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RULE #1: You can't just go out and cut an album (or a CD or whatever) by yourself.
RULE #2: If you do somehow manage to cut your own album (or CD or whatever), the costs of doing so automatically rules out any possibility of profits.
RULE #3: (In Other Words) The whole thing is rigged, you can't win unless you sell your soul to Satan or, even worse, to a record company.
I swear, if one more person makes this subject sound more complicated than it really is, I am going to the nearest post office and hold the place hostage until someone hears me out.
I've been digging around in this information for years and I have yet to meet even one person that sees this the way I see it. I don't know, maybe I'm really stupid or something.
Well, if I am stupid, which is a distinct possibility, let's see how I got that way.
It all began when I started writing lyrics and I tried looking for an outlet for my work. After a while I got angry because nobody wanted anything to do with my lyrics. After becoming disillusioned with the music scene I figured, "Screw it", and bought a bunch of instruments and eventually built a micro-studio in my garage. I wrote "music" for my lyrics and eventually started sending out demos.
Then I started to get even more angry, here's why:
DEMO GUYS: Mr. Z., we like your demo but you neglected to send us a bio. Can you tell us a little about yourself?
ME: Sure, I am currently working at a hospital and...
DEMO GUYS: No, no, no. I mean your music biography. What can you tell us about your musical background?
ME: Oh, that. Uh, well, um... I'm a lyricist that had trouble finding collaborators and I eventually...
DEMO GUYS: (dial tone)
Soooooo...
I decided to release my own stuff and I found myself writing to and calling up a number of CD and tape manufacturers. I learned a lot. The main thing that I learned is that record companies get a hell of a lot of money for doing very little.
Talk about angry...
A long time ago, it used to take a large number of people to assemble and distribute even one little record. It took multitudes of musicians, producers, promoters, lawyers and gangsters to get any platter started on the road to success. All of these people required at least one thing to get them to participate in a project - money.
In order to pay all parties involved, artists had to sign away most of their rights to the record company that they worked with. The record company then paid everyone off and collected their money back in the form of royalties.
No one could blame a record company for wanting their piece of the pie. Record companies deserved every penny they received since they had put forward most, if not all, of the money needed to produce a work. The record companies stood to lose the most if a project failed so record companies were perfectly entitled to a large portion of the profits. A solid rule of business states that the ones carrying the most risk deserve the most profits. Besides, without the record company, the lone artist did not stand a chance. Record companies earned their keep.
But record companies were also shrewd, they found that they could stay on top of their competitors if they made sure that they covered their assets.
One way of covering assets was to make sure that artists only received money on the actual number of albums distributed as opposed to the total number of albums distributed. Because the earliest albums were easily broken, record contracts only paid the artist for 80% - 90% of the albums distributed since it was estimated that 10% - 20% of all records broke before reaching the market. This is known as a breakage clause. Fair enough, right?
Right.
Year after year, record companies made records and record companies made money. One of the things that record companies found out was that it was to their advantage to help young talent mature into money making acts, they encouraged their fledgling performers to keep on trying until they succeeded in making a hit record. Yes, those were the good old days.
And then came the martians from outer space. Yes, the martians ruined it all.
I started to read about the Evil Record Companies and their Evil Scams.
I found out that record companies had been screwing recording acts for a long time and that the record companies felt that the artists were so stupid that the artists would never figure out that they, the artists, were being porked senseless.
I found out about the Evil Breakage Clause. The breakage clause served a purpose at one time, it covered record losses due to breakage during shipment. Breakage stopped when vinyl records were introduced and yet the record companies still insisted on paying artists for only 80% - 90% of units sold. Every time I tried to explain this Evil Plot to the average musician, they looked at me like I was insane.
I also found out that record companies would dump a recording act like a hot rock if the act didn't pay off immediately. Apparently, there was a time when the record companies actually helped recording acts along, but no more. If an act didn't blast the charts the first time out then the act was history.
And record companies now require that recording acts pay for their studio time, this is not how it used to be. I also know that record companies can screw artists even more if the artists write their own material.
The more I learned the angrier I became.
Martians. The game was called Space Invaders. Space Invaders took a lot of money away from the record industry. Space Invaders was just one of the many, many video games that kids were pumping their money into. The money that the kids put into the games was the same money that they used to spend on records. The video game market made many people rich but it cost the record industry nearly everything.
In order to cut back on expenses, record companies started asking more and more from their artists. Studio time was paid for by the artists, the records companies sweetened things by fronting the studio money but the artists repaid the record companies through withheld royalties.
The average singer was dumped unless they were already established. The problem with someone that "just sings" is that they do not write their own material. If a singer performs someone else's music, the record company had to pay rights to the song's publisher.
Record companies were playing for keeps. Record companies started targeting singer/songwriters insisting that the singer/songwriters sign over most of their rights, this cut off any money that would go to outside publishers. Record companies did not allow singer/songwriters to publish songs outside of the company because it could affect the record companies' bottom line.
Record companies were not being rude, they were covering their assets. Anyone else in the same situation would have done the exact same thing.
