Having worked for both venture backed technology companies and record labels I often have friends from one industry attempt to relate to the other by saying something along the lines of “record labels are just like venture capitalists”. It is true both venture firms and record companies invest their time and money into a third party with the intent of making a (large) return on their investment. However, in my experience there are more differences in their traditional approaches to investing than similarities.

Venture capitalists typically understand how important it is for the employees at their investment to have cash to pay their rent and eat. One of the secrets taught in business school is: No payroll = No employees = No company = Lost investment. The traditional record label agreement dictates the artist or band doesn’t get paid any royalties from sales until after the record label has been paid back (or “recouped” in music industry language) from their initial investment in its entirety plus any and all other new release related expenses. Since the advance most non superstar artists receive for a new record is often times just enough to cover the recording costs and they won’t receive royalties from sales for some time (if ever) it’s not uncommon for the lack of income to cause a new band to break up before they have a chance to develop to their potential. It’s doubtful even Google would exist today if their investors demanded to immediately “recoup” their investment and keep every cent earned from ad sales instead of making sure the company had cash to pay their employees and other expenses during their early days.

Venture capitalists don’t demand ownership of the intellectual property the employees of their investments create. With the traditional record label agreement the record label retains ownership of the master recordings the artist or band creates in the studio.

Venture capitalists understand there is more that goes into a successful investment than just a sales and marketing strategy. They are involved with management, product development, legal, staffing in addition to sales & marketing at their portfolio companies. Record labels spend almost all their resources and money singularly focused on their artist’s sales and marketing results and very little on the other aspects of their business. Even the 360° degree deals record labels are now pursuing are really just ways to extend the labels involvement into other sales and marketing related areas of their artists such as licensing, touring and merchandise.

Venture capital firms usually invest in promising new companies along with other venture firms, each firm taking a minority ownership position. Having multiple investors helps spread the risk around and allows for collaboration on making the investment successful. Record labels have traditionally not worked with or collaborated with other labels (outside of their ownership group) on developing new artists.

Venture capitalists are far from perfect and certainly don’t always have the owners or employees of the companies they have invested in best interest at heart when making decisions. But the approach they take gives their investments a much better shot a long-term success than a traditional record label deal.

Some artists, like some startup companies, do need an investor and team of professionals to help them succeed. Hopefully as the music industry continues its ongoing transformation new and more equitable models for investing in artists will emerge and Patrons & Champions will give more of them the chance to build long-term, sustainable careers.

Have you ever found a band (or several) you were convinced would become a success or even destined to be one of the most popular band on the planet if only other music fans knew they existed? Isn’t it always completely baffling when a band you love doesn’t catch on despite their outstanding talent, songwriting and live shows?

This happened to me many times during my tenure at Yep Roc Records while working with such a great artist roster. In 2004 we had a new release from a band called The Comas I was convinced would be one of the best selling indie rock releases of the year. The Comas are a very talented band and Conductor , based on singer Andy’s Herrod’s breakup with Dawson’s Creek star Michelle Williams , was a great release. Additionally, director Brent Bonacorso created an amazing full length video based on the album that was included as a DVD in the CD’s packaging.

I thought once we executed the publicity plan, music fans of the world would have a new favorite band and Conductor would be sitting at the top of the indie charts.

The label committed fully to this release with new media, publicity, radio promotions, and retail marketing to build awareness; plus, provided a tour support budget to get the band on the road. The band and release were embraced by the media, a few of the successes included:

• An 8 (out of 10) rating from indie tastemaker Pitchfork Media

• Named to Rolling Stone Magazine’s 2004 “Top 10 Bands You Haven’t Heard of"

• Magnet Magazine’s # 3 record of 2004

• Multiple songs added into the rotation at KEXP plus a featured interview and in studio performance

• Yahoo Music “One to Watch” selection that included an in studio performance and interview plus a full day feature on theYahoo.com homepage

Conductor sold just over 5000 total units despite strong media coverage and all the other things the band and release had going for them. The Comas moved to Vagrant Records for their next release in hopes of finding greater success. Unfortunately their 2007 release Spells sold even fewer units than Conductor.

