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Wednesday
Jun292011

What Are The Vegas Odds Of Success On Today’s Major Label Record Deal?

It is a known fact that many acts get stuck in limbo once singed to a major record label, neither being released or advanced to the next level. How many of the acts that majors sign ever actually get released, or make a second album? Are the odds of commercial success better by staying Indie, or about the same, all things considered? The following answers, from the new tell-all book 100 Answers to 50 Questions on the Music Business by music business veteran Moses Avalon, are real eye-openers.

Moses Avalon

In Las Vegas, the odds to each game are readily available: roulette, 33:1; blackjack, 1.5:1 (if played optimally); craps, anywhere from 2:1 to 9:1. But what about the chances of getting signed and having a successful career recording albums? Sure, there a lot of factors, like if you’ve got talent—but what about the raw odds? The “Vegas odds”?

I did some research and was intrigued to find that there are no published stats on this. Here, perhaps for the first time, are the “Vegas odds” of record deals and going major verses staying indie. (UPDATE: While tweaking this piece which was originally published in my new book, released in March of 2011 a new article came out on Music Think Tank with more data on this subject. See the bottom of this page for the link.)

***NOTE: All math equations are noted by a number in parenthesis (#) and the equation is at the bottom of the post. I do this to maintain the narrative flow. (Also, I hate math.)

GETTING SIGNED

According to my sources at the various major labels, each year approximately 43,000 demos are sent to the 35 major labels. (Up from about 30,000 ten years ago.) I consider these 35 labels “major” as they are directly connected to the Four Major US Distributors or their affiliates. Out of those 43,000 demo submissions a total of about 30 get that rare multi-album deal of yesteryear which includes a large advance and all the perks (down from about 150 in the early 2000s). But, if you count all the demo, development, P&D, and various forms of 360 and licensing deals, it adds up to about 1,000 new deals each year. It’s not an even split. Between Universal, Warner, Sony/BMG and EMI it can get pretty lopsided, with about 500 deals parsed throughout the massive family of Universal labels, alone.

So, the Vegas Odds of even getting signed to one label if you submit your demo to all four major labels is about 1:42. Just a little bit worse than playing double-zero on the roulette wheel. But now, let’s drill down…

GETTING RELEASED

Getting signed is one thing. Getting released is another. And actually fulfilling your five-album commitment is yet another thing entirely.

In the past, out of these 1,000 aggregate label signings only around 250 would have been released to the public or have been promoted from “demo deal” to “album deal.” But since 2008 this number has been reduced to the current level of about 100 per year. So, the odds of being released after you beat the 1:42 odds are about 1:9. Big leap. So far, this brings the aggregate odds to go from minimum wage pizza-delivery guy to low-six-figure playa’ to about 1:429. (1)

Of the 100 albums released, only 50 will sell enough records to justify a second album. Of that 50, about 30 will make a third. Of the 30, only about 20 will make a fourth on the same label, or have their contract “up-streamed” to a parent label.

We are now in roughly the 6th year of the multi-album deal and it is usually here that is the tipping point for the artist; the point at which he can now feel secure that he will never likely have to return to his day job. (A sell-through of 70% of units shipped will earn you a next shot. If you have an out-of-the-box smash hit record at any point in this process, you leap-frog immediately into year-six, or fourth album status.)

I think most of us would agree that this benchmark is “success,” no matter how you measure it: doing music and nothing else to pay the bills. By album four (roughly six years into the major label deal) the artist can remove that Bachelor’s degree in computer science from their den and replace it with a Gold record plaque. They will buy a new house, maybe several, hire relatives to work for them and become a demanding pain-in-the-ass to the label.

When major labels say that less than 5% of the artists they sign “make a profit,” this is the basic concept they are referring to. However, this is misleading. In essence, even if most major label signings don’t result in the creation of a superstar, the dropped or “failed” acts left behind at album two or three or dropped one album after their sales peek, still generate enough ancillary interest (read “income”) to create mini-empires with myriad revenue streams. These are the “one-hit wonders” who still tour and generate mass appeal off their single hit from 20 years ago. They sell records of new releases in respectable numbers and can still fill a 3,000-seat venue. And remember — these artists are considered the “failures” by major label standards. Which ain’t a bad way to fail, if you ask me.

