Show notes
This week’s special guest on Trapital is entertainment lawyer Karl Fowlkes. As part of his own The Fowlkes Firm, Karl represents entertainers across many domains — from music to sports to media, including hip-hop’s rising star, Blxst. He pulled double duty, not only appearing on the podcast, but guest-writing for the newsletter about the need for the artist contract to evolve.In particular, Karl predicts shared equity between not only artists and record labels, but also with other parties like distributors or fintech companies. The days of record labels having 100-percent ownership of an artists’ masters could slowly be phased out over the next decade in favor of a split much more friendly toward the artist.Karl also has advice for an artist, or any content creator for that matter, signing a new contract — LOMO. The acronym stands for length, obligation, money, and ownership. These are the top-line items creators should prioritize when inking deals, according to Karl. Karl has a ton more insights into how artists and creators can maximize their long term value, plus how deals will change in the near and distant future. Here’s everything we covered during our interview:[4:13] The Future Of The Artist Deal[5:50] Changes With Major Record Labels[7:36] Will Record Labels Exist In 10-20 Years?[11:20] Artists Wanting A Partnership, Not Signing [15:50] Karl’s Advice To All Content Creators Signing Contracts[19:18] The Issue With Music Royalties[22:42] The Hip-Hop “Middle Class”[24:47] Building EVGLE Brand Alongside Blxst[25:08] Blxst Partnership Status With “Major” LabelsListen:Apple Podcasts | Spotify | SoundCloud | Stitcher | Overcast | Amazon | Google Podcasts | Pocket Casts | RSSHost: Dan Runcie, @RuncieDan, trapital.coGuest: Karl Fowlkes, @esqfowlkes, Fowlkes FirmEnjoy this podcast? Rate and review the podcast here! ratethispodcast.com/trapitalTrapital is home for the business of hip-hop. Gain the latest insights from hip-hop’s biggest players by readingTrapital’s free weekly memo. TRANSCRIPTION[00:00:00] Karl Fowlkes If you're making $20,000 to $30,000 a month off music. I mean, damn, that’s pretty, you know, that's solid money. No, that's nothing to shirk off. And some of these people, if they were independent, they might not be the global superstars that they are, they might be a little bit more in control, they might have less obligations, and they might still be able to put out the music that they want to put out. And all that stuff sort of creates sort of a concoction of, man, and maybe I will be happier, maybe I wouldn't have to get fake teeth, get a bunch of gold chains. I wouldn't have to do that because I'm living a lifestyle that's conducive for long-term success. [00:00:38] Dan Runcie Hey, welcome to The Trapital podcast. I'm your host and the founder of Trapital, Dan Runcie. This podcast is your place to gain insights from executives in music, media, entertainment, and more, who are taking hip-hop culture to the next level. [00:00:58] Dan Runcie Today's episode is all about the deals that artists sign. There are so many more options and ways that artists can level up and types of companies that they can partner with. It's no longer just the record labels. There's alternative finance options, their distribution platforms, and more. And I broke this down today with my friend and well-respected entertainment attorney, Karl Fowlkes. And he runs an entertainment practice called The Fowlkes Firm where he represents artists like Blxst, producers, entertainers, athletes, and more. [00:01:30] Dan Runcie So I talked to Karl about his experience with this and what he sees as the future landscape. And Karl has this phrase that I think he needs to trademark, he has this phrase called LOMO, which is focused on the four key elements that artists should be focusing on when they're signing deals. The important thing about LOMO. And more broadly, this conversation is that this doesn't just apply to artists, look at all the different types of creators right now. There's so many deals that they're doing, there's so many opportunities from different companies that want to partner with them. And whenever those things happen, there are more and more contracts that aren't always set up in the easiest way for you to be able to understand and break this down. So we talked about that and where things are heading and how it really is shifting to a place where artists aren't just giving the keys to a big corporation to handle everything. Let's have them, build the businesses around themselves, partner with the different companies to fill in the different roles you need, and build up from there. This was a great conversation. I think it's really insightful for all the creators out there. So I hope you enjoy it. Here's my chat with Karl Fowlkes. All right, today, we got Karl Fowlkes with us who's back on the podcast from The Fowlkes Firm, you represent Blxst and a bunch of other artists. But we're here to talk about this guest piece that you wrote for Trapital, a really great piece about the future of the artists deal. So let's start at the top. Why did you want to write this piece?