[InclinedPlane]

Yes, those crooked contracts. Just because the labels give artists an advance doesn't make it virtuous, they're still shady as hell. They are every bit as crooked as classic "company store" based labor practices of old, the big difference is that it's not dancing around the poverty line so it's not quite so malevolent.

Nevertheless, compare a music label advance to a business loan, a mortgage, or VC investment. With a loan or a mortgage the financier takes a risk and puts money behind someone buying a house or building a business. But the obligation of the person on the other end of the risk is to pay back the loan plus interest, and the interest is how the risk of the loan is mitigated. With VC an investment is made in a venture and in exchange the investor is given a share of the venture, when the company is acquired or goes public the investor then owns a decent chunk of a now liquid asset and can either continue ownership or cash out and effectively earn RoI on their original risk taking.

But a music label advance is a very different and far more unreasonable beast. First the label loans the artist money in the form of an advance. Then the label takes majority ownership of the artist's works. Then the label requires the artist to fund production of their next album, music video, etc. out of their advance. The label gives a small share of the profits from the artist's works back to them which they must use to repay the advance. Meanwhile, the label takes a larger share of the profits for themselves. Additionally, the label may or may not spend money promoting the artist, but we should not look at this as virtuous because they are promoting their own products at this point.

The genius of this system is that the amount of money the labels take in from their share of the album revenue is effectively hidden, so artists can't tell how profitable their work has been for the labels. Moreover, by forcing the artists to pay back the loan out of their smaller share of the profits and forcing the artists to pay for album production out of their advance it minimizes the overhead the labels have to pay and increases their profitability while simultaneously making albums look less profitable than they actually are for the labels. Hollywood pulls similar accounting tricks with movies to dick people out of their rightful share of profits.

Imagine a world where VCs took complete control over startups, took the lions share of the profits, and forced founders to pay back initial investments out of a small share of company profits, while also requiring the company to pay developer salaries out of that small profit slice and the initial investment money. Nobody would stand for such a crap system, but many artists continue to allow themselves to be suckered into a similar exchange because it's the norm in the music industry and because most artists tend not to be business savvy.

[tptacek]

In lieu of a long, drawn out thread that neither of us are likely to be too invested in, I'd just suggest you track down David Lowery's piece about the economics of the music industry in the 1990s versus that of the 2010s. He appears to disagree strongly (and compellingly, and with data) with your summary of how exploitative major label contracts were for midlist artists.

You might consider that the acts you & I tend to have heard of are, relative to the market, breakout successes. For acts that achieve unexpected and spectacular success, label contracts probably look pretty terrible; a band generates a huge amount of sales revenue but captures only a small part of it. But for the midlist and down, that might not be the case at all; again: Lowery suggests that the labels lost money on midlist acts while subsidizing a lifestyle that allowed those acts to work in music full time.

Certainly, we can see that in the absence of a thriving label system for music, being a midlist independent musician isn't exactly lucrative. The Arcade Fire can probably afford very nice cars and private jet rides now, but how well are Savages or Low or Grizzly Bear or Spiritualized doing? It's not the labels squeezing them anymore.

[InclinedPlane]

I've read some of David Lowery's arguments on the music industry and I'm not convinced he understands the economics of music in the 21st century.

Personally, my musical tastes run more towards the long tail so I am quite familiar with many musicians who have never been on the radio and are acts you would classify as "midlist". By far the dominant feature of moderately successful musicians in the modern era is that they tend to own the entirety of their businesses. They produce their own music, they sell their music and merch on their own websites and at gigs, and they have an intimate relationship with the planning of their tours and appearances. If they need to they use kickstarter to help fund albums or other projects.

And they make a good living, often at levels of popularity that would be unsustainable if they had to sign away so much of their rights and revenues to a record label.

A perfect example is Jonathan Coulton. You're not going to hear him on the radio but he has monetized his music in a way and to an extent that would not be possible if he were tied to a domineering label. He sells shirts and prints, he does variety shows with friends sometimes, he sells his music by track, album, and box set in mp3, ogg, and flac. He also sells karoake track versions of several of his songs. And he even organizes Caribbean cruises along with several other acts.

Jonathan Coulton is a bit unusual but fundamentally his control over his own music, his "brand", and his business is not unusual these days. A great many musicians across the entire success spectrum have such control, and by and large I think they are doing better than they would under the label system.

When you break it down the label system doesn't make much sense. Somehow they convince artists to sell their work and themselves in trade for a loan. They were able to do that in the past because production and distribution of music was hard to get into and they had an effective oligopoly on the system. Today those functions are not just commodities, they are so inexpensive as to be effectively inconsequential.

I would argue that today signing on to a big label actually benefits the artists that become the most popular far more than "midlist" artists. Many extremely popular artists are not actually terribly musically talented, but they are either interesting, controversial/infamous, or pretty and thus benefit greatly from having a big corporation constantly promoting them. Whereas for artists who have legitimate talent it doesn't seem to help very much to have to wrestle with them over ownership of their "brand" and to be elbowed out of most of the revenue of album sales.