The Risk Record Labels Take

Steven Knopper of Rolling Stone reported this past week that Lady Gaga will need to undergo hip surgery and will have to cancel the remainder of her Born This Way Ball tour. Gaga and her concert promoter, Live Nation, will have to refund close to $30 million in tickets, and due to doctors orders, most likely, will not see Gaga gross another $161.4 million like her 2012 world tromp.

You can read Knopper's full article here.

If anything, Gaga's tour cancellation proves the huge risk that record companies take on when they sign a new artist to their roster.  There has been a lot of negativity cast on the record companies introduction of the 360 deal, which allows them to take a percentage of the artist's entire revenue stream from record sales to touring, merchandising, and sponsorship income. Truth is, the record executives had to push for this new standard contract because musicians have moved away from selling tangible products such as CDs into offering a service to their fans.

For the record companies, artists, and their management a service based business provides a different set-of risk elements for the brand. The biggest in this instance is the concept of inseparability. Under this theory concert goers expect Lady Gaga and nobody else when they purchase a concert ticket, pay for parking, and buy a beer. And as we are witnessing with the current Gaga situation, once the brand must separate the artist from the equation there is no money to be made.

While I will not go on to justify record companies and the 360 deal, I will cut them some slack. Very few business models take on this level of risk and require the hefty investments they are willing to fork over. To get an artist "off the ground"  a record label will invest hundred of millions of dollars in crafting an album, promoting the artist and their music, establishing a brand presence online, in social media, and in the national market, and then fork over more money to establish a tour, merchandise, another album, etc.

That is a huge investment for any company, and while insurance will probably cover the losses for Gaga it often does not, leaving record companies hanging when their product, the artist, gets sick, injured, or goes AWOL.  I encourage all musicians out there to think about this when the time comes to sign that deal. It will help you respect where the label is coming from and provide you with a more educated bargaining position.

How Touring Can Elevate Your Career

This week I want to talk about touring, and just how powerful it can for your musical career.

Last week I received my copy of Rolling Stone, and was pleasantly surprised to see that one of my favorite groups, The Dave Matthews Band, had reached number one with their eighth studio album Away From the World.

Dave Matthews hit the mainstream back in 1994 with Under The Table and Dreaming, and close to ten years later, the 45 year old Matthews still leads a group that can sell records and sell out concert venues. This is a rare feat in today's musical landscape. One hit wonders and passive fans have made it almost impossible for a young band to gain national stardom and then maintain that position for close to a decade. So how did Dave Matthews and his group of rocking minstrels do it?

It all boils down to touring. Even before the group had a major label record deal they toured. Their manager Coran Capshaw put them on the road in the early nineties and they crisscrossed the United States a number of times picking up fans at each show. A fan of The Grateful Dead, Capshaw understood the importance of coordinating a fan base for the group and then motivating them to buy into the brand. This proved quite successful because by the time the band was ready to sign a major label deal they really didn't need to. When asked about the group's powerful fan base A&R man Bruce Flohr explained why RCA decided to sign the group in an online article. "I only realized how lucky we were the more shows I went to go see. I was working at a label where 90 percent of the acts we had signed couldn't draw what this dude was drawing. All of a sudden I realized that if RCA did everything wrong, we had a gold album under our belt.

The newer generation of musical dreamers should take notice of the importance of touring. First it helps you support your career. In today's day in age you probably will not sell a huge amount of $16 albums, instead you will sell a larger amount of 99¢ tracks, and you will probably give more away than you actually sell. To earn income you need to get fans to buy into your brand. Many younger musicians think this is done through FaceBook and Twitter, but trust me this rarely works. In order to connect you need to play live in-front of your fans or potential consumers.

When you play a concert, no matter how big or how small, you have a captive audience. If you can give them a performance to remember they will buy your music, your merchandise, and tickets for future shows.  All of this income adds up pretty quick, and like Coran Capshaw knew, can actually help keep a band on the road earning more fans and making more money. 

If a major label deal is your ultimate goal you MUST, and I repeat MUST, tour. As we all know there are fewer and fewer major labels out there today, but hundreds of thousands of musicians fighting for their attention. It is time for musicians to accept the cold hard fact that the music business is a business, and no matter how great your songs are these labels want to see how well you can connect with an audience and get them to buy into your brand.

I want you to step outside your rock attire and into a suit for a minute and look at it like a music industry professional. You are looking at two bands. They both have decent music that can be made marketable. They both have the look, and they are both pretty talented. But band one is touring. They play to an average of 400 people per night. They have merchandise at their shows and are selling t-shirts, thongs, stickers, and music. The other band plays occasionally, usually to about thirty people because they haven't been collecting and mobilizing a fan base, and they do not sell merchandise because they feel their music should speak for itself.

As a music executive it becomes simple math. The first band has proved they can captivate an audience and get them to buy into their brand. If on their own they are playing in front of 400 people per night and most of those people are walking away with music or merchandise, than imagine how much money the label can make when that group is introduced to 1,000, 5,000, or 10,000 fans.

For the executive band two isn't even an option. Even if they had better music, they have not proved they can connect with an audience and make them break out their wallets. Musicians must remember that if you want to make a living at your craft you need an audience that is willing to buy into your product.

This mentality is what put Dave Matthews on the national and global stage, and is why close to a decade later they can hit number one in the Billboard Charts whenever they release an album. Through touring they have built up a fan base that is always hungry to buy into the group's brand. This is what record executives want. They are investing in your small company and want to know that ten years later you will still be making them money. If you can accept that premise than you have a huge chance to get your music heard by the world. 

In an upcoming article I will offer insight as to how to keep records of your sales, motivate a fan base, and sell merchandise so you have the evidence those major executives need when the time is right.