But there were problems with this approach, problems that could eventually make things even worse than the video game situation.
As if all of the other stuff weren't enough, I read that record companies were jacking up the cost of their products. One of the few joys I have left in these hard times is my music and the record companies know this, they know that I will continue to buy music no matter what, so I get screwed not only as an artist but I get screwed as a consumer as well.
It wouldn't have been so bad but I also found out what it would cost to print up a CD on my own. In some places I found that it could cost as little as $1.30 per disc (for a lot as small as 1000 units) if I did everything myself. I couldn't even begin to imagine how little it would cost a record company to print a CD, especially if the company had its own manufacturing plant.
I started thinking that I could do all of this by myself and then I hit a brick wall. The wall was called distribution. The big "D" was where the record companies had everything locked up.
Or so I thought.
With the advent of new technology, the record companies were faced with a new and possibly insurmountable problem. The record companies had created an artistic version of Frankenstein's Monster. It was a thing of their own invention and this thing started looking like it was going to become much bigger than they could have ever imagined. The first obvious manifestation of this problem was a man named Prince.
Prince insisted, against Warner Brothers wishes, on recording everything himself. Warner Brothers had no idea what impact this specific event would have on the overall future of recording. Had Warner Brothers known just how this would affect the future of the recording industry, they would have cancelled Prince's contract and prayed that no one would find out what he was up to. But they let him go and it spelled the end of the record industry as we know it today.
The problem was this: If Prince could perform and record independently, how long would it be before Prince (and everyone else, for that matter) figured out that he could also put together his own album? And how long until he started publishing his own material? And how long before he found a way to distribute his own material?
It comes down to one very big question: How long would it be before independent artists figured out that they could cut out ALL of the middlemen and deal directly with the consumer?
This poses some problems of near incomprehensible proportions.
I called a distribution company about the distribution of an independent work. The conversation went like this:
ME: I was wondering just how to plug a disc into the network for distribution.
DISTRIBUTION GUYS: How many singles has the disc landed on the charts?
ME: Uh, well we haven't been able to...
DISTRIBUTION GUYS: (dial tone)
My Waterloo. I had found a lot of information on the singles market and none of it was too nice. I was pretty sure that I was doomed without a charted single. My chances of hitting the charts were pretty slim since my music is really weird, so I went another direction.
I called even more CD manufacturers and found a company that combines distribution with its printing deal. The rates were good and the distribution deal was pretty simple. Still, without a single or a tour I was dead in the water. But, hey, information is information, there had to be some use for it.
I continued working on my music and one day, while working in my studio, I tripped across this really weird idea.
The Record industry had been culturing a new species of artist. With more and more demands being made on the artists and less and less money being thrown in the artists' direction, it was only a matter of time that the artists would come to see that the artists themselves could take over everything.
If an artist could establish distribution and then sell his or her wares at the market price, then the artist could pull in $5.00 or more profit per disc. This is unheard of. An artist could sell as little as one-tenth the number of units that some other recording acts sell and still make as much money.
And then there is the other end of the spectrum.
If the small time acts chose to cut their prices, they could increase sales while at the same time undercutting the major labels by amounts that would drive the majors straight to bankruptcy.
So I thought about it some more. While I continued to think, I picked up a tape that I had bought many years ago, the tape was the answer that I was looking for.
Have you ever been in a bar listening to a band and noticed that after a couple of drinks that all bands are of Led Zeppelin quality? Have you ever noticed that two pitchers into the evening that the band that you are currently listening to has to be the absolute greatest band on the face of the earth? Have you ever noticed that four pitchers after you arrive at the bar that this two-bit bar band is grossly underrated, that it is the best band on the whole (burp) earth and that if this band had an album, you'd buy that album in a heartbeat?
I looked at this stupid tape that I had bought in a bar and thought some more. The time I bought this tape was the only time that I had ever seen a band selling tapes in a bar, I thought that maybe it was a fluke but it seemed to me the most logical thing in the world to do. Why weren't more bands selling their stuff at their gigs? Hey, the tape sucked, so what? I still bought the stupid thing.
Yet there had to be a problem, there had to be something that stopped groups from doing this more often. Then I figured it out. The problem was the studio time. The cost of printing up albums was not as much the problem as was the cost of actually recording the masters. Studio time really ate up the profit margin.
I had an answer for this problem, too.
There is a rule in distribution, it goes something like this:
If you cut your price by reducing the profit margin by 30% and the reduced price doubles your sales, you increase your overall profits by 40%.
The record industry has always been somewhat immune to this rule. Consumers often think that if an album is selling at a lower price that the album must be pretty awful. This has always been, at least to some degree, true. More often than not it comes down to getting exactly what you paid for. But even if they found a way to convince consumers that lower prices do not necessarily mean lower quality music, record companies could not make the above distribution rule work for them.
The reason that major labels cannot utilize distribution rules like the one above is because the record industry is incredibly top-heavy. A thirty percent reduction in profit margins would mean little or no savings to the consumer. There is no way that a price reduction based on profit margin could ever create a twofold increase in sales.