So, that brings the Vegas Odds of going from basement tape to having the label release your album to about 1:429, and the aggregate odds to go from garage-dope to Grammy-hope (or at least making it to your 4th Option Period) at a whopping 1:2149! (2)

THE LONGER YOU PLAY THE HARDER TO STAY

But, the odds have an interesting dynamic if you survive the major label game a few years. Now, this gets a bit complex and rather than make this piece 10,000 words with graphs, here’s the simple math:

Let’s say you’re one of the 500 signed to a label in the Universal family. In year one you’re competing with the other 499 freshmen plus the already existing 1,500 or so senior acts at have survived this game and have product in the UMVD retail pipeline. You’re actually competing with about 2000 acts for promotion/marketing money from the label.

This is hard enough, but, by your third release, it will be year four. That means you will have the 500 acts signed that year, the 1,500 senior acts, (the senior number remains constant because large distributors budget for the same amount of releases, more or less, each year) the remaining 50 from the class right after you, and the 20 remaining in your class. So, about 2,070! (500 + 1500 + 50 + 20 = 2,070)

Now remember that this expansion is happening at other labels as well. Even tough the math is convoluted, you can see where this is going. The longer you survive, the larger the field becomes (contrary to what you probably thought). Just like Vegas, the longer you play, the more challenging it is to win; as the stakes rise, so too does the quality of the competition.

So the 1:2149 odds are probably too low as a constant and will actually increase as you approach superstar status. Remember that now you are in the 1:2149 club and everyone else there wants to be the million-to-one superstar. History has taught labels that even if you sold millions of your last release, this does not mean you’ll repeat that level of sales in your current release. You have to prove yourself each time to the marketing team, with each new release. And every year there are more artists entering in that particular competition (as they survive each level in this game) and the harder it is to get attention from your sugar-daddy, the major label.

What will you do to stand out? Now that you’ve beaten some of the toughest odds on the planet, what will you do to hold on? Just about anything.

Now you know why beak-out acts seem to do stupid things just to get publicity. Or why some artist’s sound remains consistent to their formula from one album to the next. They are trying to duplicate the 1:2149 odds. They are trying to make lightning strike twice, because guess what, the inverse of those odds also resemble the odds of getting dropped. Like most competitions, you get more desperate towards the end-game as the challenges ramp up to a steep gradient. And 1:2149 is pretty steep.

STAYING INDIE

Think your chances of quitting your day job are better without a major label — or for that matter — any label? No one to compete with for marketing dollars? Guaranteed release of all five albums? Less pressure to stay on top. Could be. Let’s see.

According to SoundScan, in 2009 all labels/artists of every size in the US released a total of approximately 100,000 titles. But just a little over 2,000 titles sold more than 5,000 units. Which for an indie record label or DIY artist is often thought of as the (break-even) point that financially justifies an investment in a followup release. (Although many will make a second album whether it’s financially justified or not.)

In simple probabilities this means a 2% chance of success, or odds of 1:49. (Rounded to nearest whole number.) Which is on par with the major label odds of just getting any deal at all! Sounds great, right? But… in the DIY scenario you will not be getting the support of a marketing department, professional publicist, SEO people, producers, A&R guidance, and let us not forget— Advances. And…

To reach the same plateau of success of the artist who has beaten the 1:2149 odds on the major, you have sell in the top 2% consistently for six years in a row as well as having year after year of profitable tours and merchandise sales. All with virtually no corporate safety net.

