Major Record Labels: Doing Less & Grabbing More?

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Passion, anger, humor & realistic assessments were the order of the day at a NARIP panel called "The Incredible Shrinking Profit Margin" showing how major labels want more from artists while doing less. Lively predictions abounded, including: "Britney Spears is over." Â? A Report by The G-Man.

"Been there, done that, still doing it, but with new budget parameters."

That seemed likely to be the summary of the National Association of Record Industry Professionals’ (NARIP) program on "The Incredible Shrinking Profit Margin," a look into how the major labels are providing fewer services while attempting to grab a piece of artists' publishing, merchandising, touring, and more.

Boy, was I wrong.

The session was funny, lively, controversial, cynical, hopeful, and exciting. Before the session, it seemed to some of us that this topic would lead to a recitation of gloomy sales figures. But the three panelists mixed facts and a fantastic amount of passion into their presentations – so much, in fact, that they would have goosed an audience even if they had been discussing bran muffin recipes.

Who's Who on the NARIP Panel:

Participating in the discussion were Darryl Franklin (Business & Legal Affairs for Interscope, A&M, Geffen and DreamWorks Records), entertainment attorney Dina LaPolt (LaPolt Law) and Carol Peters (Peters Management Syndicate). Each has an excellent track record (see bios at the end of this story) and each brought a unique perspective to the evening's presentation.

Negotiating a Record Deal:

A prime attraction for this event was a mock negotiation of a major label contract for an up-and-coming band. Each panelist played himself in a hypothetical conversation. While this elicited excellent information and insights (along with much humorous banter), the hoped-for effect of the audience being a fly on the wall didn't always work because all three panelists kept stepping out of their mock negotiation with asides to the audience. Since this meant we were getting even more data than would have taken place with the mock discussion, no one complained.

In fact, NARIP President and panel moderator Tess Taylor rarely needed to ask follow-up questions, as the panel launched into responses in a freewheeling yet coherent onslaught of ideas, fee ranges and controversial deal points.

Some selected gems:

Franklin, on the ephemeral nature of the record industry: "Britney Spears as a pop artist is over."

LaPolt, on the next big area for artist/producer/publisher/record company profits: Mobile phone rights. "Know the four parts of mobile phone rights: master, sync, image, and Java games."

Peters, on the change from physical to digital sales: "Who is the traditional market for records? 14-24 year-olds. It's ironic, but the core record buyers are not buying records."

Franklin, on the profit-taking of phone corporations when their services offer downloads: "Phone companies take 50% of all downloads." Another observation raised a few eyebrows: "The phone could replace the iPod."

LaPolt, on fees that game companies pay to license songs: "They’re tiny. Incredibly tiny. And it's inefficient. EA (Electronic Arts) will clear 60 masters, then use just 15 songs in a game, all at low rates. And they want to pay these low rates on a buyout basis, with no share of revenue, no points, and no step-deals."

Peters, on the current state of affairs in the recording industry: "The record business right now is like musical 'Survivor'."

Franklin, sending a warning to MTV: "There's a new video channel in town. Watch for Fuse TV."

LaPolt, on the future: "There is new music coming, real diversity of music, and it will be a rebirth of the record industry."

The Bottom Line:

The handout from LaPolt Law on "Traditional Major Label Royalty Computation" was itself nearly worth the price of admission as it revealed the often hard-to-find formula used by record companies to retain a much higher amount of money than might otherwise be expected from the way the artist contract is worded. There is a reason major label artist payments are known as a "penny rate."

In addition, the NARIP-supplied "iTunes Artist-Producer Royalty Calculation" sheet was fascinating because it answers the question all artists on iTunes keep getting asked: "How much of a 99-cent download do you get to keep?" While indie artists do better, for major label artists, Apple collects 34 cents, the label keeps 55 cents, and the artist gets a dime.

Ah yes, a dime. Some things never change.

SCOTT G writes and records as The G-Man. His music is on iTunes and his commercials are at

DARRYL FRANKLIN, otherwise known as "that English guy", works in Business and Legal Affairs for Interscope, A&M, Geffen, DreamWorks Records, all part of Universal. Helmed by Jimmy Iovine, this group of labels is probably the most successful in America and the world today. As the industry reengineers itself, Darryl and his colleagues are attempting to navigate the many issues new to all of us. Prior to moving to LA five years ago, Darryl worked in the UK as head of Business Affairs at each of Mercury Records, Polydor Records and East West Records.

DINA LaPOLT is an entertainment attorney at LaPolt Law, P.C. in Los Angeles and is on the Attorney-Manager Advisory Board for AFTRA. Her boutique entertainment firm specializes in representing clients in the music, film, television, and book publishing industries. She also teaches at UCLA Extension and the Musician's Institute in Hollywood, speaks regularly on panels at music industry conferences nationwide, and still has time to perform in her all girl rock band.

CAROL PETERS is a long-time industry veteran whose credentials include positions at labels (Capitol, Elektra, Warners, Planet, Pasha, United Artists), manufacturing (Ampex), distribution (West Coast Music Sales), and management (Left Bank, 10th Street). Last year, Peters started a new management company, Peters Management Syndicate, which currently represents rock legends Heart; multiplatinum singer/songwriter Deana Carter; Seventh Day Slumber, a Dove nominee for Best Rock band of 2003; and Jane Wiedlin of the Go-Gos.

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