Analysis

The evolution of labels: ‘What’s your value proposition?’


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“Labels who call themselves labels? That’s like dinosaur shit to me! It’s what’s your value proposition? What’s my value proposition? Can one plus one equal 10? As long as I can say to somebody that you and I together will be better… 300 is not a label, we’re a platform. We’re an opportunity for people to plug in and power up.”

Kevin Liles, CEO of 300, was on sparkling form in his keynote appearance at NY:LON Connect, the music industry conference that Music Ally co-runs with the Music Business Association (Music Biz), in New York today.

Interviewed on stage by Music Biz president Portia Sabin, Liles was the first half of the conference’s ‘Label Evolution’ track, exploring what labels are becoming, and the other kinds of companies that are edging into their territory.

Liles started by talking about the streaming era not as a format change akin to cassettes, CDs or downloads, but rather as a “consumption change” that brings challenges, but also big opportunities.

“We were in a low-volume, high-margin business, but now we’re in a high-volume, low-margin business,” he said, before stressing that some fundamentals haven’t changed.

“Rick Rubin always said ‘Make a fucking great record’. If you make the great record, people will find it… I believe now the opportunity for us to share our creative spirit is bigger than ever right now. There’s no barrier to entry. You can do anything as a creator today, based on technology,” said Liles.

“I want more change to come, but I want us to value our music more. It’s for us to not let distributors or DSPs to say how much our music is worth. Be open to a conversation, but we have to value who we are, why we are and what we are more.”

Liles was keen to play down the idea that labels’ main function for artists is as a provider of capital: essentially a bank. “We kinda tore that down at Def Jam,” he said. “It’s all about the money? No, it’s all about the value proposition.”

He also addressed the nature of modern hits. “Do I believe that there is disposable music? The answer is yes. A song of the day. Yes those things are out there, and I wanna be able to be in that business in some sense. But I really am old-school when it comes to [artist development]… I want people to wanna be you. Act like you, talk like you, walk like you. Live the life of you. When you do a dance move, they wanna do that dance move. I truly believe in artist development,” he said.

Sabin asked about the notion of artists as brands, and the pushback on that idea from some musicians, who don’t like the terminology. Liles wasn’t impressed by that pushback.

“We all are brands ourselves. When I touch people, you can hear me, you can see me, but if you can’t feel me, I can’t do my job,” he said, suggesting that this is the essence of a brand. “You can call yourself whatever you want to call yourself but… The day that we don’t want to be a brand, then what’s the differentiating factor between us? What makes this artist different from that artist? As human beings we’re brands with each other.”

Liles said that many of his views on artists were born in his own experience, when Milli Vanilli had a hit with his track ‘Girl You Know It’s True’ – a cover that he hadn’t had the opportunity to approve, or even know about until it was blaring out of a nearby radio.

“I hired a lawyer, and it was that moment I said I don’t want to be in the music business. I want to be in the business of music,” he said, adding that the experience led directly to him taking an internship at Def Jam.

“I never wanted what happened to me to happen to another artist ever. I always said artist first… Transparency. If I’m going to treat you bad, I’m gonna tell you I’m gonna treat you bad. But if I’m transparent with you, you’ll understand how it breaks down… I’m not buying you a fucking chain or putting anything around your neck… I’m going to be fully transparent, because what happened to me, I never want to happen to another artist.”

Liles talked about the super-fluid nature of current dealmaking with artists. “I have deals that probably most people won’t do, but because I don’t have to answer to anybody, I’m able to do deals that make sense for a moment, a lifetime, a career. Some artists should own their rights, some artists if they want to be a true partner should put up some money,” he said. “Being an independent label, it’s up to us to help foster the creativity around dealmaking also.”

It all still comes back to the music, however. “You should look at what you do as art. You should look at being in the Smithsonian Institution. You should really look at being a national treasure… In my heart of hearts if it’s not art to me, it’s disposable music.”

This, he suggested, creates a responsibility for labels. “If we don’t provide a value proposition to art that makes sense, we’re doing a disservice to our culture. 300 was created five years ago in the midst of people saying ‘The music business? Aw, why the hell you guys doing this?’ We were doing what we felt from our hearts and just embracing the creative communities.”

In 2020, Liles said that he’s excited about the people who are coming into the music industry now, at this time of growth.

“I’m excited about the young people. When I came up, I really didn’t care what they said happened before. I felt I could bring new energy. I have people who work for me who ask ‘why’ every time. ‘Why are you doing it this way?’… At the end of the day, I don’t want to run the company, I want the company to run.”

He also celebrated the fact that many of the assumptions of the industry past are being torn up, citing the popularity of Lewis Capaldi and Ed Sheeran – who don’t conform to some of the traditional expectations of what pop stars look like – as evidence.

“They make great music and they have great voices. The limitations of us saying you have to look like this and sound like this and be like this? There’s no limitations [now]. Great shit is going to rise to the top. Bullshit is not!”

label evolution panel

The second half of the ‘Label Evolution’ track was a panel exploring the new label models, deals and revenue streams.

Panelists included Colleen Theis, COO at The Orchard; Jonathan Azu, managing partner at Culture Collective; Diego Farias, CEO at Amuse; and Rich Isaacson, EVP and GM at Def Jam. Monika Tashman, partner at Manatt, Phelps & Phillips, moderated.

Azu said that for managers working with artists, the important thing is to create a roadmap, based on how that artist defines success, but also to think of their career as a sandbox. “Who are we going to put in this sandbox with us to build the career? And it’s different for everybody,” he said.

Farias noted that the power dynamics have shifted in terms of how artists deal with rightsholders and distributors, and found agreement from Isaacson, who is seeing all this from a major label’s viewpoint.

