Many who take a good amount of cash upfront will never know the benefits of long-range thinking.”
The Internet has leveled the playing field, artists can now choose to take the DIY road, and the main advantage Record Labels now have is reduced to their network and their cash. Both are valuable, how to take advantage of them without selling your soul? Think long-range.
An artist or band has these songs, they're awesome, and they got a label interested, they sit down at the negotiating table and the story repeats itself, the label wants master ownership and a participation on all income streams, even non-music related until costs are recouped (a.k.a. 360 deal). Is there a way to break this vicious cycle?
In order to use long-range thinking, you need to have some fundamentals in place. An investor (usually a record label) wants to ensure their ROI*, and investing in great songs that lack basic infrastructure presents a risk. How are your numbers? How have they been behaving in the past couple of months? Are you growing your fanbase? Are you playing for a consistent number of paying headbangers? Get your fundamentals ready. If the investor is asking about engagement, note it as a red-flag. Engagement are likes, comments, and shares, and sure, they're sexy metrics and look good, but they don't necessarily help drive sales. On the same token, don't open your pitch with your engagement numbers, no matter how tempted you are to show off your inventiveness. Pitch your sales numbers, show that you know how to sell your merch and tickets, even better if you were able to sell a synchronization license (getting your song on a video, from a commercial to a youtube video, doesn't matter).
If your pitch was effective, you'll get an offer. No contract should be EVER signed in the room, all deals are to be reviewed with your lawyer in order to provide feedback, this is part of the negotiation process.
The long-range perspective.
Let's discuss the actual long-range perspective now. For this to work, you need to be able to give up short-term benefits in exchange for long-term potential benefits. Yes, it's a bet, you are betting on yourself, so you better bring your A-game and your A-products.
When George Lucas was negotiating the deal for Star Wars, people thought the project would flop. So he asked for the Toys, and the studio effectively said something along the lines of “Toys? Yeah, sure, whatever. You can have the toys.” Thanks to which George Lucas is set for life, with an estimated 3,000,000,000 units sold to date.
As author and investor Tim Ferriss said, it's all about trading short-term, incremental gain for a potential longer-term, game changing upside, an element that might be far more valuable in 5 to 10 years, like rights or options you can explicitly carve out and keep. This requires capping the downside (time, capital, etc) and having the confidence to take uncrowded bets on yourself.
When the movie Twins was being negotiated, no one believed Arnold Schwarzenegger could tackle a comedy, so he talked to Dany DeVito and Ivan Reitman, and the three of them went to Universal to negotiate a deal forfeiting their salaries from the production budget in exchange for a big cut of the back end (profit participation). Universal made quick numbers and was ecstatic, without having to pay those three salaries out of the production budget, they could make the movie for $16.3 million dollars.
Let me tell you, I made more money on that movie [Twins] than any other movie, and the gift keeps on giving. It’s just wonderful. Tom Pollock, after the movie came out, he says, ‘All I can tell you is that this is what you guys did to me.’ Then he turned around and bent over and pulled his pockets out. ‘You’ve fucked me and cleaned me out.’ It was very funny. He said he’d never make that deal again. The movie was a huge hit. It came out just before Christmas. Throughout Christmas and New Year’s, it made $3 to $4M every day, which in today’s terms would be, of course, double or triple. It was just huge and went up to $129M domestically, and I think worldwide it was $269M or something like that.”
So, look for these bets you can make on yourself and your music. Learn to place yourself in the investor's shoes (mindset), give them a deal that ensures their ROI with an upside, and ask for stuff that might seem meaningless in the short-term. Maybe forfeit the advance in exchange for the masters' ownership after a 5-year period so that they'll counter to 10, then end up somewhere around 8, and you'll have your master's ownership for the 10-year re-edition which you can capitalize in its entirety.
*if you need to look it up, you are far from being ready, buddy. Ditto for the term "KPI."
Luis Garza is a professional project manager, and the head of strategic planning at Estratagema Records.