Overview
Record Labels have been the typical vehicle to success for composers. Labels have the necessary assets to cover the costs of an entire release cycle. That includes music videos, appearances, shows, studio time, and numerous other expenses for marketing endeavors. However, there have been many discrepancies between the two parties. The disagreements over ownership, distribution rights, and compensation led to composers detaching themselves from conventional label deals.
Structure of Contracts
Record labels essentially behave like venture capital firms. When a label invests vast amounts of capital into a composer, they seek a return on investment through shared ownership of music released throughout the partnership. No two record deals are alike, as each composer has changing variables. Nonetheless, composers utilize labels across every career stage as a financing vehicle for large sums of debt in the form of marketing. However, new composers are riskier for labels to invest in because of the lack of history surrounding them. A composer can have a sizeable audience, but they may not be received well in a larger market. Therefore Labels will keep their time horizons into a new composer for about a year. The firm builds recoupable cost and distribution rights into its contracts to stay risk-averse. Furthermore, the composer will receive a cash advance with the contract's inception. The cash advance in debts the composer to which is paid back throughout the life cycle of the partnership. Because composers lack access to capital before entering the deal, they often do not possess the legal competence needed to parse the language of their contracts.
A Pivot to Independence
The absence of negotiation has been the leading cause of a change in pace. The rise of popular independent composers began around 2015-2016. It was made possible by innovations in technology and social media. Traditional music distribution became disrupted after composers started using YouTube and SoundCloud to release music. These companies allowed composers to upload songs to their platforms and access large markets easily. Other competitors entered the market, such as Spotify and Apple Music, attaching incentives for composers to utilize their platform over another. Although Spotify and Apple music became dominant players because of their incentives, they narrowed access to critical markets. The use of Intermediaries soon after became popular as they helped expedite the process significantly. Companies like Distrokidd, United Masters, and Tunecore were established as a one-stop shop for distribution. Providing services to connect the composer to all major social and music platforms, assisting in managing releases allowing the composer to fully own their distribution, establishing marketing campaigns, and allowing access to 100% of earned royalties. The control over every aspect of music production has reached unprecedented levels following these innovations. The business model is so attractive that even veteran composers are pivoting. In 2018 Young Dolph had announced walking away from 22 million dollars to remain independent and bet on himself. His endorsement of UnitedMasters, a budding intermediary, galvanized many composers to explore their options as independents.
Outlook
Record labels will still own a large share of the distribution of music. Label financing can be a great tool in the right hands. Increasingly, however, more composers are claiming a stake that will change the structure of record labels. Established composers are gaining market share with the creation of composer-led record labels. The development of composers will become the new strategy as firms continue to look for ways to cut costs. Since the Covid 19 lockdowns in 2020, studio software and professional audio producers' have seen significant growth in sales. Composers are increasingly acquiring studio production skills, which will ultimately reduce studio costs for record firms given continuous training to the composer. Additional revenue streams and increased compensation from music streaming have been on the table. Spotify has led the charge in paying out more revenue to composers, which caused Apple to adjust its position. Lastly, technology continuously disrupts the music industry as firms and composers have to optimize their strategies to reach profitable markets. NFT tickets to live events, once fine-tuned, may prove helpful to firms in driving engagement and raising quick capital.
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