1-3) Explain why record companies today usually only sign certain acts.

The record industry your parents knew about is dead. Years ago, the record industry operated in ways that seemed to make sense: they would find an act, develop and produce it until it was ready to be released upon the public, and then they would take time to nurture the long-term career of that artist. This method was put in place usually by people who had an innate understanding of music and commercial appeal: former musicians, songwriters, and music lovers like Berry Gordy, Jr. of Motown; Ahmet and Nesuhi Ertegun of Atlantic records; Jerry Wexler, also of Atlantic records; Herb Alpert and Jerry Moss of A&M records, and many others.

Due to corporate mergers, downsizing, changes in distribution methods such as the internet and video games, a sluggish economy, and advances in recording technology which have allowed small labels to compete just as effectively as the majors for consumer appeal, today’s music business has radically changed. This change has resulted in an industry more devoted to the loss-or-profitability of an artist than to anything else--including, at times, quality. Artists in the 21st century need to be aware of how this change affects their likelihood of being signed by a major label.

Up until the early 80’s, a tradition of sorts was established in how a band or artist was signed. A band would be playing at some greasy-spoon dive when an A&R (artist and repertoire) rep would walk in, be amazed at their talent, and hurriedly sign them to a contract. The A&R rep would then take the group back to his corporate offices where a team was assembled to “makeover” the artist for mass appeal: a choreographer to teach them to dance; a vocal coach to hone their skills; a wardrobe consultant to dress them in the latest attire; a publicist to begin the hype around the impending product of the artist; and a promotional department to coordinate the local, regional, and national press releases or advertisements of the group.

This method, which began the careers of many of the artists who now inhabit the Rock and Roll Hall of Fame, was extremely costly and time prohibitive. It could sometimes take a few months to a few years to effectively develop an artist enough to see a healthy return on the money invested in them, money which could reach in the millions of dollars.

When the economy took a downturn during the Reagan administration, this, coupled with the rise of digital technology which launched the home recording revolution, caused most labels to suffer horrendous losses.

To staunch the bleeding of their profits, most labels enacted measures to ensure that they would remain afloat. Recording and expense budgets for artists already under contract were reduced, with the result being that less and less product was shipped to the stores. Only those artists who were almost certain to reach the widest possible audience were hyped, promoted, and released. Most importantly, production and development budgets for new artists were basically dropped to a nearly non-existent level, which meant that fewer A&R people were available to scout out new talent--or to develop the ones that were already signed.

Major labels now looked to sign artists who already had enough of the essential marketing and production ingredients in their make-up such as: were they already established by way of a look?; did they have someone in the group who could write their material rather than have the label look for one?; is the act sufficiently “polished” already in terms of stage presence, wardrobe, and production qualities such as musicianship and personality?; and last but not least, does the act already have a FIRMLY established fan base, a base which would not only show their support and buy the artist’s product, but could possibly foretell what sales of a national release on the act would look like.

This became the criteria that many labels adopted to remain competitive and profitable: they only wanted to sign acts in which they had to do as little work as possible on. The labels wanted artists who had already demonstrated on the local level that they could bring in profits for all concerned. By looking at the local output of the artist, the labels likened it to a “test market” of sorts, one which could provide a glimpse into what is or is not working.

If a band had demonstrated through sales receipts of their CDs and through in-concert performances that they could generate profits, major labels realized that the group could possibly be one in which their investment would be recouped. This act would then be worth putting a national marketing budget behind. In other words, if the band has demonstrated they could sell 2,000 copies locally, major labels would extrapolate that data over 50 states and reason that with proper marketing and distribution, the act could possibly sell 100,000 units.

With the implementation of such a strategy, a new force in the industry began to rise to power: the production company. The production company has now become the developing ground for many artists who otherwise would not get the opportunity to catch the attention of a major label.

Production companies are now supplanting the role of the A&R exec of old by scouting out talent in karaoke bars, nightclubs, and talent shows. They sign “development deals” with these artists to nurture and hone their skills for studio recording and concert performances. Most companies--such as my company, Cornbread Productions--are not looking to launch a nationwide release on the artist, but rather to develop them enough locally in order to attract the interest of a major label for outright acquisition of the artist’s contract, or to distribute the act in areas and markets the production company cannot.

Production companies which have consistently established themselves as arbiters of good talent have furthered their clout by entering into development deals with major labels in which the majors promise to distribute the product of artists the production companies have developed. Production companies have, through these arrangements, become “labels” themselves, handling all the necessary production elements of the artist, while relying on the majors only as “distributors”. Production companies such as LaFace Records, Bad Boy Entertainment, Aftermath, and Shady LTD all have deals similar to this.

For the local act who wishes to take their act nationwide, turn first towards the many local production companies whose goal is to do just that. Local production companies can help establish a “buzz” about an artist in their home region that, when properly executed, can demonstrate they have the commercial viability the majors seek.