Two music business/management graduates win an award for crafting an inventive scheme for running record companies.

By Sarah Murphy
Berklee.edu Correspondent
January 26, 2005

	Dan Konakis (top) and Chris Oquist.

Simply selling records is no longer enough. If labels and their artists are to thrive, they are going to have to get creative. Or, to put it in more business–like terms, "They're going to have to find ancillary sources of income," says recent music business/management graduate Dan Konakis.

Last summer, Konakis and fellow graduate Chris Oquist won recognition from the National Association of Recording Merchandisers for an innovative marketing proposal, as part of NARM's first ever "Class Acts" competition. Drawing on these "ancillary sources," the two devised a creative approach to launch an up–and–coming new band on a shoestring budget, while still realizing a profit for the band's label. The winning plan earned Konakis and Oquist an expenses–paid trip to the NARM convention in San Diego, recognition at the awards dinner, and the opportunity to present their marketing plan to record company executives.

In developing the proposal, Oquist and Konakis were required to take the position of record label executives and to devise a strategy to market an artist. They chose Berklee's own Heavy Rotation Records and student hard rock band Full Tilt to play these hypothetical roles. To win the competition, they needed a plan that was profitable, original, and thorough. But they also believed it should be fair and respect the integrity of the musicians, emphasizing artistic development and career longevity.

"First and foremost I am a musician," Oquist says. "That always has to be the most important thing."

In a typical record deal, an artist receives—at best—15 percent of the profits from record sales, after recouping the cost of making the record. Meanwhile, the artist's touring, management, merchandising, and publishing generally are conducted independent of the label.

But the proposal made by Konakis and Oquist took a nontraditional approach. They devised a 60–40 partnership between the label and the artist, from which the artist would receive 40 percent of profits after recouping costs. In exchange, the artist would agree to be managed by the label and to share profits from publishing, touring, and merchandise sales.

While many artists might balk at the idea of ceding so much control to their record company, Konakis and Oquist believe the deal is ultimately beneficial to the artist, especially to new acts trying to break into the market. As they see it, the label becomes more invested in the artist's enduring success.

"We're trying to achieve a partnership deal between the artist and the label. You want them to feel you're in it with them," Konakis says.

Though the terms of the record deal Konakis and Oquist proposed were unusual, their plan relied on two tried and true industry practices: artist development and extensive touring.

As the record industry has struggled these past few years, long–term commitment to artist development has largely fallen out of favor.

"Artist development is one of those solutions that has been shunned because it's so slow," Oquist says.

The result is a vicious cycle: The downloading of singles (rather than the purchase of entire albums) causes labels to lose money, which limits the label's investment in artist development, which leaves the underdeveloped artist with only one hit, which is then downloaded off the Internet, which means no one is buying records.

Konakis and Oquist have built their strategy, in part, on the idea that the more an artist is nurtured, the better their songs will be, the more profitable the artist and the label will become.

"We're saying bring back artist development. You don't want the band to be a one–hit wonder," Konakis says. "You want them to have longevity."

Dan Konakis (left) and Chris Oquist (right) pose with their awards and Jim Donio, NARM president (center).

The label–artist partnership Oquist and Konakis proposed resembles in some ways Motown in its heyday. And for that very reason, some have viewed their proposal with skepticism. Motown kept tight reins on its artist management and booking, and the label was notorious for withholding royalties. When Oquist and Konakis presented their proposal at the NARM convention in San Diego this past summer, one audience member asked why any artist would put so much faith—and money—in the hands of a record label.

"It is true that there is a lot of controversy surrounding corruption and the lack of ethics in Motown practices," Oquist says. "But the business model did work. And if the label had been run in a more ethical manner, it would have been successful for the artists as well."

Konakis and Oquist's proposal calls for a partnership built on trust and a commitment to creating and selling quality music. In order for it to work, the label must operate in good faith and the artist must trust the label.

Jeff Dorenfeld, associate professor of music business/management and an advisor to the project, agrees that under such circumstances, this type of deal can be mutually beneficial.

"You have to make it a win–win for everybody," Dorenfeld says. "If the label can participate in different revenue streams, if there is incentive for the label to support [the artist] all around, then it's beneficial to the artist."

Consolidating services and revenue within the label just may be the wave of the future. The independent label Sanctuary Records, for instance, has been extremely successful in operating artist management, merchandising, and licensing arms. Their roster includes the Strokes, Nelly, Destiny's Child, Morrissey, and Iron Maiden.

Konakis and Oquist learned of Sanctuary's business model after they wrote their own proposal. It was exciting, Oquist says, to realize that some in the industry are taking such innovative approaches. But for right now, Sanctuary is the exception, not the rule.

"I don't think record labels have been creative in approaching their problems," Oquist says. "They're just putting Band–Aids on wounds all the time, as opposed to generating solutions."

Sarah Murphy is a musician and freelance writer.