2013 was another cracking year for British music. For the ninth year running, the best-selling album of the year - One Direction's Midnight Memories - came from a UK artist. And our music continues to excite people all around the globe - for five of the last seven years, the best-selling global album has come from a UK artist.
This is no accident.
In the UK we're bursting at the seams with independent thinking, creative-minded people, who have grown up with a strong musical heritage and are exposed to a rich mix of international influences. And our talented musicians are supported by ambitious, risk-taking record labels, which help turn creative ideas into successful global business.
So it was disappointing that a recent blog for the Huffington Post by Horace Trubridge, of the Musicians' Union, ignored the success of this partnership and concentrated on grievances over specific points of record deals.
I can't comment on his particular deal or specific terms - each recording contract is different, negotiated individually by artists and supported by a business manager and professional legal advisers. Rather, I would like to lay out a simple ABC of the fundamentals of the artist-label relationship.
Advances - advances from record labels allow musicians to live and work full-time on their music, and use great studios and producers to make the best record they can. Horace's blog compared advances unfavourably to mortgages, but, unlike a bank, a record label will offer an artist tens or hundreds of thousands of pounds to make a record they have never heard, without security, and without expecting the artist to pay the money back if the record doesn't sell. If it does, the label will pay the artist royalties on top of the advance, after recouping some agreed costs. On top of that, the record label will invest even more in marketing and distributing the record. It's a risky business - in 2011, UK record labels invested £163 million, more than 20% of turnover, on signing and developing artists (known as "A&R"). That's a higher percentage than the pharma sector invests in R&D. Labels spent an even greater sum on marketing, even though typically only about one or two records in ten make money. The record label bears all the financial risk in a typical record deal and the terms of the deal overall not unreasonably need to reflect that risk.
Brand - the up-front investment made by record labels helps to build the artist's brand. Connecting with large numbers of fans, particularly to break new acts, requires a huge marketing campaign encompassing everything from advertising and plugging to radio and TV to social media and PR. The artist can make money from the brand value that results in a variety of ways, including through live performances, brand sponsorships and merchandise. Sometimes a record label gets a share of these additional revenues under a so-called "360 degree" or "all rights" deal, but often they do not - it's all down to the individual artist negotiation. And that takes me on to my final point.
Choice - artists have never had greater choice over their career path. The digital revolution has made it simple for artists to release their music themselves, or to form their own record label. If they want the support of an established record label - and the vast majority still say they do - then they have thousands to choose from, many offering new kinds of partnership that look quite different to traditional record contracts. It's a competitive market and artists quite rightly shop around for the best deal. Labels always insist that artists should have independent, expert advice before they sign.
The changes in the record business since Horace signed his contract have been dramatic - fans can now instantly access any song they want, anywhere and at the touch of a button. And the economics of the industry look very different to 40 years ago. British labels have helped to lead this transformation, licensing more new digital music services than in any other country. But one fundamental has stayed rock solid. It's the partnership between artist and label that drives the phenomenal success achieved by British music.
Artists can best reap the benefits of a new age of digital growth by recognising the value that partnership brings.
It takes two, baby.
This is no accident.
In the UK we're bursting at the seams with independent thinking, creative-minded people, who have grown up with a strong musical heritage and are exposed to a rich mix of international influences. And our talented musicians are supported by ambitious, risk-taking record labels, which help turn creative ideas into successful global business.
So it was disappointing that a recent blog for the Huffington Post by Horace Trubridge, of the Musicians' Union, ignored the success of this partnership and concentrated on grievances over specific points of record deals.
I can't comment on his particular deal or specific terms - each recording contract is different, negotiated individually by artists and supported by a business manager and professional legal advisers. Rather, I would like to lay out a simple ABC of the fundamentals of the artist-label relationship.
Advances - advances from record labels allow musicians to live and work full-time on their music, and use great studios and producers to make the best record they can. Horace's blog compared advances unfavourably to mortgages, but, unlike a bank, a record label will offer an artist tens or hundreds of thousands of pounds to make a record they have never heard, without security, and without expecting the artist to pay the money back if the record doesn't sell. If it does, the label will pay the artist royalties on top of the advance, after recouping some agreed costs. On top of that, the record label will invest even more in marketing and distributing the record. It's a risky business - in 2011, UK record labels invested £163 million, more than 20% of turnover, on signing and developing artists (known as "A&R"). That's a higher percentage than the pharma sector invests in R&D. Labels spent an even greater sum on marketing, even though typically only about one or two records in ten make money. The record label bears all the financial risk in a typical record deal and the terms of the deal overall not unreasonably need to reflect that risk.
Brand - the up-front investment made by record labels helps to build the artist's brand. Connecting with large numbers of fans, particularly to break new acts, requires a huge marketing campaign encompassing everything from advertising and plugging to radio and TV to social media and PR. The artist can make money from the brand value that results in a variety of ways, including through live performances, brand sponsorships and merchandise. Sometimes a record label gets a share of these additional revenues under a so-called "360 degree" or "all rights" deal, but often they do not - it's all down to the individual artist negotiation. And that takes me on to my final point.
Choice - artists have never had greater choice over their career path. The digital revolution has made it simple for artists to release their music themselves, or to form their own record label. If they want the support of an established record label - and the vast majority still say they do - then they have thousands to choose from, many offering new kinds of partnership that look quite different to traditional record contracts. It's a competitive market and artists quite rightly shop around for the best deal. Labels always insist that artists should have independent, expert advice before they sign.
The changes in the record business since Horace signed his contract have been dramatic - fans can now instantly access any song they want, anywhere and at the touch of a button. And the economics of the industry look very different to 40 years ago. British labels have helped to lead this transformation, licensing more new digital music services than in any other country. But one fundamental has stayed rock solid. It's the partnership between artist and label that drives the phenomenal success achieved by British music.
Artists can best reap the benefits of a new age of digital growth by recognising the value that partnership brings.
It takes two, baby.