How could a great band with a great release and full backing from their label and distributor not be more successful? The harsh reality of this business is that many bands simply don’t catch on with music fans or become a commercial success.

I have come to the realization over the years that there is some type of unseen “X” factor at work for bands that become successful. Some bands hit, some bands don’t and it’s not always clear why. Ask any experienced musician or industry professional and they will most likely tell you the same thing. I’ve taken to calling this “X” factor magic pixie dust since it’s not easily defined and quite elusive. Magic pixie dust isn’t available from a different publicist or found at the newest online music website to be sure.

How do you go about finding this magic pixie dust? No one knows for sure, but I’m of the opinion that it has to find you. The only way to put yourself in a position to be found is to work hard at your craft, play as many live shows as possible, build up your fan base and simply persevere through all the challenges you face every day as an artist pursuing your passion. You never know when a little magic pixie dust might come your way.

John Doe is the founder of the seminal Los Angeles punk group X, a solo artist and actor. Photo by Autumn de Wilde

OK, admitting that I’m a bit of a luddite - I accept that computers are my friend and fully embrace their benefit. However, when it comes to music there is a vast difference between marketing & creativity. When you see a band that has designed their logo-website-tshirt-wardrobe-marketing plan, before they’ve written four or five great songs, and I use that term loosely, you know something is rotten in Denmark.

First, let’s talk about songs. That can be pretty much anything as long as it has a beginning and an end. For lots of good songs the middle is not so important but for great songs, I think it is. I have my own preferences but won’t engage in the debate on what’s better, or more valid, as a song. If you communicate to an audience in person or in some alternate-virtual reality & don’t even have a chance of pulling that off on stage, it doesn’t matter. DJs, et al are included in this communication. Again, I have my own preferences but I recognize there being many ways to skin or get that cat outta the tree. BUT, it’s hard to make an argument for something succeeding if it doesn’t“speak” to some group of people. For my money that is where a musician or anyone in music, must start. Being truthful in some fashion or speaking some truth to others. Whether you’re out to change the world, baring your soul, reflecting your culture or telling a tale, there has to be some truth, even if it’s a lie.

You can make a case for, & give countless examples of, people becoming popular in the indie world on the basis of their talent, determination and ability to communicate to an audience. Anyone from Elliott Smith, Feist, Guided By Voices, Sufjan Stevens, Neko Case, Yo La Tengo, The Sadies to countless underground punk rock & jam bands. Even though I’m less familiar with & interested in the last two groups, there’s no denying their success in carving out a niche and career for themselves. I’m convinced that one of the main reasons for this is quality and making something that means something to others. This applies whether you’re a DJ, a jam band or the next Willie Nelson, wait a minute Willie Nelson is sort of a jam band now-a-days . . . you get my point.

So, I suppose this brings us to marketing. I won’t deny that a great photo or ingenious advert can go a long way in grabbing attention and even establish someone. But what really works in marketing is after the fact and the fact is quality of whatever it is that you create. You still have to look good or weird or the same as someone else or just project what ever it is that made you who you are. People who have longevity come to marketing ideas relative to whatever project they’ve just completed. My experience has been that you, as an artist, can and should have as much of an idea as to how to promote & market your records as anyone else, assuming that you don’t just get in other people’s way. Ask yourself the question, “What’s important about what we just made?” Maybe in the old days all an artist had to do was sing good, look pretty & leave the business up to the company. Not any more and if you have been living under a rock and don’t use DIY methods this is how people become dissatisfied with their record companies. They leave too many of those decisions to someone else & then don’t like the result. This is something to establish at the beginning of the business relationship, which brings us back to the beginning of the discussion...

Write a few great songs & figure out what your MySpace page will look like later.

John Doe – Oildale, CA 9/29/07

John Doe will have a regular blog on KnowTheMusicBiz.com entitled What Would John Doe Do? (WWJDD?) where John will answers questions from community members about music, the music business or life. If you have a question you would like John to answer in his blog please email it to: wwjdd@knowthemusicbiz.com

For more information on John Doe check out theejohndoe.com or yeproc.com