Industry’s Top Lawyer Says Major Label Crisis Is Their Own Fault

A senior partner at Manatt, Phelps & Phillips and boasting a client list that includes Neil Young, Brian Wilson, The Eagles, and Tracy Chapman, Lee Phillips‘ most recent accolade is the Entertainment Law Section of the Beverly Hills Bar Association’s 2014 Entertainment Lawyer of the Year award.

And while his decades in the business tell him artists and even major labels can survive the seeming limbo it has been forced into as a result of what he calls the “digital revolution,” he admits to The Hollywood Reporter, “the record companies didn’t see this coming, and that’s typical for them.”

“There are always changes in the [industry]. Piracy has been around since the cassette, but when labels didn’t embrace digital right away, it was too late,” he says. “I was there at the beginning, representing Real Audio, who hired me to acquire content from the labels, and the negotiations dragged on for almost a year. But music has always been important and will continue to be.”

According to Phillips, having dropped the ball early in music’s transition to digital, labels are now scrambling for revenue. “Suddenly, the bonanza of selling 3-5 million copies of an album is gone. As a result, companies have cut their overheads, and are trying to find out what their place is,” he says.

“The labels will pay anything to keep prestige acts,” he adds. “But there are only a handful of artists in that category. In signing new acts, it’s not only about talent, but what kind of following you bring to the table. That’s why labels have started signing these 360 deals. Since they’re not making money from albums sales, they want a piece of touring, publishing merchandising and endorsements.”

As far as Phillips is concerned, the industry is now paying for its lack of foresight. “The labels made a mistake not doing a deal with the original Napster. I think they should’ve realised this was another revolution. They should have threatened to shut it down, but offer to make a deal,” he says. “Since then, they’ve lost control of their distribution, and they’ve been trying to get it back ever since.”

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