Trapital - deal or no deal

deal or no deal

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Hey! This week’s guest post is from my friend, Karl Fowlkes. He’s an entertainment attorney who represents Blxst and several other artists, producers, and athletes.

He wrote an essay about the future of the artist deal, the advice he gives to artists and teams everywhere. He also joined the most recent Trapital Podcast episode to talk more about it.

I’ll be back from pat leave next week. I’m excited to get back into the swing of things. Talk to you soon!

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the future of the artist deal

Guest Post by Karl Fowlkes

In 2022, artists are no longer choosing the best record label. They are now choosing the best record label, distributor, or platform to partner with. These additional options have given artists (even the unachieved) more leverage to negotiate. Like any other industry, competition among new and old participants in music can spur the invention of better terms and solutions.

We’re moving past the days of the daunting 360 deal. Today’s artists are getting the best deals terms in the history of music. But is this sustainable?

Some believe that we are entering the “golden age” for creative freedom and ownership, but I won’t take it that far. Many of the major record labels are still inflexible and overzealous in serving contracts that require perpetual ownership, paltry royalty rates, treacherous recoupment and overreaching ancillary income provisions.

This has sparked a heartbeat to grow (and continues to grow) among creators and those that support them. The system in place still doesn’t serve their needs. However, there’s an opportunity to approach deals in a modern way that adds value for both artists and the companies they partner with.

times are changing. deals must change too

The way artists create and release music has changed, as have their ways of building community. In 2021, 2 million artists released their music through DistroKid and 1.3 million released their music using UnitedMasters.

Both companies offer different but similar products to independent artists. They lead the pack in giving talent and their teams’ effective ways to distribute music, pay third-party contributors at source, and collect analytics on where their music is streaming.

These are crucial artist needs that were things that labels did. This is why artists are so excited about the future of the creator economy. They no longer have to rely on the label for these services. Therefore, if what is being asked of partners is changing, so should the business.

A moderately successful artist has the same needs as any other business. There is a need for upper management (manager), legal (entertainment attorney), marketing, distribution, accounting, and other important roles. Now, more artists and their teams realize that it might be better to fill these roles with different vendors and different solutions as opposed to a one-size-fits-all solution.

This brings clarity to the future of the artist deal. Artists and their teams need to isolate their business needs. They should use technology to aid their search for the right partners. This will help them create their own scalable operations that don’t rely on the savior mechanism where artists have to rely on record labels for everything.

This is our strategy at Evgle, the record label I co-own with one of hip-hop’s rising stars, Blxst. Victor Burnett (Blxst’s manager and President of Evgle), Blxst, and I have had countless conversations about how to scale our company and what strategic partners we need to execute our vision yet stay privately owned.

Our portfolio of vendors and partners has continued to grow. We have partnerships with Red Bull Records and Warner Chappell for our publishing, but we have yet to dilute our cap table.

Artists and their teams should approach contracts in a similar fashion. They should prioritize partnerships that limit the participation of income to areas that their partners directly contribute to.

LOMO: a modern approach to contracts

Still, artists’ camps that have their ducks in a row may get thrown off by the complexities of record deals that overcomplicate easy terms. To help this, I developed a modern way to address contracts: “LOMO” – which stands for Length, Obligation, Money, and Ownership.

Length: How long is the deal term?

Obligation: What specific services are you required to perform or deliver?

Money: How are you getting paid? Now and later?

Ownership: Who owns what?

LOMO has been adopted by several reputable organizations such as Songtrust. It allows artists and their teams to prioritize key elements in an agreement prior to receiving an agreement. Different teams will rank LOMO differently. Some teams will want full ownership and a short license. They may not get a hefty advance, but that’s the compromise.

Other teams will want more money, but in return, their obligation and term may be longer. Each side will have more transparency and a better understanding of the terms they really want when they use the LOMO strategy to prioritize their wants and needs.

shared equity could create balance

The ideal structure for the future artist deal is more obvious than many people think. The paradigm between recording agreements and distribution deals for example is quite drastic.

With many traditional record deals, an artist receives a mid to high six-figure advance, a full transfer of ownership to the label (or extremely long license), and a royalty rate close to 18-20%. But with distribution deals, an artist might receive a five-figure advance, full ownership, and 80% of the master income minus a 20% distribution fee. Those two options are a stark contrast to the vast majority of artists who probably want and need something in between.

The reality is companies like Indify and beatBread are shaking things up in the industry, allowing Artists to regain control of their business destiny. Indify is a marketplace that allows accredited investors to invest in music for a royalty stream while artists retain ownership.

beatBread is another company allowing Artists to get advances based on a multiple on prior streaming income and algorithms predicting future income. Both of these companies are amongst a plethora of new disrupters looking to solve the age-old problem in the music industry: access to good capital.

The music industry should adopt a shared equity-driven option in this new age deal ecosystem that allows all parties to gain proportionally. A cap table approach could bring equilibrium for artists and record labels, distributors, or other partners. Artists and companies come together to jointly own or own proportionately to value as opposed to a full assignment or work for hire.

Record labels who invest resources, add value, and provide funding and staffing should have a piece of an Artist’s business for the long haul. Artists should control the destiny of their catalog long-term (or until they can make a data-driven decision on whether to sell it).

The all-or-nothing approach that labels take in regards to ownership, royalty rates, and overreaching terms has forced creatives to seek alternatives. Those alternatives are here. The legacy record labels that have built their dominance on catalog music might not share in the equity pie of newer catalog music because of it.

balance is needed

Artists need partners: funding partners, marketing partners, operations support, business strategy etc. Stakeholders should have a piece of the equity pie but full transfers of ownership should be far and wide and only be consummated with intention and knowledge. The shared equity approach could bring the balance the industry so desperately needs.

Karl Fowlkes is an entertainment attorney at The Fowlkes Firm, where he represents Blxst and several other artists, producers, and athletes.

new pod: before you sign the contract

​On the podcast, Karl talked more about this essay and went in more depth in a few areas:

• Valuing artists like companies
• How he helped Evgle and Blxst structure their team
• The importance of LOMO
• Tradeoffs for indie artists vs signed artists

Listen to the Trapital Podcast here:

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money moves

• Black Thought becomes GP at Impellent Ventures​
• Jay Z doesn’t charge for guest verses​
• Hipgnosis brings in $200M+ annual revenue in full year results
• Vinyl growth stalls, CDs decline, and streams rise 12.4% in first half of 2022​
• Irv Gotti says there is less money in music than TV and film​

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coming soon from Trapital

Podcast: Talib Kweli

I had a great conversation with a New York hip-hop legend. We talked about the return of Black Star, putting his album exclusively on Luminary, artistic independence, and more. Drops on Friday!

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