[00:02:56] Karl Fowlkes I think right now, you know, historically, there's, there's been a few players. And those few players are really just record labels. So it kind of pigeonholes what the what the deal is going to look like, you know, now, there's so many different players out there. Technologies is infused all through the music industry. So there's, you know, there's distributors, there's advanced companies, right, they're just trying to like, you know, model what they can give you based on streaming algorithms, you know, companies like beatBread, for example. And then you still got those major labels, they're sort of offering a lot of those services. So the landscape is so different, I think, because there's so many different parties and so many different solutions. I think the deal has to change with the times that we're in. And oftentimes, you know, what I'm seeing, you know, I'm not seeing, you know, those changed deal terms. And, you know, I just think it's something that we need to get ahead of.[00:03:48] Dan Runcie Yeah. And I feel like now you're hearing more than ever, people talk about ownership artists, whether or not they may have enough behind it, want to make sure that they're owning everything when they're coming to try to negotiate contracts. Do you feel like that's shifted the landscape? I mean, I feel like it's definitely improved the conversation around it, but do you feel like that's actually having an impact on the deals that are being made?[00:04:13] Karl Fowlkes Yeah, and it's been quite effective. You know, I think most people who are in my position, you know, doing deals on the attorney side are seeing contracts that, especially if there's any built-up leverage that almost exclusively, you know, have a license period, right? So instead of the full transfer of ownership or work-for-hire language I've seen in the past, I'm seeing a lot more 20-year licenses, 25-year licenses, 15-year licenses. So the artist is you know, almost exclusively, you want to get the masters back. Now some of the other top line terms might not be that different in terms of the royalty rate, or some, you know, the ancillary income. But you know, the ownership paradigm is definitely, definitely changing. And I think that's the unique thing about it today.[00:04:59] Dan Runcie Yeah, because I feel like, especially with the major record labels is kind of two things happening, right? On one hand, you're streaming revenues are continuing to grow. And you have all these other revenue sources from outside of the digital streaming providers, whether that's with Peloton or Roblox and all these other partners that want a license deal. So while that's increasing, but on the other hand, more and more artists are not going to want to just give up their masters in perpetuity. So the labels are also counteracting that piece of it. So I see them in a lot of ways, they're hoping that the revenue from all of these areas can offset the loss that's eventually going to come from the masters, because eventually you can earn money from the back catalog forever if the current artists are going to keep that back catalog, and the labels aren't going to be able to have it.[00:05:50] Karl Fowlkes 3,000%. So I think, I almost wonder why some of the record labels out there don't sort of take from their publishing counterparts, right? Because the co-pub deal is sort of set up as a joint ownership structure, 50-50, right? So the songwriter usually owns half the composition, and the publisher owns the other half of the composition. And, you know, when the term is up, the kind of, the songwriter can go do what they want with their 50%. And they can have, you know, whoever collects on it, and then you know, the record label can, sorry, the publisher can take their 50% and go collect on it as well. So it's a shared equity model. It's something that I think tends to work for better parties. I know, there's some mechanisms that are a little bit different, you know, as it relates to distribution of music versus collection of music. But I think that's sort of a precursor to, you know, maybe something we'll see, you know, happen over the next 10 to 20 years.[00:06:46] Dan Runcie What do you think the next 10 to 20 years will look like? Because I often have this conversation with a lot of people, some people go to the extreme of being like, no record labels will be extinct by then. And I've never quite gotten to that perspective, just because the people still ignore the desire that people have to be the biggest star in the world and where they feel like they need to go in order to do that. But I do think that we'll likely see more of these shared equity or more of these flexible options because I feel like one of the things you highlight in the piece is that it's great that there's so many distributors and places that you can release your music, but it's still a pretty big difference where it's like, okay, you either got to give up everything, and we'll make you a superstar, or you try to do it your own. But it's still hard to get to that level without some additional support.