Pop Stars in Search of a Better Record Deal

In the late 1990s, as the Backstreet Boys climbed to the top of the charts with hits such as I Want It That Way, they gained attention for more than just their music: The singers sued a former manager who they say cheated them out of millions of dollars. When it came time to release their most recent album, the band sought greater control and a bigger cut of the profits. For their eighth studio release, In a World Like This, the Backstreet Boys—now middle-aged men—abandoned the classic record company contract, turning to what the industry calls a label services company, which works almost like a consultant. Under these deals, bands call the shots on marketing and distribution, and they can receive more than triple the typical artist’s share of earnings. “With this type of situation, you’re responsible for getting the right staff and people behind it,” says Peter Katsis, the Backstreet Boys’ manager. “It falls on the artists.”

The biggest of these newcomers, Berlin-based BMG, works with artists such as the Backstreet Boys, Bryan Ferry, and Anastacia. Competitors include Kobalt Label Services, which has deals with the Pet Shop Boys and Prince , and Cooking Vinyl, which works with dozens of acts, including Madness and Amanda Palmer. The success of label services has spurred traditional record companies to open similar divisions. “It’s almost like the major labels are having a crisis of identity,” says Mark Mulligan, a music industry analyst at Midia Consulting. “Artists don’t have to go through a label to be successful anymore.”