In response to these shifts, music executives began pushing artists to sign “360” deals that guaranteed labels not just a portion of album sales but live music and publishing rights as well. These deals brought pushback from artists and their managers, who complained about labels going after revenues that had not, historically speaking, been theirs. While 360 deals were controversial, artists still seemed to need labels, even in the digital era, and many, sometimes against their better judgment, signed on.
And that was the state of the industry in mid-2010, when, after a 47-year career in the music industry, Morris finally prepared to step aside. Privately he grumbled about the mandated transfer of power, but in public Morris did the best he could to put a good face on things. His decade at Vivendi had been tumultuous, perhaps from some perspectives even catastrophic, but he could say this much: in ten years of declining revenues and massive layoffs and economic upheaval, not once had Universal ever had a losing year. In fact, Morris’ aggregate return on invested capital during the first decade of the 2000s was splendid, and when you added it all up, B still looked a lot better than A. No one at the other major labels could say the same.
Perhaps it was for this reason that, as word began to spread of his upcoming force-out, Steve Jobs began to call more frequently. Soon there was an offer on the table. Leave Vivendi, said Jobs. Come to Apple. We’ll start our own iTunes imprint. We’ll go after artists aggressively, and you’ll run the greatest music label the world has ever seen.
Jobs was looking to rewrite the economics of the business from a blank slate. Historically, recording industry deals were determined by major labels bidding against one another for the right to represent the artists. They did this by offering advances against future album royalties, and the label to offer the highest advance usually retained the artist. After the album was recorded and sold, the initial advance was then “recouped” from future royalties, and over time the money was paid back. Under this system, artists earned surprisingly low percentages of their overall album sales—for a first-time artist, this number could be as little as 8 percent. At this rate, it would often take artists years to recoup their advances, and most musicians never earned them back at all.
This was the reason that musicians sometimes complained about “never seeing a cent” in royalty payments. From the labels’ perspective, though, it looked like the artists had been advanced massive royalty checks on albums that had flopped. The advances market encouraged risk taking, and that was the secret reason for the small cut of royalties most artists got paid. Because the biggest cost at any label wasn’t pressing, or distribution, or marketing—in fact, the biggest cost didn’t appear anywhere in artists’ contracts at all. It was the cost of failure: the cost the winners bore to support the larger group of artists the labels went after who would never succeed. For the labels, the advances were a way to pool risk at the artists’ expense.
But to Jobs this approach looked obsolete. He didn’t think the labels had to invest so much money in risky music ventures, and he believed the artists wanted a greater stake in the overall pie. His proposed iTunes music label would offer artists nothing—no advance—in exchange for a royalty split of 50 percent that would start paying out from the first day. The economics would be transparent, and totally fair, and no one would be asked to subsidize anyone else.
It was a daring proposal, and for Morris, one that was the ultimate rebuff to his critics. If he was such a clueless technophobe, why did the most celebrated innovator of his time keep trying to hire him? But at the same time Morris knew it was a proposal he couldn’t accept. For one thing, he disagreed with Jobs. He thought that for a lot of artists—particularly artists at the beginning of their careers—a large advance check was a rite of passage, and a signal of confidence, and that without this carrot to dangle Apple would be unable to meaningfully compete for new acts. Despite their occasional complaining, he suspected that the musicians were just as happy with the current arrangement of high advances and low royalty percentages as the labels.
This strategic disagreement was overshadowed by a more pressing concern: Jobs was dying. His face had grown gaunt; his voice had gone raspy; his body was unbearably thin. After a long period of remission, his pancreatic cancer had returned, and metastasized. As tempting as the Apple offer sounded, Morris didn’t dare sign on. While he liked Jobs as a person, he feared that enthusiasm for an in-house music label at Apple was unlikely to survive the passing of the company’s charismatic founder. After some discussion, he politely rejected the offer.
But Jobs wasn’t the only one looking to upend traditional music business economics. Around this time, Shawn Carter—Jay-Z—showed up at Morris’ offices in New York looking to get out of his own advance. Morris had long ago signed a multi-album deal with Carter that gave him an exclusive option on all of his future work. Now Carter was proposing to buy his way out of this deal and retain 100 percent of his royalties for his next album, The Blueprint 3.
Morris was amenable to the deal, as he was bearish on Carter’s career. The rapper’s last two albums hadn’t sold that well, and he was approaching a certain age where the commercial viability of all musicians seemed, irrevocably, to decline. Morris had experience with this—he’d pursued a lot of big artists on the declining side of fame. One of his first big signings, way back in 1980, had been Pete Townshend at Atlantic Records. Responsible for the Who’s Tommy and Quadrophenia, Townshend was one of the greatest songwriters in the history of rock, but in the late 1980s, after he had turned 40, the magic had dried up. When, in a frank discussion about the state of his career, Morris had asked him what was going on, Townshend had responded that he now saw the world through different eyes. Townshend explained that, when he was young, all he had wanted to do was go out and drink, party, and chase girls. Now when he thought about sex, his first thought was, “God, I hope my daughter doesn’t get AIDS.”
Morris was worried the same phenomenon was beginning to affect Carter, who in 2008 had retired his lucrative pimping persona after marrying the pop superstar Beyoncé. Music had always been a young person’s game, and the newly housebroken Carter would turn 40 soon as well. Although he normally held artists to the terms of their contracts and guarded his options on future albums jealously, Morris was, in this case, willing to make an exception.
The discussion soon turned to figures. Morris wanted six million for his stake in The Blueprint 3. Carter was only willing to offer five. The typical negotiation would have ended somewhere in the middle, but these weren’t typical men. Soon the two came to a compromise decision: to settle the dispute over the remaining million dollars, they would flip a coin.
Even for Morris this was cavalier. Then again, he was playing with Universal’s money. Carter was paying out of his own pocket, but he had always been a gambler. And while a million dollars was for most people a life-changing amount of money, for both Carter and Morris it was a meaningless asset milestone they had long since blown by. Why not flip a coin? Despite nearly fifty years in the game, Morris had no idea what The Blueprint 3 was really worth.
Life was unpredictable, and the best projections of his accountants had never panned out. He had watched the dark horse win and seen the sure thing fail. His business had been saved by one digital technology, ruined by the next, then potentially saved again by the third. He had been the custodian, several times, for radical upheavals in American culture. More than anyone, he had a sense of what was really possible in life, and it was this boundless sense of potential that kept him eternally young.