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Sunday, April 18, 2004
From a VR thread about Fiona Apple's new album possible getting shelved:

"So, they're not sure they have a "Single" and think that may mean lackluster sales, so they've decided to hide it away in a vault.

Sounds like a great plan to me."

3 words.

Yankee, Hotel, Foxtrot

This is exactly why the music industry is the laughing stock of any business where smart people dwell. You never hear a baseball coach say "Either hit a home run, or strike out. Those are your only two options."

This is, of course, not really true. It doesn't make logical or moral sense, but it does make business sense. (Indeed, the fact that it doesn't make logical or moral sense is sort of a good sign that it makes good business sense.) The first album did tremendously well; the second one less so. But it's reasonable to assume that Fiona renegotiated her new-artist deal after the first album, and it's further reasonable to assume that there was a guaranteed marketing commitment included in that renegotiation, and that this guarantee was somewhat high. And so if they do release the album, that's committing to an expenditure of a further $1 million at least in marketing, promo, and manufacturing. They'd have to sell at least 200k to make that up, and clearly some at the label don't think it will. Why release something when you're going to lose more money on it?

So why not sell it to someone else? Well, since the label has probably already spent let's say $300k in A&R costs, it needs to get these back, plus it needs a compelling reason not to have it in its catalog in case it does sell well. So it wants an override (presumably in addition to a partial repayment of recoding costs) of 2 or 3 points on the album, which would come out of the artist's royalties, except that unlike artist royalties, you have to pay from record 1, not just once costs are recouped. And so there's a big disincentive to pick the album up, since the new label will essentially have to start laying out money before the artist is recouped, and a similar disincentive for the label to give it up until they've exhausted all other avenues.

And so this is why shit happens like Wilco getting dropped by a major and resigned by one of its subsidiaries, or Dead Prez getting dropped by and re-signed by Columbia: it allows you to re-renegotiate the contract based upon the album at hand. So you drop the band, drop the contract, and resign with a whole new contract that's probably more beneficial to the label in a lot of ways but which also gives the artists certain rights of independence. (It also gives you time to let the album circulate in the free market to get a better idea of its value.) I assume right now there's an internal battle at the label between A&R, finance, and marketing (and the various execs thereof) as to whether or not to release it, and it's this internal battle, i.e. the hope that it will actually be released, that further delays its being shopped elsewhere.

Is this all pretty stupid? Sure. But it all stems from release and marketing commitments, and those are in there to protect the artist from being short-changed by the label. These end up hurting the label sometimes, and so they also end up hurting subsequent artists, but it wouldn't be necessary if the music industry wasn't one giant cesspool of untrustworthiness where, OK, it's a bad thing for the system, but fuck you, I don't want you releasing an album I spent years on without laying out a reasonable amount of money to promote it, because if you're not promoting it then why the hell am I with a record company? The solution at this point would probably involve a greater use of labels as marketing companies, rather than whole entities, wherein the artist would have a freer hand in setting the level of marketing and manufacturing, with proper consultation. You could also decouple the labels from ownership of the products, and so they wouldn't have a vested interest creating a disincentive to having it released. Furthermore, you could have bonuses based on benchmarks rather than individual unit sales, i.e. you don't get five dollars for selling one more CD, you get a chunk of money when you hit 500k sales, so there would be a greater incentive to increase sales.

Of course, this probably won't happen without everything sort of collapsing, and I'm not really ready for that yet.

The music industry is a "laughing stock of any business where smart people dwell" not because of its weirdo business practices (if anything, they're better for the salesmen than the practices of a lot of other industries), but because you can't really make any money in the music industry; from a business perspective, there really isn't a lot of money to be made, whichever way you slice it, unless you go gold and so actually, again, the smart business decision doesn't work out well for anyone. The industry survives by maintaining an aura of cool that draws people who are looking for some cool to it, and if they have a little money, well, they give us their money, they look cool, everyone benefits. Sort of. Without this steady supply of star-struck rich idiots, where would we be?

The lesson from Yankee Hotel Foxtrot wasn't that you can make money off "difficult" bands. It's that if you shelve an album and then drop the band and work it in a way that you get a ton of press for it, the album will do really well. This is not good for artists.