In another case, Sony was discontented with Fiona Apple’s album, Extraordinary Machine and had chosen to withhold it.  Understandably, the artist was becoming more and more frustrated with the record company.  In protest, fans organized freefiona.com demanding her music’s release from industry prison.  Apple has talked about how insulting corporate meddling in the creative process is—that when the label asks for changes in the product (different chorus, softer guitar, “more cowbell”)—that they would be getting in on her songwriting, which she equates with her own death.

Doug Derryberry and Matt Scannell

“Put the artist into a cannon and blow him/her up.  Once that’s done, after the big blast, they’re out there looking for the next big thing.”  Such was Scannell’s description of the record company’s approach to signing new acts.  Reiterating this sentiment, a former BMG executive, speaking under the condition of anonymity, referred to the A&R “day trader mentality” (A&R stands for Artist and Repertoire—those responsible for scouting and developing record label talent, as well as other liaison-type activities).  Purged in one of the RCA regime changes, this former employee said that, “they go out and sign as many artists as they can, and then throw them all up against the wall to see who sticks.  They scout prepackaged artists that are release-ready.  They want to put in the least amount of effort.”

Unethical and disingenuous practices are nothing new to this industry.  In a July 25, 2005 Press release from the office of New York State Attorney General Eliot Spitzer, it was announced that Sony BMG Music Entertainment agreed to halt pervasive "pay-for-play" practices in which, the entertainment conglomerate was “making payments and providing expensive gifts to radio stations and their employees in return for ‘airplay’ for the company's songs.”  Four months later, Spitzer’s office once again announced that another industry giant, the Warner Music Group, was the second to settle in the payola investigation.  Spitzer did go on to say, “Unfortunately, other companies continue to engage in [these practices].  I applaud Warner’s decision to halt this conduct, cooperate fully with my office, and adopt new business practices.”  Currently, Spitzer is seeking evidence of collusion between major labels.  Apparently, the “most-favored nation” clause between labels and online services guarantees better prices and upgraded agreements.

(Un) Sound Decisions and Legalities

A detailed explanation of corporate desertion and neglect can be found in Jacob Slichter’s So You Wanna Be a Rock & Roll Star.  The 2004 text describes (his band) Semisonic’s journey to stardom and subsequent disregard by the record company.  The group slipped into oblivion.  Fans didn’t even have a chance to forget about the sincere musicians.  It was corporate mismanagement and other industry red tape that squelched a follow-up to their first and only smash hit, “Closing Time.”  Slichter’s story shows that artist development is nonexistent.  He suggests that record companies seem not to care about building a band's career.  Their greatest concern is the third-quarter P&L statement: “Under the current system, major labels can only be loyal to the shareholders of their parent corporations.”

Slichter’s understanding of corporate loyalty, sadly, is “right on the money.”  A 1919 Michigan Supreme Court denied Henry Ford’s attempts to use the company’s surplus (cutting shareholder dividends) of more than $100,000,000 to employ more workers, help them build up their lives and their homes, and increase the number of people who could afford to buy his cars.  Due to the objections of minority shareholders hungry for larger payments, the Court held that a business corporation must operate primarily for investor profit.  Essentially, if efforts to better serve customers and employees mean less in shareholder return, it risks being in conflict with the duty of the corporation, which is to the shareholders first.

This hard-line approach can be countered with what is known as The Business Judgment Rule.  In its application, it frees members of the Board of Directors from potential liability for certain “harmful” decisions.  Essentially, it protects board members from legal action for making a flawed choice.  The justification for the rule shows judicial recognition that businesses must be allowed to take risks and not necessarily face legal action for making such decisions.  This can be a reliable record company justification for maintaining an artist that is not an immediate blockbuster.  Acts may have long-term potential, despite the first album not being a smash.