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Recording Contract Structures

Former CEO at EMI Group & Board Member at Pandora Media

IP Interview
Published on October 18, 2020

Why is this interview interesting?

  • The structure of a typical deal between a record label and artist
Executive Bio

Roger Faxon

Former CEO at EMI Group & Board Member at Pandora Media

Roger has over 30 years experience in the music and publishing industry. In 1994, he joined EMI, one of the four largest record labels globally, and spent 5 years as CEO of EMI from 2007-12 just as the industry was rapidly shifting digitally. Roger has led A&R investments, negotiated deals with the largest streaming platforms, and is on the board of Pandora Media and ITV. Previously to working in the music industry, he was CEO of Sotheby’s Europe and EVP at Lucasfilm.

Interview Transcript

Let’s say that I’m a major artist, I don’t want to go with a large record label, or I’m even with a large record label. If I was to approach a smaller independent, that’s not a captive of a large record company, what would the relationship be like and how would Spotify be involved, for example?

Spotify is, in effect, selling a deep dive understanding of current consumption and trending consumption. Think about the independent as being an investor, they want to have a greater amount of success, per dollar, per pound, than the major record companies. That’s how they can succeed and be able to match the economics, the advances, that go to major artists. I don’t want to get too granular here. The big advantage that the record companies have at the moment, is that when an artist looks as though they’re going to forward and they are a true independent artist, they go and they sit down with artist and their manager, and it’s all about the advance. It’s all about, how much money, up front, do I get? The money they get is structured. For example, I’m going to give you $1 million, a lot of money, and for that, you’re going to deliver me a record. Then I’m going to sell that record, get that record into the marketplace and make money and I’m going to take X amount, as a record company, and you’re going to get Y amount, out of which I’m going to recoup the $1 million I gave you. That’s the way it works.

But the independents don’t have that large capital base to give the advance?

That’s correct. They try and get in much earlier and, by the way, the reverse way of this is that the indies go out and they find the people and then they will sell their position with that artist, to the major record companies. That’s how they make their money. That’s historically true, because they don’t have any capital; they have very little capital. What should happen, if you can efficiently understand what music is going to be more accepted in the marketplace, it’s a play that absolutely is primed for an investor. That is happening and it’s going to happen more because, where most of those investors have been, in music publishing, those numbers are eye-watering, and if you can lay this out in the proper way, you can probably get to a pretty good answer.

It’s not as complicated as it sounds but it’s the moment at which it’s starting to happen, I think. The record companies have lots to do, to be able to change that. But if I were an artist, and there are artists that are doing really well, but are not at major record labels, the individual artist needs to believe in themselves. I always used to say in making deals, to the artist representatives and the artists was, look, we’re betting for you, that you’re going to do really well and you’re betting against yourself. You’re saying, I want the money now, because I don’t believe I’m going to succeed and we say, we’re investing now, because we think you will. When you have people you believe in and the artist believes it, because it’s a more coherent way forward, that changes the entire way in which the market will work.

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