The Real Reason Major Record Companies Suck

by Peter Spellman, Director, Music Business Solutions

An artist who signs a major label recording contract today is probably taking the biggest risk of his or her career. With a mortality rate of 1 out of 10 failures, it’s clearly a crap shoot whether a new major label artist will “make it” or not. The list of “where are they nows” over the last ten years runs into the thousands.

This sucks!

When we try and figure out why this mortality rate prevails, a number of familiar reasons present themselves:

The major labels are putting out TOO MANY RECORDS…True, but I believe this is merely a symptom of a bigger problem.

The major labels are SIGNING ARTISTS TOO INDISCRIMINATELY…Yes, but this too is symptomatic of something deeper.

The major labels are peopled with DYSFUNCTIONAL, TURF-PROTECTING CLIMBERS…True sometimes, but this too is merely a symptom.

The major labels aim for A LEAST-COMMON-DENOMINATOR MUSICAL “SOUND” that will appeal to the masses…Yes, but a symptom again.
We can go on and on with possible reasons and never arrive at the REAL one. The real reason major record labels suck is because they are “divisions” within larger multi-national corporations that are obligated, BY THEIR VERY NATURE, to behave in a certain art-destoying way.

Let me explain.

There are certain obligatory rules by which all corporations must operate. These rules are assumed, accepted, rarely articulated and color everything a corporation does. Now don’t get me wrong. There ARE music people within corporate record labels – people who are truly turned on by music creation, recording and promotion. I know some of them.

But when push comes to shove, all their actions must reflect the policies and procedures handed down from “corporate”. Too much independence on their part and they will be handed a pink slip and shown the door.

There are seven primary rules corporations (including music corporations) must obey, and each rule has a profound effect on how music and artists are treated, regarded and disposed of.

Here they are:

Monetary profit is the ultimate measure of all corporate decisions. Shareholders “own” corporations and they expect the value of their shares to increase, not decrease. Forget the little old lady that owns a few shares of stock. Most shares are owned by tremendously wealthy and thus politically influential individuals and most importantly by other corporations, many of which are investment banks. All are itchy for quarterly, measurable profits.
“EBIDTA” (earnings before interest, taxes, depreciation and amortization) controls everything. Senior corporate officers are notorious for wearing “ninety-day glasses”. Three months ahead is as far as most CEOs can see. This myopia often infects the entire organization, as relentless pressure to perform over the short term radiates from the top.

A factory may be closed rather than modernized and an artist dropped rather than developed because the tax write-off makes the next period look better.

This goes hand-in-hand with the profit imperative. Profit means growth, expansion of the talent pool, expansion of the master catalog. Corporations live or die by whether they can sustain growth. Music corporations must keep on signing new artists in order to use their vast infrastructures and justify their overhead expenses.
Sometimes company growth doesn’t happen fast enough to suit the ambitious, however, and sometimes it doesn’t happen at all. What to do then? The power-hungry CEO’s typical solution is to expand by acquiring another company. Growth by acquisition has been the modus operandi of the corporate music business since the 1970s.

EMI is a case in point. By acquiring such hot labels as Virgin and Chrysalis and bringing its antiquated operations up to snuff, EMI for a while seemed headed to the top. But chairman Sir Colin Southgate also pressured his executives to maintain double-digit growth, first in good times, then in the face of a rapidly deteriorating market. They responded by pumping out quick-buck anthologies and slashing costs willy-nilly when they could have been building talent for the long haul. Managed for short-term results, EMI has literally consumed itself in pursuit of its numbers.

The profit and growth imperatives are the most fundamental corporate drives; together they represent the corporation’s instinct “to live.”

Corporations place every person in management in fierce competition with each other. Anyone interested in a corporate career must hone his or her ability to seize the moment. This applies to gaining an edge over another company or over a colleague within the company.
All divisions of the record company are attempting to represent themselves as an indispensable component of the recording industry. The day-to-day work of dealing predominantly with one specific medium, whether the music, the image in the video, radio media, or the press, tends to result in different staff assessing the potential of artists in different ways and developing their own agendas and goals rather than working towards a shared overall vision. As a label employee, you are expected to be part of a “team,” but you also must be ready to climb over your own colleagues when an opportunity presents itself. Turf battles and other “family dysfunctions” are a “normal” elements in the corporate game.

