Analysis: Record industry pins its hopes on Robbie Williams plc

He may be the biggest pop star in Europe but is EMI gambling its future – and that of the business – in a new deal worth £80m?

At their opulent Regent's Park headquarters, executives of the music giant EMI proposed a toast yesterday as the ink dried on Robbie Williams' signature.

After an intense bidding war, which forced the label to pay up to £80m, EMI has secured a large slice of arguably the most bankable singer in Europe.

But for EMI staff, the hard work of ensuring that the investment pays off starts here. At the back of their minds will be the bitter experience of a similar deal with Mariah Carey, which collapsed earlier this year at a cost of £20m to the company.

The structuring of a 21st-century record contract is a far cry from the often-exploitative deals of the 1960s when management and record company shook hands on the proportion of performance and writing royalties owed to the artist.

The Beatles, for example, initially agreed to a pitifully small proportion of royalties when they started out. It was only after John Lennon and Paul McCartney conducted negotiations themselves that they were able to strike a deal in which their Apple label received a healthier share of sales from EMI.

Robert Sandall, a former director of communications at Virgin, says that in the lawyer-dominated modern world of deal making, such things are no longer left to chance. "These days a band gets a lawyer before it has a base guitarist," Mr Sandall said.

But the same care is taken by record labels, and EMI will have moved mountains to ensure that, if Williams fails to deliver, he will only receive a fraction of the £80m.

Every eventuality, including peaks and troughs in the artist's popularity, will have been covered in a contract full of legal caveats.

This is something that Robbie Williams, who has been prone to going off the rails, will do well to remember before he starts spending his many millions on high living.

Nowadays the headline figure attached to a deal is often dependent on the artist producing solid sales for each album he or she records. If the first album flops, the cost of the second album to the record company is reduced.

EMI has also hedged its bets by backloading the contract. Williams' deal is thought to be made up of £10m up front, £15m on completion of the first record and £55 for the remaining three albums.

The bottom line for the artist may also be hit, depending on whether the act or the record company are financially responsible for the considerable marketing spend necessary to achieve chart success.

When EMI pulled out of its estimated $100m (£63m) deal with Mariah Carey, it prompted speculation that the era of the huge record deal may be over.

Such speculation was fuelled by the under-performance of Michael Jackson for Sony and the example of REM. The Georgia band extended their relationship with WEA in 1996. Although the sales of their first album under the new deal, Reveal, were a disappointing three million, the company finds solace in the prestige and the effect REM, with a loyal thirtysomething fanbase, has on their share price.

Record companies indisputably feel more secure with a Britney or Robbie on their books and are happy to sacrifice a few lesser names if the budget demands.

Analysts were divided yesterday on whether the Williams deal was a face-saving exercise designed to impress the city after EMI was recently dogged by piracy problems. But most industry insiders agreed that in the past year Williams' fan base has broadened, which is comforting to the money men.

Many doubt that Williams can justify the price tag in record sales alone, but in common with other deals they have bought the right to profit from other facets of the artist. Aside from CD sales, the company can profit from merchandising, tour receipts, videos and access to the artist's back catalogue.

This income stream has recently been exploited by several artists including David Bowie, who issued bonds valued on the likely future level of his record sales.

Gareth Grundy, associate editor of Q magazine, says the risk taken on Williams will be significantly reduced if he can finally crack the US market. "The deal suddenly becomes viable if you make it in the US," Mr Grundy said. "Because the market is so much larger it supports the megadeals."

Bands such as NSynch and Backstreet Boys can command multimillion contracts almost regardless of their appeal outside the US.

There was also a palpable sense of relief among some record company bosses that Williams and his management had not carried out their threat of becoming free agents.

A music journalist, Ben Todd, who first broke details of the deal at the weekend, said Williams' management company, iE Music, had started negotiating with independent retailers and CD manufacturers.

Mr Todd said: "If Robbie had walked away from the industry, then that would have led semi-autonomous artists such as Madonna to also consider walking away. Without the big names on their roster, the record companies are stuffed, but the end effect may have been that they would have started sending scouts out to the clubs and bars looking for fresh talent to invest, say, £100,000 in."

So are there any potential losers from the Williams deal? The cost of promoting an unknown band is becoming increasingly expensive, and if they do not score a hit they tend to disappear within six months. At EMI, as the company puts all of its efforts into keeping the Williams juggernaut on a straight course, the window of opportunity for newcomers appears to have just shrunk.

But even successful artists of his stature can find that apparently lucrative contracts fail to deliver what they are expecting. The perils of not defining who is paying for what were laid bare last year when, having fallen out with his manager, Elton John tried to pursue a complicated expenses claim through the High Court.

The responsibility for the marketing budget also came as a nasty surprise to George Michael, whose protracted wrangling with Sony served as a reminder to other artists to check the small print.

Now that he is free from these arrangements, Michael has struck a single-by-single deal with Polydor which could well become the blueprint for future deals.

Some of the worst excesses of artist exploitation were eradicated in the late 1960s by the formation of United Artists, originally a trades-union style record company. But there have been plenty of examples of the recording artist placing too much faith in the hands of management or a recording contract.

Some industry figures argue that exploitation is still a problem in the music business. Bernard Doherty, public relations manager for the Rolling Stones, said: "The contracts with the record company are extremely biased. If I were a DJ and I wanted to bring out my own perfume or strike a deal to endorse a clothing brand, I would most likely have to refer to the record label."

It may seem curious to use the word exploitation when considering a deal which may gross Robbie Williams the better part of £80m.

But, in finalising the contract, EMI will have done its best to ensure that they squeeze every last drop of success out of him before they pay out such a sum.

Big deals: Lucrative record contracts that failed to pay off

* REM

$80M, A&M, 1996

REM have done little to justify the $80m (£51m) that Warner Brothers is said to have given them. The two subsequent albums have failed to match their predecessors' sales.

*Whitney Houston

$100M, Arista, 2001

Even though Houston has sold more than 140 million units for Arista, the deal was a gamble ­ not only because of her shaky personal life, but also because she owes Arista six albums from her last deal.

* Mariah Carey

$100M, EMI, 2001

EMI's four-album deal with Carey is a poor precedent for its investment in Robbie Williams. Her first, Glitter, did anything but shine. Earlier this year the deal was unwound at a reported cost of £20m.

* Michael Jackson

$160M, Sony, 1991

Eleven years ago, Sony set the trend with a $160m deal with Jackson, then the biggest thing in pop music. But the investment has turned sour, with Jackson's latest album, Invincible, having little impact.