Inside the Midas/Big Machine deal

Monday, August 11, 2008 at 3:18am
From left: Mike and Darren Taylor of No Strings Attached; Andrew Kautz and Scott Borchetta of Big Machine Records; artist Adam Gregory and his manager, Lawrence Mathis; Brad Allen and Keith Follese of Midas Records

Midas Records’ recent decision to restructure its country division captured the music industry attention, as the mid-size label exited the promotion/distribution and marketing of its acts and shifted those duties to its new partner, Big Machine Records. The move brought into clear focus how the changing market fundamentals are impacting labels of all kinds.

Adam Gregory is the first Midas artist to be part of the new arrangement, but label mates Emerson Drive and Whiskey Falls are expected to announce similar partnerships with Big Machine and/or other labels.

The new profile in some ways resembles the Hollywood film business model, where production houses develop films and then partner with the large-scale marketing/distribution companies that pick and choose properties they believe will be successful.

A&R — the art of deciding which acts get signed to labels — has always been a key ingredient for success. Traditionally, record labels prospered using the 80/20 or 90/10 rule: If one or two out of every 10 new artist signings succeeded, a label would be profitable. In fact, until a few years ago, the payoffs were so great that no one stopped to consider why a company would endure a business model with such poor odds of success.

But, as evidenced by continued downsizing and layoffs, today’s marketplace demands better odds. Do labels really belong in the baby act development business? Taking a page from the evolution of movie studios, new acts could instead be developed by a group of “talent providers” — publishers, producers and others — that would invest frugally and provide labels with finished products to consider and even test market.

If A&R odds improved under this kind of system — which has worked for the movie industry — both talent providers and labels could profitably share in the rewards. The idea of a 360-degree deal (which includes sharing the risk and reward of touring and merchandise revenues) would then have greater value for all parties.

Deal or no deal?

Midas Co-A&R head Brad Allen said he and Keith Follese started their company wanting to develop and prepare artists. As their venture became a full-service label and oversaw several No. 1 records, it went through several distribution changes. The Big Machine move falls into the ‘next step’ category on that level.

This “presents a chance to plug into a situation already on the next level,” Allen said. “It gets us back to our strengths creating and helping develop careers. When an artist is ready to be fired out of the rifle, then we have a great partner to do so.”

Big Machine’s track record with artists such as Taylor Swift, Jack Ingram, Trisha Yearwood and Jewel, coupled with the operation’s momentum, were obvious attributes. Add in its dual promotion teams and top-line Universal distribution and there are a lot of resources.

Gregory’s manager Lawrence Mathis — who is also affiliated with No Strings Attached, the label that together with Midas introduced Gregory to the United States — sees the Midas/Big Machine partnership as a business evolution and a huge step forward for his client.

“We’ve seen labels of all sizes throw lots of artists out to see which ones work,” Mathis says. “They go to radio chanting over and over, ‘This one is the real deal.’ The indies are different. They put their personal money down and say, ‘This is something worth investing in. We are going to make this work.’”

But Mathis, who sold 1.5 million albums with previous client Jason Aldean, is no fan of the 360 model.

“I come from the old management school where you don’t give up touring or merchandise. Labels say they need it because they aren’t selling enough records, right? Wrong,” he said. “For how many years has the record business just signed artists and said, ‘OK, I’m going to loan you $1 million and if you make it, I’m going to take that money back out of your record sales. But if you don’t, we’ll just try another artist.’ Record labels have been run like the government.”

Evolution or revolution?

So does the Midas/Big Machine pairing represent a new business model or is it actually a modification of existing methods? The outsourcing of marketing, promotion and/or publicity duties has been a staple of the Nashville label business for well over a decade and often can be very cost-effective.

“These types of partnerships are part of a long-term tradition,” says Nine North Records Owner Larry Pareigis. “To me, the big difference between then and now is that majors no longer have the resources or time to drill down and do hardcore artist development, so they're looking to guys like us to do the heavy lifting.”

Will talent providers also find a willing market for their discoveries among the major labels?

“These things take such a massive push that there are only a few spots available,” Allen said. “The majors are going to have limitations doing deals with indies and production teams because of those full rosters. But we’ll see more of that process become the wave of the future.”

Sony BMG Nashville Chairman Joe Galante said large labels have often signed acts brought to them by smaller labels. In his career, Alabama stands out as the biggest such success — Galante’s label got a hold of the band by buying smaller label MDJ.

“So yes, can it work,” Galante said. “Does it work with multiple acts from the same label? Maybe, if all the talent is of the same quality. But both majors and indies have vaults full of acts that were given more money for recording, video and radio promotion. It doesn’t equal success. The music is still the key and that comes down to how good your A&R skills are.”

David Ross is founder and publisher of Music Row, a sister publication of The City Paper.

Filed under: City Business
By: musicrowreps on 12/31/69 at 6:00


By: musicrowreps on 12/31/69 at 6:00

If you truly went "inside" the deal, you would find fear, desperation, and mismanagement on the part of Midas executives. The owner of Midas wanted out and this was a way to save the label when they couldn't sell it to another investor. Big Machine took advantage of the situation. The real story is all over the street and it's not difficult to discover.Midas, in conflict with this article, wasn't set up to be a talent provider and had huge potential to be a successful indie label in their own right. Like many music industry businesses, they squandered their artists, talent, and potential. It shows you the mentality of most of today's label executives. They are running their business on an outdated and ineffective model. In the end this is about Midas saving face and making a bad situation of their own creation look like a deal that was planned from the beginning. Pure spin.