Taylor Swift, Usher and Justin Timberlake are about to enter an all-too-familiar crossroads for pop superstars: Their next albums will also be the last ones due to their respective major labels (Big Machine/Universal for Swift, RCA for Timberlake and Usher).
But unlike the mega-stars of yore, today’s top acts face a different marketplace in which they’re required to work much harder for their hefty advances — with lower sales to show for it. In fact, you would have to go all the way back to 2001 to a find a nine-figure commitment, when Whitney Houston re-upped with Arista for a multi-album deal worth $100 million. Britney Spears recently renewed her deal with RCA for an undisclosed sum, sources tell Billboard. But when Timberlake, Swift and Usher head to the table, what can they expect?
“The trend is definitely toward shorter [term] deals on both sides,” says Donald Passman, an entertainment lawyer at Gang, Tyre, Ramer & Brown who negotiated Janet Jackson’s $80 million EMI contract in the 1990s and authored the book series All You Need to Know About the Music Business. “The industry is in distress and digital is not picking up the slack, so the big companies are worried about long-term commitments, and the artists tend to take longer between product. Unless you’re Taylor Swift, very few can command a top-of-the-market deal.” Sony Music chief creative officer Clive Davis concurs: “There will be a fair and hard negotiation to re-sign her,” he says.
Today, the high end of a recording contract is a $7 million-plus advance per album, but it’s rare that an artist secures that large a payout without giving up a piece of his or her ancillary income. Indeed, 360 deals are now the norm among newer acts — One Direction, Ed Sheeran and 5 Seconds of Summer all have revenue-sharing agreements with their labels on touring, merch and other back-end fees. So are such hefty upfront payments a thing of the past?
“Each case is different,” offers Kenny Meiselas, a senior partner at Grubman Shire & Meiselas, who represents Nicki Minaj and Lady Gaga. “When you have an artist at the peak of their career, I’ve never seen a record company not be open to renegotiating and treating their artist fairly.” Meiselas would know: He just renegotiated Mary J. Blige‘s contract with Universal Music Group, moving her from Interscope to Capitol for her anticipated London Sessions album (see story, page 40) in what one source describes as a “very lucrative” deal. Says Meiselas with a smirk: “We figured it out.”
One thing certain about the new contracts is that “marquee artists will own their own masters,” says manager Jim Guerinot, who represented Nine Inch Nails for decades. “When Nine Inch Nails did their deal, they signed for a high royalty with a low advance and they own the master. Artists make most of their money on the road anyway.”
Indeed, adds Joel Katz, chairman of global entertainment and media practice for Greenberg Traurig, who reps Timberlake among other music clients: “Artists will not only want to reserve as many rights as they can, they will also want to retain ownership of their new albums.”
That’s if they choose to stick with a label, rather than taking the DIY route, as acts like Wilco and Prince have done with varying degrees of success. A major facing a defection can offer one more carrot, however: an imprint. Pharrell Williams has one (I Am Other with Columbia) as does Maroon 5‘s Adam Levine (222 Records through Interscope). Such deals not only give acts signing power, but allow them to license new releases for “pressing and distribution” (or P&D) deals, which can net as much as an 80 percent to 85 percent profit split, compared with the more standard 50/50 share. However, Timberlake (with Tennman for Interscope) and Usher (with US Records for Sony’s J) have already tried that approach, with little to show for it. Still, labels may look to revive the concept come re-up time.
This article first appeared in the Nov. 29 issue of Billboard.