Selling out is, has been, and will always be a huge bone of contention in the music world. In general, artists are considered to have "sold out" when they lend their song to a commercial product for advertising (and assumed monetary compensation).
In the past, I have, like most people, viewed selling out negatively. But recently, I have become pretty much ok with it. This article just about captures my thoughts on the subject. It describes the three different situations that are typically associated with selling out. The first being the most common, that an artist's song is used for advertising and commercial gain. It's interesting that this is becoming more prevalent in the indie society (i.e. M.I.A.'s 'Galang' in a Honda Civic commercial). This is of virtually no concern to me anymore. I do not necessarily like that songs that I like are becoming more widespread, but I figure, it's not that bad that more people are exposed to really good music. The second part of this scenario is that the artist is receiving some sum of money for their work. I don't mind this too much, as it allows me to not feel bad about pirating their music. And really, what is the difference between that and Dali being commissioned for his paintings?
The part of selling out that I do have a problem with is when a musician severely changes their aesthetic to sell more records. The above article says that they should not be blamed for having more expansive budgets and thus better production values. But I disagree with this. An example is Wolf Parade who had a greatly increased budget for the recording of their debut LP Apologies to the Queen Mary. Their first EP's were very messy, but the cleaned up sound of the LP does not strip away anything from the band's music. But often times, a band will completely alter their sound in order to be more radio-friendly. And this is of more concern to me than leasing a song to a commercial.
I think the reason that people (myself included) have a hard time with hearing their favorite artists giving away songs is that they hold these songs close to them. The increased exposure that commercial success brings steals the sense of exclusivity away that the listener had previously enjoyed. It is unavoidable that artists will want to make money from their work, and this is both justifiable and advantageous. If they did not receive some sort of compensation, the artist would not be able to devote themselves to exploring their craft. Therefore, when an artist can be freed to pursue what they want, the listener will benefit.
In summary, I do not necessarily like that a band will give its songs away, but since it happens, I can be ok with it. And as long as a musician maintains their own creative control, (and not that of record company suits who encourage more accessible music) the process of signing to a major label is also not that troubling. In reality, many independent labels are just subsidiaries of major labels anyways. Nonetheless, a band like Clap Your Hands Say Yeah shows that you don't need any label to be a success. But regardless, the thing that musicians need to do is to focus solely on making quality music, and not simply "making it." If they do that, then good things will happen.
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