The Blog

Leopards and Spots - Why Record Labels Never Change

Imagine that you take out a 20-year mortgage, pay back five times what you borrowed and the bank still owns your house at the end of it. Banks don't do that simply because it would not be allowed.

I signed a recording contract in 1977. I also signed a publishing contract with the same company - yes I know it's not a good idea but I didn't know or care about that at the time and anyway, the label wasn't going to sign us unless they got our songs as well. It was an independent label with a great track record for getting hits instantly with new acts, that's why we signed to them. We had an offer with a much higher advance on royalties from a major label to consider alongside the offer from the indie but the major had a poor reputation for launching new acts and was simply growing fat and lazy on back catalogue so we went with the indie.

And, guess what? Our first record went to No. 6 in the singles chart and we followed that with another two years of top 10 hits so you could argue that we made the right choice. This was an independent label in name only and its independence did not reflect any kind of enlightened ethos in the way it treated artists, in fact it was anything but artist friendly in the terms and conditions contained within the recording and publishing contracts.

These days, we tend to think of indie labels offering fairer deals to artists than their larger cousins, the majors. In many cases this is true, but it wasn't true back then. In fact the indie that we signed to contracted us on terms that would not be contemplated in 2014 but they got away with it back then simply because they could. Here are some examples of the hideous terms we signed up to:

• We were paid on overseas royalties at the worst exchange rate that had occurred during the accounting period.

• The advance on royalties due under the recording contract was cross-colaterised against any royalties due under the publishing agreement. In reality, this meant that when I was due £9,000 publishing royalties on one of the songs I wrote it was swallowed up by the label as we were still unrecouped on the recording advance.

• The label had the last word over producer choice, single release and album tracks and, of course, as soon as the hits dried up, the label stopped working for us. However, the owner of the label didn't allow us to leave the contract and go and record with another record company until he was satisfied that enough time had elapsed to make it very unlikely that we could enjoy a renaissance period with another label.

Fast forward nearly 40 years and are things any different?

Well, as I said, some of the above would not be tolerated in 2014 but that hasn't stopped the labels from finding other ways to screw the artist and some of them are just as bonkers and indefensible. Take, for instance royalty deductions on digital for packaging, breakages and returns. Yes, that's right; we still see plenty of contracts that have these royalty deductions. Where is the packaging on a digital download? How do you break it? Who returns it? Don't even bother asking the labels why they still put this stuff in contracts, they will just give you some flim-flam about levers of negotiation and swings and roundabouts and stuff. Also, while I'm warming to the subject, exactly how much money changed hands between the new digital services and the labels simply as a payment to the record company to make the catalogue available to the new service? We don't know because it is all subject to non-disclosure agreements, what we do know is that none of that money gets passed on to the artist. Then of course there is the practice - largely a major record company phenomenon - of paying the artist an analogue (cd sale based) royalty in what is quite clearly now, a digital age. Is it any wonder that artists moan about the royalties they get from a stream when the label is keeping up to 95% of the money!

The majority of record contracts offered in 2014 will still take an assignment for life of the copyright in the sound recording. That means that during the period that it takes the artist to pay back the advance on royalties, the label will earn something like four times that amount and when all artist debts have been paid off, in other words, what it cost to make the recordings, they still belong to the label for life of copyright! How can that be fair? Imagine that you take out a 20-year mortgage, pay back five times what you borrowed and the bank still owns your house at the end of it. Banks don't do that simply because it would not be allowed.

So, what has changed in the artist record company relationship over the last 40 years? Not very much really, the record company scams are different but the rip-offs are much the same. Why do the labels still do this to artists? The answer is simple, because they can.