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SXSW Day 3 afternoon report: Where does the money come from?

March 20, 2009 |  6:12 pm

The record label of the future might continue to look a lot like management firms of today.  The first two days of the South by Southwest music conference and festival in Austin, Texas, were dominated by discussions about the continued dip in CD sales and the volatile state of the economy. As much as the Internet has been heralded as a tool for the music biz, the question remains: Where does the money come from in this depressed climate?

There wasn’t necessarily an answer in Friday’s multitude of SXSW panels, but there were some indications as to how the economies of the labels are shifting. Sub Pop’s head of A&R, Tony Kiewel, noted that it's still doing well, pointing to the Fleet Foxes, who he said have become the quickest-selling act in the label’s history.

But the good times aren’t likely to last forever.

“The way the money is coming in is going to get worse,” Kiewel said. “There’s only going to be less and less revenue from recorded music sales. I don’t think it will drop off completely, but I think you have to be pretty blind to not see the writing on the wall.”

Expect labels to continue to take on more management duties, and vice-versa. Pete Ganbarg, executive VP/head of A&R at Atlantic Records, indicated that the Warner Music Group label would be employing in-house managers.  “Atlantic tries to do broader rights deals,” he said.

This is now the fourth SXSW in a row where industry reps have touted the benefit of so-called 360 deals, which see a label taking a cut of other aspects of an act's revenue, including touring or merch. It’s still a controversial topic for artists.

It was a sticking point for Los Angeles band the Airborne Toxic Event, which signed with Majordormo and recently did a deal with major Island Def Jam.  Asked frontman Mikel Jollett, “How do you make money otherwise? You’re not going to make money on your record sales unless you’re a top tier band.”

Yet there were indications at the industry conference that such issues might be coming to a head. Kiewel offered a counter argument at a different session: “Who’s paying for stuff?”

“Labels are less willing to throw down $20,000 in tour support,” he said. “As label revenue slips, the likelihood that they’re going to underwrite these tours diminishes. What we’re seeing is a titanic shift. Where is the money going to come from?”

Management firms starting record labels are nothing new. If labels are starting in-house management divisions, such a tactic would be another opportunity to explore the validity of 360 deals.

“Management companies could more and more fill the niche of indie labels,” Kiewel said. “For indie labels, working with acts who don’t have managers, we acted as managers … We’re holding hands and talking to these people at midnight when they’re freaking out.”


Labels, apparently, still have some money to burn. Airborne’s Jollett said his band had spent last year’s SXSW being courted by major label suitors. “We ran up a $5,000 tab at the Driskill [Hotel] and left it with one of the labels,” he said.

Sub Pop head Jonathan Poneman jokingly shot back: “Wait a minute, you’re the guy who left me with a $5,000 tab!”

Ganbarg said that Atlantic is still spending money but that it's going toward the company's 25-person digital team rather than artist advances or video clips. This was seen as good news at SXSW, as the days of major label excess may not be over, but are dwindling.

"I don’t think you need $100,000 to make a video," said singer-songwriter Mandi Perkins, who is signed to Sony BMG's Victor Records. "You don’t need $500,000 to make a record. If you’re making stuff you care about, you don’t need to spend all this money."

Thus far, Perkins has found that major label life hasn’t necessarily resulted in any major rewards. She reports that these days, people are less likely to offer her any favors. “I’m actually working much harder now,” she said. "If you’re an artist, you’re using every new tool that becomes available. Oh, Twitter becomes available? You’re using Twitter.

“The difference between being independent and not independent is pretty much zero,” she continued. “The only difference is I was able to put the label beside my name, and on MySpace.”

Four years ago, Matthew Hales, who records under the name Aqualung, was a hot SXSW artist, one who received a massive push from Columbia Records. Since then, he’s seen his label deal disintegrate. Now that he’s no longer being touted as the "next big thing," he said he’s relaxed, and making money, thanks to his production work for other artists and licensing to film and TV.

“The goal now is try and scale the whole thing to this modest place,” he said, “and put people around me who understand that’s the goal … Some people would look at me and think, ‘I’m so sorry. You looked like you had it all.’ I just feel like I’ve escaped.”

-- Todd Martens

Photo: Airborne Toxic Event. Credit: Stefano Paltera/For The Times