Paraphrased excerpts from David Byrne's Survival Strategies for Emerging Artists
1. The 360 DEAL (or EQUITY DEAL). Every aspect of the artist's career is handled by producers, promoters, marketing people, and managers. The artist becomes a brand, owned and operated by the label. and in theory this gives the company a long-term perspective and interest in nurturing that artist's career. [It also lets them get their hooks into every last penny of the artist’s income – from EVERY source.]
This is the kind of deal Madonna made with Live Nation. For a reported $120 million, the company – which until now has mainly produced and promoted concerts – will get a piece of both her concert revenue and her music sales.
2. The STANDARD DISTRIBUTION DEAL. The record company bankrolls the recording and handles the manufacturing, distribution, press, and promotion. The artist gets a royalty percentage after all those other costs are repaid. The label owns the copyright to the recording forever.
There's another catch with this kind of arrangement: The typical pop star often lives in debt to their record company and a host of other entities, and if they hit a dry spell they can go broke. [Consider] Michael Jackson, MC Hammer, TLC – the danger of debt and overextension is an old story.
Obviously, the cost of these services, along with the record company's overhead, accounts for a big part of CD prices. You, the buyer, are paying for all those trucks, those CD plants, those warehouses, and all that plastic. Theoretically, as many of these costs go away [due to increased online distribution], they should no longer be charged to the consumer . . . or the artist.
3. The LICENSE DEAL is similar to the standard deal, except in this case the artist retains the copyrights and ownership of the master recording. The right to exploit that property is granted to a label for a limited period of time – usually seven years. After that, the rights to license to TV shows, commercials, etc. revert to the artist. If a band has made a record itself and doesn't need creative or financial help, this model is worth looking at. It allows for a little more creative freedom, since you get less interference from the guys in the big suits. The flip side is that because the label doesn't own the master, it may invest less in making the release a success.
4. The PROFIT-SHARING DEAL. I [David Byrne] did something like this with my album Lead Us Not Into Temptation in 2003. I got a minimal advance from the label, Thrill Jockey, since the recording costs were covered by a movie soundtrack budget, and we shared the profits from day one. I retained ownership of the master. Thrill Jockey does some marketing and press. I may or may not have sold as many records as I would have with a larger company, but in the end I took home a greater share of each unit sold.
5. The MANUFACTURING AND DISTRIBUTION DEAL. [Also called P&D deals, standing for Pressing and Distribution.] The artist does everything except manufacture and distribute the product. Often the companies that do these kinds of deals also offer other services, like marketing. But given the numbers, they don't stand to make as much, so their incentive here is limited. Big record labels traditionally don't make M&D deals.
In this scenario, the artist gets absolute creative control, but it's a bigger gamble. Aimee Mann does this, and it works really well for her. "A lot of artists don't realize how much more money they could make by retaining ownership and licensing directly," Mann's manager, Michael Hausman, told me. "If it's done properly, you get paid quickly, and you get paid again and again. That's a great source of income."
6. THE SELF-DISTRIBUTION MODEL. The music is self-produced, self-written, selfplayed, and self-marketed. CDs are sold at gigs and through a Web site. Promotion is a MySpace page. The band buys or leases a server to handle download sales. Within the limits of what they can afford, the artists have complete creative control. In practice, especially for emerging artists, that can mean freedom without resources – a pretty abstract sort of independence. For those who plan to take their material on the road and play it live, the financial constraints cut even deeper. Backup orchestras, massive video screens and sets, and weird high tech lights don't come cheap.
Radiohead adopted this DIY model to sell In Rainbows online – and then went a step further by letting fans name their own price for the download. They weren't the first to do this – Issa (formerly known as Jane Siberry) pioneered the pay-what-you-will model a few years ago, but Radiohead's move was much higher profile. It may be less risky for them, but it's a clear sign of real changes afoot. As one of Radiohead's managers, Bryce Edge, told me, "The industry reacted like the end was near. ‘They've devalued music, giving it away for nothing,’ which wasn't true.” “We asked people to value it, which is very different semantics to me."