Monday, August 30, 2010

Music Business/Law Tips - "Distribution" (Part 2)

Major label distribution has some other players that contribute to sales. One stops are middlemen who buy records from labels and then make them available to local record stores that prefer the convenience of one stop shopping. Rack jobbers are middleman that buy records from labels and then stock them in the racks that they operate within retail stores. Chain stores such as Wal-Mart buy records from labels and then place them in their stores. Record clubs buy from labels and then resell to their members at discount prices.

Independent distribution can put records in stores, although to a lesser extent. Some independent distributors have huge territories, while others are much more regional. Independent distributors generally distribute the product of smaller labels. Occasionally, they will distribute an unsigned artist's record if they can be convinced that there is potential for substantial airplay and sales (the artist will probably have to generate some sales first).

As the reader can now see, without distribution, the public would never have an opportunity to buy a record. Further, an artist fortunate enough to obtain a deal which has major distribution in place stands the best chance of achieving economic prosperity in the music business.

Ben McLane Esq

Monday, August 23, 2010

Music Business/Law Tips - "Distribution" (Part 1)

The key to selling records is to find a way to place them in stores. This is where the concept of distribution comes into play. Distribution can come in the form of either major or independent or online distribution. Since major labels have distribution down to a science, that will be the focus of this article.

Assuming that an artist signs to a major label, the major label will then distribute the finished record. Another scenario for major label distribution is for an independent label to be distributed through a major label. This usually happens only if the independent label has several acts on its roster (distributors are interested in a steady flow of product). Occasionally, a major label will sign an act off an indie and re-release the record under the major label banner.

Major labels utilize major label distribution systems to position records in physical and online stores. These are giant conglomerates known as "the big 4" which consist of: SONY/BMG, EMI, UNI, and WMG. "The big 4" in turn distribute a multitude of major and independent labels. Each of "the big 4" has a regional warehouse in each major metropolitan area from which the records are distributed to local record stores and other outlets. It is the distributor's obligation to (1) wherehouse inventory, (2) solicit sales from stores, (3) fill orders, (4) process returns (unsold records), (5) bill/collect, and (6) generate sales reports.

[part 2 next week]

Ben McLane Esq

Monday, August 16, 2010

Music Business/Law Tips - "Development Deal" (Part 2)

With a right of first refusal, the record company protects itself by not allowing the artist to make a great sounding demo and then use that demo to get a deal elsewhere - that is, until the label is certain that it wants nothing to do with the artist. After the artist delivers the finished demos to the label, under the right of first refusal concept the artist has to give the label a period of time ranging from thirty to sixty days in which it has to decide whether it wants to sign the artist. From the artist's perspective, it is best to keep that period short. Moreover, under this same concept, the label will generally provide in the demo deal that if the label wants to sign the artist, the artist must negotiate a recording deal, and, if an agreement cannot be made, the label gets first refusal. This means that the record company gets a chance to match an offer given to the artist from a competing label, and if it matches or betters that offer, the artist must sign with the demo company. The artist should limit the time within which the label which funded the demo can accept or reject the other offer. Ten to fifteen days is a reasonable amount of time, and never give the record company more than thirty days to match the offer.

If the label which funded the demo passes on the artist and does not match an offer under the first refusal provision, the artist is free to record elsewhere. However, the original label will still want to make its money back for the cost of the demos. The only recourse for the demo label is to get the money from a record deal an artist might make in the future. Most labels signing an artist are willing to reimburse the demo company for the cost of the demos as long as the cost is recoupable from the artist's royalties. The artist should include in the demo deal that the company funding the demos can only get its money back if the artist makes a record deal within a specified time limit (i.e., one year).

Since a record deal is not easy to come by, a demo deal can be the entree an artist needs to obtain a record deal. Therefore, it is probably to the artist's advantage to enter into such an agreement with a reputable label so long as the above matters are discussed.

Ben McLane Esq

Monday, August 9, 2010

Music Business/Law Tips - "Development Deal"

It is possible for a record company to see potential in an artist and yet still be reluctant to sign the artist to a full blown recording contract. When a situation such as this rears its head, the label might offer what is known as a demo or development deal ("demo deal"). Such a deal can eventually lead to a recording contract. However, the artist should try to include certain provisions in the demo deal.

In a demo deal, the label gives the artist a certain sum of money ranging from $500 to $5,000 to enter the studio and record demos. Based upon the sound of the demos, the record company will decide whether or not it wishes to sign the artist to a record deal. If it decides in the affirmative, great. Yet, often the label will pass on the artist. When the label passes, it still keeps some strings attached because it did pay for the demo and wants to be reimbursed. For this reason, the label will include a right of first refusal in the demo deal.

[part 2 next week]

Ben McLane Esq