Close your eyes. Imagine it's the early 2000s and you work in the music business. What you see is far from pretty.

Everywhere you look, record sales are tanking. The post-Napster malaise is in full swing. Being in the music business feels a little like standing on the Titanic moments after it struck the iceberg: the ship is still afloat, but the freaking thing sure does look like it will sink.

Now imagine that in the midst of all that downturn and upheaval and uncertainty... you decide to risk everything you have and start a record label.

Sound crazy? It does to me... but fifteen years ago that is exactly what Scott Robinson, the co-founder of Dualtone Records, did. Today Dualtone is the thriving label behind breakout acts like The Lumineers, Shakey Graves, and Shovels & Rope. (The Lumineers self-titled debut album is nearing triple platinum status, and Dualtone artists have earned four Grammies and sixteen Grammy nominations.)

And almost every act the label has signed has earned out its advance, an unheard of hit rate for the industry.

This month marks the label's 15th anniversary, and to celebrate Dualtone is releasing a compilation album featuring rare, classic, and unreleased songs from their roster. That made it the perfect time to talk with Scott about why he started the label, how he builds unique professional relationships with each artist, and his outlook for the future of the music business (spoiler alert: he's extremely optimistic.)

Obvious question: during a time when most labels were contracting and some were even folding, why go against the grain and start a new label?

In my prior life I was a manager and also worked with major labels for a short period. The industry was starting to pivot in a negative way and there was this new digital business model. I could just tell it seemed like the perfect time for an independent model.

Keep in mind everyone had gotten fat and happy from CD sales. When digital caused CD sales to decline, the industry shrank and consolidated... and we saw a chance to jump in and be different.

All those changes in the music business gave us the opportunity to reposition the compass.

In what way?

Coming from the management space, we realized it doesn't have to be a land grab. You don't have to lock people up in standard deals. We saw an opportunity to focus on artist development, to create partnership scenarios... given the economics and business model the timing was perfect to take a new approach to working with musicians.

Consolidation always creates new business opportunities. Consolidation in this industry gave us an opportunity to redefine the model and reinvent the process.

Plus a lot of artists were looking for a new home and wanted something different... and we were eager to be different.

What does that mean in practical terms?

We started with determining the goal of the company. Obviously the goal is to have success, but there are different ways to carve out that success.

For us, the approach isn't to sign an act and lock them up. We treat the artist as a partner. We approach each deal not from a standpoint of "the artist works for us" but in a way that lets us work together and create a partnership scenario.

That means the economics of a deal are unique to that deal. What does the artist bring? What do they get? Do they bring finished master recordings? Do they want a licensing deal versus a master ownership deal? The list goes on and on.

The goal in each case is to create a structure that is fair to everyone.

I've never talked to a band that was first signed in the 80s or 90s who felt their first record contract was in any way fair.

Back in those days most labels provided artists with 80-page contracts. Today our contracts are 6 pages long, and sometimes that's including an illustration. If I can't read the contract and need a third party to explain it, I shouldn't be doing the deal.

The goal is to make the agreement transparent and ensure everyone is protected.

We like to unwind the traditional model. The spirit of a true partnership gives the artist a lot of control, lets them express their vision... and it gives us the ability to treat them as someone we work with.

This way, we all feel like we're in it together.

From what I can tell that seems to pay off, especially from a business standpoint.

Long story short, the majority of our artists are recouped. (That means the artist earns back their advance.)

Our results are almost completely opposite to what happens at a traditional label. With those labels, most artists go un-recouped, one or two manage to break even... and the one artist who hits it big pays for the rest.

Does our approach work for everyone? No. It's very boutique. It has a throwback, co-op feel to it. I like it, though. We sleep well at night because we know what we're doing is fair. We make mistakes, we're not perfect... but we're always doing what we think is right.

And we never want an artist to feel trapped or tied to us. The industry is changing and evolving, and this way we're all navigating it together.

Speaking of evolving, the way artists make money has definitely changed.

Absolutely. Take the Lumineers. Their first record sold albums. Their latest record sells streams. Even in their short career the model has changed dramatically.

We're a boutique label that tries to hit singles and doubles. Occasionally we might hit a home run, but we're not aiming for that. So we're constantly looking for ways to create revenue for the artist.

For example, by traditional industry standards one of our artists was a huge failure but from a partnership and profit standpoint was hugely successful because he did extremely well in the sync space. (A music synchronization license, or "sync" for short, is a music license granted by the holder of the copyright of a particular composition, allowing the licensee to synchronize music with some kind of visual media output (film, television shows, advertisements, video games...)

The industry would have assumed we lost hundreds of thousands of dollars, but he generated substantial revenue.

Sync opportunities can definitely move the needle. We saw that early on with the Lumineers; we had some great sync placements before radio picked up their single.

Our goal is to win in the cracks -- and when we can, to create some new cracks.

