Throwaway Download Culture

Economics. No one, even record execs and A&R men, can predict which artists will make it big - signing an artist is a gamble – and they take the all risks - they pay all money up front to get the product onto the shelves. The record company pays for the costs of recording, manufacturing and distribution of the album; they pay for the promotion, advertising and the promotional video; and they paid the artist an advance on royalties. If the release was a success then the label made money, but if it failed they lost. The labels minimised the risk by signing a number of different artists so that the losses from all the flops and failures will be covered by the big successes and the more bands they could afford to sign then the more chances they had of having successful singles and albums. This is how Tubular Bells initially financed Gong, Tangerine Dream, Kevin Coyne, Ivor Cutler, Tom Newman, Captain Beefheart, Slapp Happy & Henry Cow, Clearlight Symphony, Robert Wyatt and Hatfield and the North. The really big labels can also cover this risk by having a large back catalogue of perennial sellers in a diversity of genres so they can weather the vagaries of fads and trends (kind of sobering thought that Bing Crosby’s “White Christmas” helped finance the birth of Progressive Rock through Decca/Deram). The recording contracts between label and artist are also structured to minimise those losses for the label, they are geared to not pay out royalties until all the production costs have been repaid, including the advance that the band was given at the beginning of the contract (it’s not called an advance for nothing), and the royalties are set at a value that leaves enough cash for the label to finance more artists and albums and still make a profit for their owners and shareholders.

The problem with that economic model is that the successful artists are paying for the unsuccessful ones, which means that the popular artists are not seeing the full benefit of their success – which in turn leads to the inevitable claims of rip-off and artistic control when the artist is pressured for another hit album. It also relies solely on sales of a single product – if sales drop then earnings drop across the board.

This model does not work so well for smaller labels, who need to see a steady income from all their artists – they don’t need the one big success to pay for the others, they need all their albums and singles to sell in moderate numbers so they all paid for themselves. While that may seem like a more stable approach, the life-span of the independent label can be short because their artists are more specialist, targeted at a narrow trend, fad, genre or subgenre of music. When that genre became less popular then all their artists sold less, and if several of their artists fail to sell then they will make a loss. When the losses get too much and they cannot pay their suppliers (studios, pressing plants, distributors) they go bankrupt and fold; or get swallowed up by a bigger label who wanted the steady selling back catalogue and perhaps the one or two the more successful artists on their own roster.

However, in August 1982 the record labels received a massive windfall – a new invention called CD was launched - and suddenly their entire back catalogues were viable again and sales soured. In a time of rapid sales growth, lesser known, poor selling artists were dropped like stones and even major artists whose popularity had declined were seen as unnecessary and a burden. New talent was still needed, but the deals being offered less lucrative and less speculative, advances were smaller and the up-front costs were minimised, it also meant that if an artist was not a success on the first album, then there probably wouldn’t be a second.

This 50 year old business model began to break down in the 1990s, (before the advent of broadband, downloading and P2P), and was suffering in the early 2000s when market saturation of the reissued albums was reached. Labels delved deeper into their back catalogues and, because production costs were practically zero, they could concentrate on reissuing more obscure artists for niche markets, they also discovered the money spinning potential of remastering to resell what they had already sold two times over.

In the meantime, artists who were dropped in the 80s and 90s started their own labels and new Independent labels, rather than having aspirations of being big labels (like those of the 70s), carried on the tradition set in the 80s of catering for niche markets and concentrated on bands that did not need huge operating budgets. (One of the problems facing small labels is they do not have the cash-flow to finance multi-million sales – once an artist gets too big they either have to let them go, or risk having the whole label being bought-up by a major)

By working with smaller overheads and tighter margins they could succeed because they knew their market, they could target their product directly to the fans and then use that to promote themselves to fans of related artists – social networking didn’t start with MyFace, it started on paper and on dial-up email with artists using mailing lists collected at gigs and through fan-clubs and appreciation societies to stay in contact with their fans, (something that was used to great effect in the 1970s by bands like The Enid). The methods being hailed as revolutionary today were pioneered by these artists and labels.