just as traditional as the mostly symbiotic relationship between manager and artist so is the fact that it’s based on a ‘handshake deal.’
Even one of the most famous independent artists, Chance the Rapper, and his manager, Pat ‘the Manager’ Corcoran, worked together for years on nothing more than an oral agreement. Even when they set up three separate companies to support merchandise, touring, and other income derived from streaming, licensing, etc., they never signed an official agreement together. Eventually, the relationship turned sour and first Pat sued Chance, and then Chance sued Pat. What’s most striking about these lawsuits isn’t the money involved, or even that the manager-artist relationship was based on a handshake deal, but how personal the filings are. What shines through everything is a deep and particular relationship. Reading those filings also shows how the manager involves themselves in every aspect of the artist’s career and brand. Again, this is aided by the monetary agreements. But if the artist is a brand, and in Chance’s case a brand with three different companies, then the manager isn’t a manager but a COO (chief of operations) to the artist’s CEO (chief executive officer) position. As artists develop this brand and entrepreneurial side of themselves and their music, they would do well to look for COOs instead of managers. The products and vision related to the music has changed from the time of the artist-manager relationship heyday.
The record deal
The proverbial golden egg that most musicians still want the most. Why? Status, advances, global marketing power, etc. There’s still a lot of pull from having a big, established, company look after your production, distribution, promotion, royalty registration and collection, and that takes care of the necessary clearances. And there’s something to be said about the luxury of an advance to help you produce your album. But that luxury comes at the expense of ownership as you mostly sign away the rights to your music to the label.
Moreover, the promise of revenues once your album is out, the royalties you agreed on, disappers into thin air when the cost deductions are taken into account. Lisa ‘Left Eye’ Lopes once did some fantastic napkin math on this. https://www.youtube.com/watch?v=PKEjTTKGIUo
How this works? It’s all about the language in the contracts. Remember when Kanye West dropped his contracts onto Twitter? There’s a helpful clause in there about ‘recoupment’. It goes as follows: “all costs incurred by UMG in connection with the … album shall be included in costs when determining recoupment.” So that’s all costs without a specific definition of what they include. For a contact which otherwise wins out in how it specifies everything, that’s remarkable. It’s also industry-standard. All in all, Kanye was not on a bad deal with his record label, but that’s beside the point. What matters is that artists do not retain their own rights.
The publisher
When you’re a songwriter or composer you deal with publishers. Throughout the 20th Century most of the money coming in through copyright flowed to those songwriters. That, however, is changing. Partly, because of how some of the rights these publishing deals are based on are archaic. And partly, because of how the industry has developed an ever increasing focus towards recorded music.
The former relates to things like mechanical rights. Something developed in the USA in the early 20th Century to make sure that composers would get paid from this new technology called the pianola, or player piano.
Nowhere and nobody in more than 100 years has been able to actually change the copyright. Instead every new technological development has been shoehorned into this mechanical right. At the very least, it should now be an electronic, or digital, right. Some moves are being made towards the establishment of digital rights, but what’s clear is that copyright will always lag technology.
Besides, whenever a new technology pops up – be it audio streaming, video streaming, creator tools, etc. – whoever is charge doesn’t do any deals surrounding copyright. Then, when a new company gets a big user base, the first ones to come calling are the major record labels. They represent the recording artists, not the songwriters or the composers. Hence, the first deals bring the money towards those labels, and officially to their roster of artists.
There’s another reason songwriters and composers are being left behind by recorded music in the flows of money. Record labels tend to invest in start-ups while publishers do not. Take Spotify, all three major labels invested in the early phases of the company. Hence, when they went public in 2018 they all stood to make quite the windfall. Of course, they all promised to share these profits with their sub labels and artists. But look at Sony Music, who was the first major to sell part of their stake in Spotify. They earned roughly $750 million from selling 50% of their share in Spotify. Not long after, Sony took a 60% share of EMI Music Publishing, valuing the company at $4.75 billion. EMI, at the time, held a catalogue of around 2 million songs. The full value of the company was solely based on the songwriters it represented. And Sony’s increasing profits also came from a streaming economy that flourished on the back of those same songwriters. And yet, those songwriters didn’t see any direct returns on these deals.
So what’s next in the paradigm shift?
So far, we’ve learned that even a forward-thinking partnership like Chance the Rapper and Pat the Manager still held its roots in old-school handshake deals. And we all know that the current streaming boom isn’t the best in terms of generating revenue for the average musician. Moreover, as catalogue music grows in stature, where does this leave new music? Or, what does a shift away from albums, and even singles, towards creation and personality mean for those flows of money?
I’ve written previously how it’s important that we have new entities and start-ups fighting to make sure that we don’t end up with unassigned royalties. In contrast, I’ve also written about how Web3 envisions a world without copyright. In that piece, I ended with a note on how that vision is still potentially decades away (there’s a great article by Dan Fowler [paywall] for Water and Music that also goes into this). In the meantime, we do well to heed Bas’ call to provide a social context to the current NFT phase of Web3 development.
So what’s next? Riding the waves as they come and experimenting with these new modes of growth. Make sure to focus on good growth, growth that enhances your ideals and the music involved. Instead of looking for a manager, experiment with a DAO structure. Instead of sharing 15% or giving away your copyright to a label or publisher, see how you can share, or fractionalize, ownership. One thing to learn from the artist-manager relationship is that to grow together a complete alignment of interests is necessary. That still counts in Web3 modes of working together: any upside is created together, whether it’s creative or monetary. Music’s paradigm shift is communal.