There is no way to calculate those odds without a team of actuaries but we do have some anecdotal data from which to draw a raw math formula: Imagine going up to a roulette wheel with 50 numbers on it (remember in this scenario 1 in 50 releases sells enough to warrant a second release) and hitting the winning number 6 times in a row. The probability is 50 to the 6th power or about 15,624,999,999:1. (Yes that is 15.6 Billion!) (3)

Okay, that is preposterous. Certainly many artists have beaten those odds in the DIY world, right? So how about this: let’s say that each year that you make it into the 2% group, you’re odds are twice as good as getting into the 2% group the following year. So, instead of a probability of 50:1 in year two, you’re at 25:1. And the next year the same thing and each year your odds of success improve because of increased fan base, sponsorship, established tour rout and just basically knowing what you’re doing. So year three is 12.5:1, year four, 6.25:1, year five, 3.13:1 and the benchmark “tipping point” year six is a fantastic 1.6:1. Now we’re talking right? This sounds eminently reasonable, yes?

So what are the aggregate odds now that we’ve made the assumptions more sensible; the odds of going from emerging wannabe to indie Sotheby? Get ready…

Around 1:477,000! (4)

Hummm… Not the “million to one” shot often hyperbolized, but still, 1:2149 is starting to sound like a sure thing.

Now you know why indie “success stories” are so infrequent. With roughly 2,000,000 acts with fan pages on MySpace and Facebook we can expect, using these assumptions, a yield of about half-a-dozen breakout acts. And when you think about it, that’s about what we have seen from the indie world since the dawn of the internet age in 1998. A very small hand-full of acts that have really distinguished themselves exclusively in the indie world have gone on to… you guessed it… sign with a major.

Now remember that is piece is about raw odds. There is much that can be done to mitigate them. Like knowing more about the business, great management, persistence, and of course — talent.

But, if you’re looking at the Vegas odds for your chances of doing music and nothing else, a major label deal, sucky as it can sometimes seem to be, is still, by far, the best bet in the house and one that you must at least consider if you’re in this for the long haul.

Next time a technoista twenty-something artist tells you he is not even considering a major because he has over 3000 fans, followers, friends, whatever and an aggregator to get him on iTunes, do him a favor and show him this article. You might just be saving his life.

Mo out

WANT MORE? A very interesting angle on this exact question was responded to on Music Think Tank by a UK blogger. He uses entirely different assumptions, but oddly enough comes up with some similar answers about succeeding without a record deal.

If the info presented here piques your interest, take a look at some of the other questions and answers I address in my latest book. Support this site and expand your knowledge by getting your copy today. CLICK HERE.

CALCULATIONS USED IN THIS PIECE:

Special thanks to my buds Brian B and particularly Jon Rezin for providing the math. (PS. if you want further explanation of the math ping Jon on Twitter.)

(1) 1/43 * 1/10 = 1/430 Conditional Probability. Convert Probability to Odds 430 - 1 = 429 = The Odds of getting signed and then released are 1:429

(2) 1/43 * 1/10 * 50/100 * 30/50 * 20/30 = 1/2150 Conditional Probability. Convert Probability to Odds 2150-1= 2149 The Odds for getting signed, released then making it to your fourth album are 1:2149

(3) 1/50 * 1/50 * 1/50 * 1/50 * 1/50 * 1/50 = 1/15,625,000,000 Conditional Probability. Convert Probability to Odds 15,625,000,000 - 1 = 15,624,999,999 The Odds are 15,624,999,999:1 against repeating the required level of success six years in a row.

(4) 1/50 * 1/25 * 1/12.5 * 1/6.25 * 1/3.125 * 1/1.5625 = 1/476837.1582 Conditional Probability. Convert Probability to Odds 476,837 - 1 = 476,836 The Odds are 476,836:1 against repeating the required level of success six years in a row.

Moses Avalon is one of the top recognized music business experts in the country. Having spent over 30 years in the business, he has seen the ups and downs and has focused his efforts on helping artists protect their rights. His artist rights advocacy fund, top selling music industry references (Confessions of a Record Producer & Million Dollar Mistakes), and Controversial Online Business Course have helped thousands of artists directly seize opportunities and avoid the pitfalls in the industry. His latest book 100 Answers to 50 Questions on the Music Business is a tell-all guide to help recording artists at each stage of their music career. His blog, Moses Supposes, deals with controversial issues in the music industry and reaches over 13,000 direct subscribers. You can reach him by clicking here or connect with him on Twitter and Facebook.

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