BMG’s Alternative to the Traditional Record Deal

Richard_ Blackstone
Richard Blackstone, Executive VP, Creative & Business Development at BMG Chrysalis North America

If the digital revolution gave artists greater power, then BMG’s Masters Model is the natural evolution of that empowerment. Setting the focus on the artist and writers’ needs was one of the main reasons why the new BMG was set up four years ago and it is the key idea behind one of the industry’s most exciting new alternatives to the traditional record deal. The BMG Master model clearly addresses and turns around the friction points in a traditional relationship between artist and music company, being economics, ownership, and control.

Digital technology has affected every aspect of the recorded music business, opening doors for the creative community to access the marketplace; to present and promote themselves over a multitude of platforms.

The BMG approach to the record business takes the empowerment of the artist as its foundation and turns the traditional record deal and its approach to royalties on its head. Sign your artist to a traditional record company and they will be netting a royalty somewhere in the ballpark of 15%. By comparison, BMG funds the costs of the album cycle, including recording costs and marketing, and once those monies are recouped, BMG enables the artist to receive 75 cents of every dollar earned from that record. It is no surprise that a string of artists such as Bryan Ferry, Nena and Dexys have already signed up for BMG’s Master Model. And no wonder we are seeing increasing interest in the US, with the recent signings of R&B legends Boyz II Men and new talents such as D-Pryde, Josh Krajcik, and a number of exciting deals soon to be announced.

To understand the model, it is probably best to take a look at traditional record deals. These are generally “front-loaded” with a big advance and the promise of a low, back end royalty. In return for that advance, artists hand over the ownership of their music to the record company and it is ordinarily up to the label to make the important decisions about marketing strategies and dollars, and how the music is sold.

There was a time, perhaps, when this traditional model may have made more sense. Part of the problem was that advances remained high– even as record sales declined– and with little prospect of artists receiving any royalties after that initial advance and expensive mass media campaign to promote the release. The net result has been a generation of artists receiving advances, but no royalties, while their record company decides to pull the plug when the record fails to quickly sell a commensurate amount of units, resulting in an overall unhealthy system.

BMG has developed a real alternative to the traditional record deal, to ensure that the music company and artist are on the same side and artists are incentivized to make the key decisions about their music and their career. It’s not for everyone, but for the right artists it can deliver real control and – if the record sells – far greater returns than they would otherwise receive.

BMG offers the artist a partnership: The opportunity to construct a realistic budget for the release, which BMG bankrolls. That budget is mutually agreed upon as part of the contract and as revenue begins to flow, it is paid 75% to the artist, 25% to BMG, with the proviso that 75% of the agreed costs come out of the artist’s share.

We believe it is vital to enable the artist to take full creative control of a release, jointly agree how best their music should be sold and recognize that artists today expect and deserve the lion’s share of the rewards of success.

Granting artists joint responsibility for controlling costs creates more efficiency and also allows projects to make money on the lower sales that have become the norm these days. Ensuring records don’t lose money has the happy side-effect that it potentially allows artists to stay in the game longer – and have the opportunity to develop that many of them need.

BMG is not a record company with endless overheads, but an enabler of label resources. We keep things lean by focusing on the areas where we can really add value in managing the release process, administration, income tracking, finance and securing sync opportunities in advertising and Film & TV. Functions such as publicity and radio promotion are outsourced with the added benefit that artists can choose the one who is right for them rather than being forced to use one company for all resources. We believe this gives the artist and manager the ultimate flexibility, and opportunity to have the best team possible for their specific release.

The response from the artist and management community has been positive. They recognize that things have changed and are eager to embrace the opportunities our new model can offer.

Richard Blackstone is Executive Vice President, Creative & Business Development at BMG Chrysalis North America