The plain truth is there are hobbyists and there are professionals. Of the professionals, nearly 87% are involved with a major somehow, through distribution, label services, licensing, JV Deals, Standard record deals, or 360 deals.
To be independent of them means you must be a company.
You must be able to fulfill each operation.
And you must be able to take on investment properly.
The goal is to get out of the system to be totally independent, which is what the professionals are fighting for. However, this can either make you or break you—it is very difficult and takes experience and training.
The major labels shouldn’t put artists in compromising positions forcefully or predatorily, but the other side of the coin is hardly lollipops and gumdrops either.
The Ye Olde 360 Deal!
Besides this being not such a favorable deal for artists anymore, this deal is still in high use. The 360 record deal is an investment tool that is designed to lock the artist in from every angle the artist stands to make money in exchange for a share in profits and success. A major upside for the labels and a downside for the artist. The 360 Deal covers sound recordings, music publishing, merchandise, fan clubs, touring, and more.
Why Would They Invest in You With No Show of Real Profits?
If the record company was to actually ask you for P&Ls and balance sheets before getting a deal, the music industry would be in a different place. The goal for a record label is to never show you how to build your very own multimedia company. It is designed to lock you into an investment with a strong insurance policy. So, why aren't more artists building companies with partners rather than running to get signed every few minutes? It's easy…
Artists Don’t Build Businesses!
Record labels know this as well as managers! Although this is slowly changing, many artists don’t understand until later that each part of their deal is a company in and of itself:
Sound Recordings - Record Label, LLC
Music Publishing - Publishing Company, LLC
Merchandise, Fan Clubs - Merchandise, LLC
Touring - Touring Co., LLC
Music Rights - Rights Holding Co., LLC
Because you don’t need it all in the beginning, it’s hard to understand when and how to build this. Plus, the amount of administration is mind-boggling to the inexperienced creative. This requires a logistical manager to pull off—a manager who is devoted to independence just as much as you.
Record Labels vs. an Investor
A record label invests in your potential activity based on the divisions mentioned above. An investor invests in you based on the valuation of your business multiplied by the multiple you want your business to be valued at.
For example, seeking $100,000 for a 10% equity stake in your company values the business and assets at $1,000,000!
Formula: $100,000 x 10% = $1,000,000 valuation
Investors want equity. Labels want your labor!
If I own your labor, I own you = Indentured servitude = Slave = Human capital.
You Shouldn’t Be Looking for a Million Dollars If You Don’t Have the Cash Flow to Back It Up.
This is the reason why record labels don’t want to be traditional investment banks. They have to wait on proven ability to pay the money back over time and available collateral. Labels don’t want you to pay them back over time if they can help it. If the game is attention, then the time is ticking on the clock! So why wait for you to finish college when you can get in the league at 18 right now! They would much rather acquire the masters as a failure to pay, sell it back to you at an overpriced value, or keep kicking your royalties down the road. Essentially holding your intellectual property hostage allows them to survive in the first place. It takes an artist a long time to get to this point; why would a record label wait this long for you to structure a company to support yourself when they can come to you with a ready-made company to take care of everything? This costs you your freedom from the label.
Why Couldn’t the Labels Help You Build Your Company?
It would be the equivalent of a company going on Shark Tank too early. The sharks will say they need 50% or more of your company to help you build it because it is too early. It’s too time-consuming and labor-intensive for the staff.
Is This the Revolution That Won’t Be Televised?
Sort of. Only those who refuse to bow down to what a major company has to say about their work will revolt by making a decision to not bend. The second stop is fighting the other battle of actually building their own independence. It’s bloody on both sides.
Why Would a Company Sign Me for a Product That Doesn't Make Money?
Precisely. It’s because your influence is priceless now, and eventually, your influence will make your intellectual property valuable!
Casey, This Isn’t for Everybody!
You’re right—everybody doesn't want to do this, and that’s why the record companies exist. Some do not want true independence to escape the matrix because they don’t know that it exists in the first place.
Check This Out!
If you're a music creative or executive looking to build your label or publishing company in 60 days or less, grab the 60-Day Record Label Course and get it done today! You’ll gain the ability to get real funding, avoid contractual pitfalls, and keep the middleman out of your pockets. Click the link below to get started now! If you’re skeptical, grab the free guide, "10 Ways to Increase Your Record Label Profits," which comes with a free split sheet download.
If You Decide to Go Independent
You have much more fun building your career.
Get to enjoy the magical wonders of cash flow.
Which allows you to move around the chess board with speed on a motorcycle instead of slow and clunky in a limo.
If You Seek the Label
Then this video went over your head.
You became a prisoner of war and gave up.
Or you had to call a truce to save yourself from becoming a POW.
Conclusion
If you were struggling with:
How to build your independence,
Why the record labels are the way they are,
A vision of what it would take to build your true independence,
You now have the means to make it happen to become the artist who can choose their own destiny.
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