Going back to streaming, Peter Mensch recently said, "YouTube is the devil."

Well, it's true that YouTube is the lowest-paying streaming platform.

Still, I believe all that stuff will flush itself out over time. I'm very optimistic about the future of the industry. Streaming was hard to embrace but now we're definitely seeing the potential. In some cases streaming is starting to outperform traditional album revenues and digital revenues.

Even though the royalties need to realign themselves, I'm truly optimistic because overall consumption of music will be higher than it's ever been. Apple, Amazon, Pandora, Spotify... music is everywhere. The more that happens, the better.

Plus, all those outlets make music a longer-tail business. Years ago a song or an album took off... and declined very quickly, and then disappeared. Or it never took off at all.

Now songs and albums can have a commercial lifespan that lasts for years, not just weeks.

Is that why you focus more on long-term than short-term results?

Our long-term focus goes back to our business model. We're intentionally built that way. We don't put out a lot of front-line releases on an annual basis.

We like to have an extended album cycle for an artist release. In fact, "album cycle" is being redefined. You don't put out albums, you put out tracks. And pre-release sometimes sells more music than after an album is actually released.

Years ago there were only one or two or three revenue streams, and now there are hundreds... and that requires more effort and drill-down. All that takes time.

We stretch out our dollars so we can explore all the outlets and and revenue platforms to promote and market our artists' music.

That would sound like you need tons of employees, but you actually have less than ten.

We're lean because we work really well with our partners. Every project has its own scope of work. Some might just require our internal staff, others might involve outside contractors working on different aspects of a project.

That's the beautiful part of being a boutique: it's very customized, very hands-on... we're like a tug boat that can move quickly. We're not a cruise ship that takes so long to turn it misses out on opportunities.

In the digital streaming world, in the social world, you have to react quickly and make quick decisions -- and that's good, because we like to move quickly and make quick decisions.

But to do that you ache to be surrounded by a great and talented staff. Fortunately, have an amazing staff that has been with us almost since day one. That's really rare in an industry that historically has huge turnover rates.

Having such a solid track record with your acts means you have to be really smart about who you sign. How do you know when an artist is right for your label?

When we find the music, we drill down. Is there good management? Is there a good team in place? Is the artist levelheaded and not blinded by the industry?

When I managed bands, I always said that signing a band is really easy, and getting a record deal is really easy. What's tough is breaking a band. That's almost impossible.

So we pick people who know it's hard and who understand we all need to roll up our sleeves and get to work.

But of course the music is the first variable. If you don't have good music, none of the rest matters.

I think the "music" aspect gets lost in all the conversation about digital and streaming and...

Great content stands the test of time, no matter how it's consumed.

When we started Dualtone, the music business was still largely a physical industry. There was no iTunes. So when iTunes made digital downloads easy, I thought, "Wow, we're in trouble. We're an album-based business. We're about the whole experience."

We were worried that the only people who would win would be the ones with hits, and that the music business would be a singles business... but the opposite has happened. Digital saved our business and was more profitable. People didn't just download hits. They downloaded multiple tracks, and sometimes the whole album.

We're seeing that in the streaming space where one track will bring someone in and their experience with one song will lead them to multiple tracks and the whole album.

I might be one of the few that think this way, but the physical business was tough. With a CD, you basically had to sell it twice. You had to manufacture it, warehouse it, market it, promote it, get it into stores... and then you had to educate the consumer to go buy it.

And if you didn't educate and inform the consumer to buy it, the retailer could send the product back to you for a credit.

With digital there's obviously no manufacturing, no warehousing, and no returns. Granted the business is more fragmented and the margins are smaller, but it's cleaner and more transparent and more accessible.

We all fought digital, but it turned out to be the best thing for the industry. Some things still need to be fixed, but I believe we'll wind up seeing the largest revenue streams in the history of the business.

In what seems to be a sea of pessimism, that's a really optimistic viewpoint.

The young guys in our office hear the negative conversations and say, "Are we stupid for pursuing a career in this industry?"

I tell them, "You're really smart, because all this changes creates huge opportunities."

The business formulas are the same for selling music as they are for selling anything else. It's the same formula with different variables.

Keep the compass pointed in the right direction, be open to change, continue to evaluate the space we live in from a digital technology standpoint, and continue to put out great product -- which in our case happens to be music.

You spend so much time having to look forward, it was probably fun to look back and put together your 15th anniversary album.

When people release anniversary projects they normally highlight their successes. Instead we decided to highlight all the great music that, for one reason or another, wasn't a success.

We said, "Let's do something that isn't trying to show how great we are... instead let's put together some great songs that people might have missed." Then we added some new tracks from The Lumineers and Shaky Graves to give it a fresh, contemporary feel as well.

You do need to always look forward, but once in a while it is fun for us to look back and see all the great music we've been lucky to be a part of.

Published on: Oct 26, 2016