Record Label Lecture Notes

A Simple Label Overview

• Artists earn money from the purchase and playing of their recordings; record labels look after their interests.
• Songwriters earn money from the recording and playing of their songs; publishers look after their interests.
• Even if one person performs both roles, the two areas are still kept separate.
• Some people run their own label, some do their own publishing, some do both.
• Every recorded song has a writer; this links the two areas. Labels and publishers work with each other all the time.

Business Type

• Starting a label is starting a business. You will need to establish a legal structure for the business.
• Get a lawyer who is a music business specialist.

Rights and Copyright

• When recording some musicians it's vital to establish recording royalties from the start. Use standard MU contracts to ensure musicians are aware that they have no further claim on a recording if it becomes successful (unless you can't pay them at the time and that is your agreed position). The same goes for designers for art work. One-off fees are best for the label owner.
• The owner of a sound recording is the person who arranged for the recording to take place, including getting people together. This could be someone's manager, who ends up owning the recording rights!
• UK copyright law states that copyright exists automatically when a work is recorded (on paper, on tape, on anything!). The only thing you need is proof, which is where posting a copy to yourself registered delivery or sticking a copy in a bank vault comes in.
• Should you be VAT registered? Have a look at this government site.

A recording is copyright in two ways…

• The song is copyright, owned by the writer(s)
• The recording is copyright, owned by the record company (usually)

• Writers can have their compositions published so that artists can use them; in this instance the writer need not have anything to do with the artist or the record company.
• There would be no point in a publisher signing Westlife; they would sign a record deal. Their writers would sign the publishing deal.
• When the writer and artist are one and the same person, the rights remain separate.
• Even obscure remixes retain the original publishing rights.

Publishing Deals

• A publishing deal used to split the income 50/50 between the writer and the publisher, but a 70/30 split in favour of the writer is more common now. The percentage split basically reflects how much work the publisher is doing on behalf of the writer. Publishers offer expertise, industry clout and organisational services to composers.
• Publishers can sign artists who have yet to sign a record deal; they take on the development of the artist, which used to be the job of record labels.

Royalty Flow

MCPS and PRS

• The Mechanical Copyright Protection Society (MCPS) issue licences to record companies to cover the sale of the recorded form of the songs, in exchange for the sale price of the record. They act as the "publisher's publisher". The main payment schemes are the AP2 and AP1 agreements.
• The Performing Right Society (PRS) collect royalties from public performances of songs. It gathers money for writers whose works are being played and performed, as opposed to the MCPS which is concerned with recording.
• Songwriters need to join the PRS to receive royalties.
• The PRS issue licences to anywhere that plays music for an annual fee. They do a lot of statistical sampling to find out roughly what music is being played. Radio One is the only station which is 100% checked by the PRS.

PPL and ISRCs

• Record sales and the playing of recordings earn a record label money.
• The PPL (Phonographic Performance Limited) collects royalties from a public playing of a recording, such as a record being played by a radio station.
• The label owns the rights to the recordings it sells. The PPL looks after the label's interests. The internet is the problem for the PPL and the labels; it is not properly licenced (yet).
• As with the PRS, the PPL collect money from a variety of sources. They issue licences to people who want to use recordings and then work out how this money should be distributed.
• The money is split 50/50 between the record labels and the performers on a track-by-track basis.
• This table shows the PPL Performance Distribution.
• Labels have to submit information on who has done what on every recording to the PPL. The PPL have set up a program called CatCo into which this information can be entered on-line, so that it can be accessed by the PPL, the MCPS and whoever else needs to use it.
• The PPL also monitor the broadcast of recordings. They issue record companies with ISRCs (International Standard Recording Codes) for each and every track they put out. Radio stations with ISRC-reading CD or minidisc players can automatically log their output. The ISRC is added to a recording at the mastering stage.

Barcodes

• Every released record must have a barcode in order to be distributed, stocked in a retail chain and have sales counted for chart use.
• The e-centre licence both UPC and EAN barcodes.

People to Know

• Labels can use product managers; they look after administration, marketing and promotion. They also organise recording sessions if required.
• Promoters
• Pluggers: push the product (a record plugger deals with records, surprisingly) in the media to generate airplay and TV play.
• PR agents, Publicists: act as the go-betweens between the label and the media or public, distribution press releases and information. They also work to push the profile of the label. The Showcase Music Business Guide is a good list of UK PR companies.

A tour is a good form of publicity, but as a promotional activity it is another label expense. However, it is often recoupable so the artist ends up paying for the tour. It is possible for artists to be on tour for a couple of years and sell millions of albums and still end up in debt to the record company.

Distributors

• Distributors take CDs and get them out into retail.
• Some distributors do a manufacturing and distribution deal, in which they co-ordinate and fund the pressing of the CDs (or vinyl). This is great for labels who can't afford large pressing runs, but the distributors risk is higher and therefore their percentage is higher too.
• There are plenty of specialist distributors who know how to handle a specific genre.
• Big retail outlets often negotiate the right to return. They can return unsold stock to the distributor. Distributors cover themselves for these additional stock handling costs by charging more in the distribution deal with the label.
• When a shop takes stock from a distributor, the distributor takes their cut and passes the remaining money to the label. However, if stock is then returned the shop will want a refund under the sale or return contract. The label then has to pay up, which can be very difficult if they are a small label which has a small turnover. Most distributors hold back about 25% of the initial payment from the shop; they do this so that if there are returns they can refund the shop from this, and then settle with the label.
• The internet is a good way for a label to distribute their physical product to their audience. Downloadable music systems which require payment have not been very successful as of yet. An emerging serious contender is Apple's iTunes Music Store. Labels like Magnatune are also attempting to change the traditional label/distributor model.

This page shows how a typically-priced album breaks down into its constituent costs. It also includes an Excel spreadsheet so you can see what happens when the retail price is changed.

• Labels often sub-licence their recordings to a foreign label, so that the foreign label takes care of the sales and royalty collection in that country.
• An alternative is to hire a trader to export and distribute the product abroad. This normally maximises the label's profit.

Expanded Money Flow Diagram

• Labels need a book-keeper and an accountant. An accountant is as important as a music lawyer as they can help with complex tax issues.
• The two performer royalty-collecting agencies are PAMRA (Performing Artists Media Rights Association), who represent any type of performer, and AURA (Association of United Recording Artists) who look after featured performers and producers.
• If artists are performing their own material they can gather all revenue from the PPL.

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