Labels are Creating Shell Companies for Investors. So Who are you Really Signed Too?
If you've really been paying attention this shouldn't be a surprise. More and more record labels are creating what's called SPAC companies that they are using solely for investors to dump money in for the label. The reason why this is important to know is that if you are an artist or a producer looking to get signed to a major label you need to know who's really been cutting the check.
Now if you have been a music fan since the days of Napster you know and have seen personally that the music industry took a tremendous hit when it had to go from physical copies sold to streaming. We don't have to go into the granular details of how streaming doesn't allow a musician or anyone in the business to make a real living, but we do need to know who's really moving the chess pieces. It was reported by billboard recently that more and more major label companies are creating what is called shell companies. A shell company is basically an LLC or S-Corp created for the sole purpose for an investor to put money into. The company may serve as a vehicle for business transactions without itself having any significant assets or operations. Now this makes complete sense as the average music fan isn’t buying CDs and with the recent pandemic most people are not paying to go to a concert for fear of of catching COVID recently. So this may be one of the ways a music label can stay afloat.
No what this should tell you as a creative in the music business is that apparently there is still money to make. There has been this narrative that there is no money in the music business but recently in 2019 it is believed that the music business, globally, was assessed to be a $11.9 billion industry. Now if I'm a VC and I am looking to make money that would spark my interest. With that being said, if these investors are cutting the what is to stop them from having control or a say in the type of music or content that label puts out? Keep in mind we have always said that the majors are so far removed from the culture that that is why they keep making these bad decisions not only in the artists that they sign but also the deals that they keep making. It's no surprise that certain labels are in bed with companies that may be backed by sexists, racists, or just anyone who does not have the best interest of the culture in mind. This may explain some of the things that we have seen in the culture in the past 3 to 4 years that keeps everyone baffled. You as a creative need to know this and keep an eye out on what is happening to the industry. Anytime you see something that raises a question, keep in mind that you are looking at the effect and not the cause.
Keep an eye out on the field. Something’s coming…