Not being human, corporations do not have altruistic goals. In fact, corporate executives praise “nonemotionality” as a basis for “objective” decision-making. So decisions that may be antithetical to aesthetic goals or artistic integrity are made without misgivings.
Corporations, however, seek to hide their amorality and attempt to act as if they were altruistic. Lately, for example, there has been a concerted effort by American industry to appear concerned with environmental cleanup, community arts or drug programs. Similarly, major labels are starting to once again toss around the phrase “long-term artist development” as an antidote to the perception they are short-sighted.

But this can only be rhetorical in a corporate setting where quarterly results rule the environment. Product (and its creators) not bringing in the necessary numbers will continue to be dropped like a bad habit.

Don’t be deceived! It is a fair rule of thumb that corporations tend to advertise the very qualities they do not have in order to allay negative public perceptions. When corporations say “we care,” it is almost always in response to the widespread perception that they do not have feelings or morals.

Corporate laws require that corporations be structured into classes of superiors and subordinates within a centralized pyramidal structure: chairman, directors, chief executive officer, VPs, division managers, and so on (based primarily on military models).
Unlike the freedoms of an entrepreneurial business, large company decision-making must pass through layer upon layer of management. This makes the process of product development slow and ponderous. For example, from the time a band is signed it can be a full year or longer before their first record is finally released owing in part to this dense hierarchical management structure. A lot can change in a year.
Furthermore, high executive turnover and frequent management “purges” at large record companies can often delay or even derail a recording project indefinitely, leaving artists in the lurch.

Corporations require that subjective information be translated into objective form, i.e. numbers. The subjective or spiritual aspects of music, for example, cannot be translated, and so do not enter corporate equations. Music is evaluated only as “product.”
Some in the industry would prefer to treat music like other industries treat cars and refrigerators. But music cannot be treated as such. As the creative extensions of human spirit, music will always defy attempts at control. Indeed, just when the majors catch up with a “new” music trend they often find that the market has shifted and music lovers have moved on to something else.

Corporations have a stake in all of us living our lives in a similar manner. The ultimate goal of corporate multinationals was expressed in a chilling statement by the president of Nabisco Corporation: “One world of homogeneous consumption. . . [I am] looking forward to the day when Arabs and Americans, Latinos and Scandinavians, will be munching Ritz crackers as enthusiastically as they already drink Coke or brush their teeth with Colgate.”
Corporations are structured and optimized for the “mass market” and so what they sell must appeal to the broadest audience possible. Their musical mainstay has been CHR (Contemporary Hit Radio or Top 40 Pop) – predictable, non-adventurous, formulaic. They have dominated the airwaves and circled the globe with this musical pablum.

Incidentally, homogenization is one of the reasons the corporate music business (along with most other corporations) is in such crisis today. It is facing a rapidly segmenting marketplace where consumers have become unpredictable. It always depended on “The Next Big Thing” to flush its corporate ledgers. But the very concept of one artist who can unite a large pop audience and help shape and define it (ala Elvis, The Beatles, Springsteen) seems about as dead as the 45-rpm spindle. Next Big Thing? More like “Next Modest Thing That Might Appeal to a Portion of the Demographic”.

But while bad news for the corporate giants, this is good news for their indie counterparts. A number of indie labels specializing in “niche” music markets (hip hop, ambient, folk, celtic, etc.) are grabbing market share almost daily and breaking open a lot of champagne these days.

So in conclusion, let us remember that the Musical Industrial Complex must, by necessity, bow to corporate imperatives that will inevitably clash with art. It’s nobody’s fault; it’s the nature of corporate cultures, and any artist desiring to get into bed with this culture should proceed with eyes wide open. Your partner could be your nemesis.