Labels Must Be More Transparent on Artist Compensation from Streaming Services (Guest Column)

Courtesy of Nick Stern

Vector Management’s Nick Stern seeks to clear up label misinformation about online payments.

Nick Stern is a former Atlantic Records publicist, currently a manager at Vector Management whose clients include The Black Angels, Phosphorescent and Eagulls, among others.

When I first started managing Clap Your Hands Say Yeah in 2005, I was an employee at Atlantic Records. I worked in the label’s publicity department from 2001-2006 and loved it there. I made amazing friends I’ve kept to this day, and have managed and worked with many bands on the label since I left.  For a couple years after leaving, I was decidedly "anti-label."  With CYHSY, we showed how you could sell a lot records, have a good career, and make tons of money without signing to a label.  And I thought that could be applied to any band. And I was vocal about it.  I hated 360 deals.  I hated that labels spent money and billed it all back to artists and hid those costs in confusing and always-late accounting.  I hated that at all major labels, the top five people made all the money, while every year more and more young and passionate employees were getting laid off.

PHOTOS: Meet the Legendary Tour Managers of The Rolling Stones, Fleetwood Mac, Alice Cooper and More 

Now, having self-released a bunch of records, put out others on some of the most respected indie labels, and still manage bands at major record companies, I feel a bit differently. While I still embrace and continue to explore various self-release models, I want nothing more than for our label partners to be stronger and healthier.  I want and need their help with my bands.  I am happy to be in business with them, and I don't even fight the idea of a 360 deal, as long as it’s fair.  If the artist breaks and makes a lot of money, I'm happy to share that with the label if they've invested significantly in the artist upfront.   But we are at a critical time right now, and I fear the labels are starting a terrible cycle all over again, and we, as artists, managers, lawyers, fans, etc., cannot just sit back and let that happen.

The CD is almost dead, despite the baffling percentage of overall sales they still account for.  Digital download sales are slowing down.  But the streaming services are real. Who knows if they are the complete future, but they are now adding billions of dollars of revenue back into the business at a time when we need it the most.  There is so much miseducation as to how the money works here, I'm constantly disappointed when I hear artists and managers complain that they aren’t making anything from them.  They do - they pay out 70% of what they take in, just like iTunes.  When people try to break this down into per-stream payouts, they're trying to answer the wrong question. When these businesses scale, this is going to be a huge windfall for the recording industry.  

STORY: Kid Rock Takes 'Pay Cut' With $20 Tickets for Summer Tour 

The real question is, where does that money go?  It's not an easy answer, one I've been trying to ascertain for a few years now, but I'll never get it. The major labels took advances and equity from Spotify (and I'm assuming from Beats, too, but don't know for sure. However, one has to wonder about the conflict of interest inherent in Universal owning a large chunk of the company), but of course none of that money is given to the artists whose catalogs these deals were based on.  And the terms of those deals -- the money, the equity -- are an incredibly well-safeguarded secret.  There are rumors, there are people who seem to know more than others, but no one will talk.  It is incredibly important to artists that they know how this money is being paid out, and that it's paid out fairly.

I'm not suggesting that transparency will solve all the problems of our business. But I do think it's about time it happened.  As we move into a world where the dollars from the streaming services add up -- and overall revenue from the sale of music continues to decline -- it's time we all took a step back and figured out how to make this business run more effectively. There is just no reason labels can't update their systems, and there is no reason why we shouldn't be privy to the terms of their deals with the streaming services.  This is now an all-digital world - there are no returns, no packaging deductions -- it shouldn't be that difficult. It’s the very definition of transparency.

I'm more excited by the music that's being created now than I have been in a long time.  I have found label partners with whom I truly enjoy working.  I've grown up (a bit) and learn every day.  But as a business, we cannot start the same old exploitative cycle again.  Let's get this right before it's too late.