“A lot of artists are self-starting now. They can put out records and build their profiles on social media and SoundCloud, and go right to Apple Music and other DSPs. They don’t need us immediately,” he said.

“The major labels are starting to go after these artists that are building their streaming profiles online. And then it becomes a lot more competitive: artists have more leverage than they ever had… We’re doing more profit-share deals than we ever did five years ago… Now if you have 20m streams you might become a 50/50 profit split on signing your deal.”

Theis said that the changing environment is driving companies to evolve: in The Orchard’s case, from its beginnings as a pure distributor, to offering a “distributed label service” when there are artists who needed more than simply a gateway onto digital services.

Amuse, which is a label sat atop a distribution company, has enjoyed success – Farias said that it ended 2019 with 38% of the top 50 tracks on Spotify in Sweden.

“A lot of these people were not artists at the start of the year. A lot of them were not looking for what we would think of as a traditional label,” he said, adding that many of these musicians nevertheless learn fast.

“They know their options and how to distribute their music. They know how to grow their fanbase and take advantage of different opportunities… I’m not entirely sure how to react to that or how to deal with that, to understand what their needs will be in the future!” he said.

“I think it’s easy to look at an artist’s career as following a certain type of a path, and seeing the label as being the end goal for any artist, but what I’m encountering for many of these new types of superstar artists is… perhaps they don’t want to go down the label route or sign with a major.”

Isaacson made the case for a major. “When we talk to new artists and we’re selling ourselves, we explain to them ‘You have an army at your disposal and it’s global… we literally have people all over the world who can plug in to an artist’s career and help them,” he said. “That’s a pretty valuable asset to have, to know any time I wanna pick up the phone I can get somebody all over the world to pick up the phone and help my artist… But not every artist wants that.”

Farias has seen this too, with artists using Amuse’s distribution tier. “Some artists fundamentally don’t want to be signed,” he said. “We had an artist tell us he didn’t want a deal that involved marketing spend!”

The conversation turned to dealmaking and issues like ownership of masters in artist contracts, and how all this is evolving.

“The terms are becoming shorter, the amount of profit-sharing deals are increasing. There are different structures as to what constitutes ‘delivery’,” said Isaacson, pointing to the contractual implications of artists releasing albums versus mixtapes versus ‘projects’ – even though he suggested that the difference between these can feel like marketing semantics.

“The deals haven’t caught up to some of the marketing discussions, so you have to work backwards… the key things are the term, the amount, what is delivery, and who gets to keep more of the money, and it’s tilting towards the artist getting more money,” he summarised.

Do artists expect to have ownership of their rights? “Many of the artists I meet, especially young artists, they don’t understand the concept of selling their rights,” said Farias. Azu, meanwhile, said “the master conversation” is the first one he has when working with an artist.

“If you go with a major, the deals we’re seeing right now, you’re not going to retain control of your masters. If you go with Amuse or The Orchard, you are,” he said. “To me, that’s an important fact. It doesn’t mean you don’t do a deal with your masters or license them, but at some point in time, they’re going to come back to the artist.”

One interesting point was the suggestion that ’360’ deals, where labels take a slice of artists’ revenues outside their recordings, may get a revival of sorts in the streaming age. Isaacson said they may be newly appealing to artists – for example rock bands – who have good touring businesses, but whose streaming numbers are less impressive.

“At that point, I think the record labels are going to go ‘We want to be in business with you, but we can’t under these terms, so we’re going to have to look at another way of doing business’. So I think it might come back,” he said.

Azu said that labels can play a valuable role in getting artists up and running in some of those areas outside the recordings. “These artists that put one or two songs out and it takes off like a rocket, but there’s no touring infrastructure,” he said. “They have a song that’s been streamed ten million times, but they don’t have a tour manager or tour production, and they need some development. The label is there to help with that process.

Isaacson agreed, giving the example of an unnamed young artist with a track that has become a streaming hit, but whose live performance skills have not yet been developed.

“We’re getting that artist a vocal coach, and a tour manager, and that’s fine. No problem. But that’s a lot of value. We are creating a management structure for that artist in a lot of ways,” he said. “So we do provide a lot of value in ways that artists don’t think about.”

Farias said that the competition between majors, independent labels and other entities like Amuse can only be healthy for artists and the industry.

“They [major labels] are being challenged by all of these new things. This new power dynamic between indies and majors? The outcome of this is going to be overwhelmingly positive for independent and major-signed artists. It’s going to sharpen everyone up.”

“That raises the bar for everybody,” agreed Theis, before talking about the change from an industry that pushed records to retailers and radio, to one that is far more responsive to fans picking up on the tracks and artists that they love.

“Now, because 40,000 tracks are going out a day, and everyone’s trying a different approach, and the world’s a global place – there’s no passport control on digital – it’s down to the particular artist to pull those fans in and demonstrate why they should give a shit. There has to be that conversation and a story,” she said.

The session ended with a discussion of the role radio, traditionally one of the key roles for labels, is playing in the modern music industry.

“Radio only really has real resonance in America and possibly in the UK now. When you go out into the rest of the world, it’s a streaming-first economy,” claimed Theis.

Isaacson was measured in his views. “I have a 17 year-old daughter. The only time she listens to the radio is if I’m driving. And it’s against her wishes!” he joked. “My gut is that radio extends he long tail of a record… it is still super-important, but I just think its role is changing, and will continue to evolve.”

“Radio instead of being the discovery platform is now the validation platform,” suggested Tashman, and Theis agreed. “You have to build the base at digital, in my opinion, before you go to radio,” she said. “ But I don’t want to diminish the importance of radio because of the mass consumption. If you really want to kick something home, you go to radio in the US.”

Stuart Dredge

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