Entertainment Law

Music as a Business: How To Make a Career Out of It

April 2009

By Jon M. Garon*

The Musician's Law and Business Guide

Given the fairly wild gyrations of the music industry, composers and performers have a challenge in how best to chart the course of their careers. Should I sign with a label? Does it matter if I create my own publishing company? And everyone wants to know what rights to sign away in exchange for that modest advance.

These challenges are not new. The music industry has changed over time and will continue to change as technology and audience tastes change over time.

Throughout most of history, composers and performers looked to patrons to sponsor their art. In the late nineteenth century, the piano democratized music, propelling live performances into the living rooms of the middle class. By the turn of the last century, the player pianos became the rage, providing a perfect duplication of a pianist's original performance. Early phonographs added to the interest in pre-recorded music and an industry was born.

The music industry found itself transformed by the player piano. A handful of companies dominated the creation of piano rolls, controlling the production of all music. But a surprising court decision provided that the paper rolls could be legally copied by music pirates at will. Congress responded quickly to the court decision and the threat of monopoly by prohibiting the copying of piano rolls while allowing anyone to produce a cover of a song once it had been commercially released, in exchange for a two cent payment to the composer. Most of modern copyright policy stems from this 1909 balance.

Eventually the phonograph overtook the player piano. Technology extended the recording length — first on L.P. records and then CDs. But media changed again and MP3s unbundled the record, reintroducing the single as the dominate music media. So much for the B-side.

This history may initially appear a bit arcane, but these lessons of the past might help musicians make professional choices regarding their future. Today, artists are balancing an investment in record labels with their own websites, trying to enter the video game market and exploit the ringtone rights in their compositions. Tomorrow will be something else.

For a musician hoping to build a sustainable career, perhaps the most important step is to control one's own destiny. Record labels find themselves in a woeful condition. Music publishers are scrambling to develop revenue streams from ringtones, video games and other sources that were unheard of just a few years ago. The most influential stars earn more than ever, while the industry provides less and less funding for developing artists.

By controlling one's own rights, a musician has a chance to weather some of the current transition. Typically, revenue comes from one's own live performances, live performance rights collected by ASCAP and BMI, record sales, mechanicals (the payment for the use of a composition by another performer) and merchandise.

Record companies will generally give musicians an advance to pay for the recording of an album and provide a few dollars as income to the artists. If recording costs exceeded the advance, the artist would end up in debt to the recording company.

Publishing rights, in contrast, should never be assigned to the record company. Only the least reputable demand these rights. The publishing company, however, will generally earn fifty percent of the royalties on the mechanicals as well as any income from use in commercials, ringtones, video games, theatre or film. For a relatively unknown composer, the promotion by a publisher may result in some revenue, but without promotion the artist will not see much income from these sources.

Record companies provide one invaluable service for their artists — promotion. Advertising, radio promotion and placement in the large discounters, Wal-Mart and Target, drive the top of the charts. Artist owned labels simply cannot compete for that market. Realistically, however, the labels only provide this support for a tiny fraction of their roster. In other words, if the label offers significant, guaranteed promotion, then take it. If not, the bargain may not be worthwhile.

Instead of record sales, the primary revenue for new artists comes from playing gigs. If a musician develops a local following, then selling CDs from one's own label can be much more lucrative than working with a major label. More importantly, if the artist produces the label without a record company, the artist will own the masters and can arrange a distribution deal which avoids the risk of debts to the record company. (A later column will dissect the modern recording agreement.)

Using a good band website, along with Amazon.com and iTunes, an artist who has produced a professional record can begin to promote the album, shows and merchandise directly to the fan base. The band can also network to increase its presence through Garageband.com, MySpace.com, EpiTunes.com or similar sites. These, in turn, will help the artist seek out local radio stations, connect directly with its core audience, sell CDs and merchandise and promote upcoming shows.

A large impact in a small market can be very important for an artist's success. By including a UPC barcode, the album can be tracked by SoundScan. Good sales numbers reported by SoundScan in a local market will get the attention of local radio stations, the music media and the recording industry. A band can use their local sales numbers to negotiate their shows and tour opportunities.

The music industry will continue to undergo dramatic changes for another five years or longer as the business models evolve to reflect the digital economy and the survivors rebound from the current economic catastrophe. Artists would do well to learn from the lessons of the previous century and avoid selling their musical rights to companies that cannot make the transition or afford to invest in their artists. The best way to survive a storm is to float above it. By actively promoting their own works, bands can build a sustainable business that may be smaller than the chart-toppers but more stable and sustainable. For most artists, a career is more important than a hit, so control may be more valuable than promotion. It depends on how long a view one takes.

Jon M. Garon is an attorney with the Concord, NH, law firm, Gallagher, Callahan & Gartrell, and is a professor of law at Hamline University School of Law.

Additional articles by Professor Garon can be found at www.lawbizbooks.com. He also writes a blog, Entertainment and Entrepreneurship. To suggest a topic for a future column, send an e-mail.

* Jon Garon is admitted in New Hampshire, California and Minnesota.

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Jon Garon at
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