But a group that cuts their own masters, does their own graphics and prints their own CD can cut out so many of the middle men that they can afford to cut their profit margin 50% or more and still make more money per unit sold that most groups can even dream of making with a major label deal.
The problem still lays in the distribution of the work. If there were a way to create an underground distribution system that would not result in substantially increased prices, the independent release could blow every record company in existence out of the water.
I equipped my studio with the following thought in mind:
I can either pay five to ten thousand dollars for the time that it would take to cut my masters in a professional studio, time that might be wasted if the effort were to come out badly, or I can pay three thousand dollars on equipment for myself and cut the masters over and over and over until everything comes out exactly the way I want it to. I chose the latter.
I wound up spending about $6000 for recording equipment, instruments and effects. I have a DAT deck, an eight-track, a keyboard/sequencer, a drum machine, a vocal harmonizer, a digital effects unit, a mixer and some other junk.
I found out that mail order prices are significantly lower than retail prices and that mail order allows people to avoid state and local taxes.
Now all that is left is the distribution problem. One of the companies that I contacted (the one that includes distribution with their pressing deal) says that, offhand, an album has about a one-in-fifty chance of taking off without any other promotion. Actually, these odds are much better than I would have figured, I figured it was more like ten-thousand-to-one. But, if nothing else, they do include one of your tracks on a sampler that they distribute and they can boast a significant number of contacts in the event that your album does decide to take off. This is good to know.
I decided that once I do cut an album (CD, whatever), I will want to establish a network of my own. This network will emphasize visibility over profit. I think that it can work.
Here is the idea:
1. Establish a co-op that requires that all members exchange a specific number of CDs with each other on a unit for unit basis.
2. Allow all members to sell on-hand units for whatever price they want to. They may sell the CDs at gigs, on street corners or any other way that strikes their fancy.
3. Members will be required to buy other members CDs at a fixed co-op price after the supply of discs from the initial exchange are exhausted.
Record companies will not disappear. Their ability to adapt to previous hardships indicates that the record companies of today will survive until the end of time.
But the role that record companies currently play may change in some very significant ways.
There will always be a place for major labels simply because there will always be a demand for popular music but record companies will no longer be a place of innovative or experimental music.
As the market goes through a horizontal growth period, many groups will find that they will be able to self-produce albums and distribute them through a cost effective network that will allow both the consumers and the suppliers to be happy with the results. The suppliers (the recording acts) and the distributors will be able to make a comfortable living from selling as few as 50,000 units and the consumers will be allowed to purchase new music at reasonable prices.
The record companies will still own the airplay market and they will still be a considerable force in the marketplace but they will not have the luxury of "owning" their recording acts by virtue of the fact that the record company has risked a lot of money on producing untested music.
Record companies will become companies that exist on secondary activities. They will pick up albums from artists that have proved to be winners and they will never again touch an artist that hasn't already tested the waters with a self-produced work.
Record companies will downsize as they transform into groups of promoters and distributors of previously recorded music.
This distribution setup is the best way to promote and distribute new work. It provides distinct advantages that cannot be found in any other marketing setup. It's easy, efficient and it creates profit for all involved.
The scenario works like this:
Three recording acts, Groups A, B and C each self-produce a CD. Each group prints up 1000 units. Groups A, B, and C then join the XYZ Music Co-op.
The XYZ music Co-op then requires that all three groups exchange twenty CDs with each other. Group A receives twenty discs from Group B and twenty discs from Group C while giving twenty of their own discs to Group B and giving another twenty discs to Group C.
Group A goes on tour and sells all three discs at their gigs, Group B decides to sell only the Group B disc at their gigs while Group C, a studio act, starts pushing all three discs at local outlets.
Groups A and C discover that their respective discs are selling well while Group B's discs is not selling at all. Group B discovers that their disc sells so-so at their gigs so Group B eventually starts selling the other two groups discs at the Group B gigs. Group B finds that Group A and Group C discs sell well.
After all of the Group A and Group C discs are sold out, Group B then can buy discs from Group A and Group C for a minimal fee (E.G., All subsequent discs are purchased from other groups for $4.50 each as per XYZ's policy.). Group A and Group C may also purchase discs from each other and other Co-op members as needed.
This system would create an underground network that would allow all groups to profit regardless of which groups produced the popular albums. The incentive to produce worthwhile music lays in the fact that a group will make more money selling their own discs than they would selling other groups discs.
The impressive part of this deal is that groups could sell discs at a price of something like $8.00 and still make a sizeable profit. Consumers would be able to buy more discs because of the lower priced discs.
The strange part about this is that the major labels may also be happy to see something like this going on. An already produced disc minimizes their investment since the albums are already recorded, packaged and proven. The down side of this development is that artists may become accustomed to the high profit margins and make demands of the record companies that were previously unthinkable. Breakage clauses would evaporate, artist authority would become unquestionable and many go-betweens in the record industry will lose their jobs as the record companies become more streamlined.
Weird idea, eh?