[00:07:36] Karl Fowlkes Yeah, I think the next 10 to 20 years are going to be a very interesting time. And I don't think anything's going to be figured out in the next 10 to 20 years, just because I think there are so many different emerging business models, right? Like, I keep talking about these music tech companies, kind of coming in and offering using algorithms and, you know, formulas to sort of create an estimate on, you know, what your royalties could be, will make in the next three to four years. They'll give you a big advance, right, and now to reference beatBread, because, you know, I just saw they did that for a massive artist recently. And they're, they're not really they're not offering service or anything, we're just going to give you that funding element. And I think historically, if you look at startups, and you know, there's always been a lot of artists, our founders’ conversation in the past five years, but when you look at a lot of startups, it's really hard to scale a business without capital. So capital is always going to be sort of the driving force on any decision I think you have to make in your business journey at a certain point. So I think what will happen is labels will realize I think the all-or-nothing approach of sort of either doing a license deal or completely owning the masters isn't really probably in anyone's best interest, including theirs. And I think we'll see more shared equity, right, and more investing in artists, you know, being in business with an artist forever, like in a tasteful way, right? Like, owning 20% of somebody's master for perpetuity seems a lot better than owning 100% of someone's, you know, master in perpetuity, right. There's, there's like a natural, if you’re an artist, you might be able to live with that, hey, this person gave me a million dollars. They have different access, resources, and funding opportunities throughout and they have a history of helping artists, you know, why don't I, we can we could share this thing forever, but you know, I'll be in control. I think that makes a lot more sense.[00:09:32] Dan Runcie Yeah. And what I think it does is it itemizes how to look at the value add that you're either getting from a record label or from another type of partner, right? Because at its core, a record label deal is very similar to a private equity model. I know a lot of people make the venture capital comparison. But I think it's a bit more like private equity or even more so an M&A deal where you are essentially selling yourself as the business, at least to the recorded music business of what you're doing, to this company. And then in return, they are paying you for the services, and they're obviously going to try to maximize it as much as they can with everything they offer, from marketing to promotion to all the other services that you can essentially get counsel advice, so on. But I think the shift and what we're seeing a lot more artists do, more so I'd say on the independent side, I think we'll see some of the bigger artists do it, too, they want to create the business, they want to be the one that is doing the actual tasks, and how can they have, you know, things set up around them in order to do that. And it's something we see with all creatives to some extent, right? I feel like some people are always going to, maybe they want to gravitate more towards the business side of things, maybe they want to gravitate more towards the art that they actually do need to make. But still, if you're going to take the business side of it, then yeah, there is likely going to be a company you go to for marketing support, there's going to be a company you go to for PR or for distribution or for those things. And if you do it that way, then you're likely going to have a better approach about how you're making deals. And I feel like this is one of the key things that, like, you and I've been talking about for years now, just in terms of like how these things get set up, and how these things should be set up, especially for the artists that are willing to put in the work.[00:11:20] Karl Fowlkes Yeah, I think what artists and their teams, too, are realizing are, you know, they're still doing a ton of work, even after they signed to the record label, right. And I think some of those things, historically, that we may be thought or attributed to regularly, but whether it's right or wrong, are things that in this generation, you know, teams, managers, other team members on that direct artists’ team are being tasked with, and, and they're executing, you know, to some extent, right? We're seeing TikTok campaigns being launched. And then that being the driving force of, of an artist being signed to a multimillion-dollar license deal, right, because that artists and their team leverage, you know, that music technology to create some moment, momentum and drive the price of that deal up. We're seeing a lot of that. So I think all that's making artists and their teams do is say, hey, if we're going to do a lot of the strategy and, and work to get signed, maybe signing doesn't necessarily make sense, maybe we're looking for,…
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