Slashdot Mirror
Record Labels Looking for a Cut of Tour Revenues
Anonymous Coward writes "As many a Slashdotter has pointed out, musicians make their money not from selling records but from going on tour. Now record labels are trying to get a piece of the action. 'Now the music labels, hungry for revenue from any source, are mulling over whether to make a grab for a piece of the tour biz. One company already has: In October EMI Recorded Music signed a deal with Brit singer Robbie Williams that gives the label a cut of the pop star's merchandise, publishing, touring revenue and sponsorship.'"
...major corporations want more money.
Full story tonight at 11
If you can't beat them, arrange to have them beaten. -George Carlin
I'm surprised it took them this long. I mean come on, there's a way for them to bilk the artist out of more of their earnings, and they didn't do it? That's not the recording industry I know!
I thought a big part of the RIAA's argument is that the labels have to underwrite the promotion and some of the costs for the tours... If this is true, then shouldn't they have already been taking a cut from the tour profits? Maybe I'm wrong here. I'd check out the RIAA's site, but it appears to be down...
....the record labels are now requiring musicians to give up their first born in order to breed a new race of pop stars.
-Valiss
Ok, to the animals who don't get the "theft" thing, a concert has real scarcity. If I copy your ticket, both our asses can't sit down in that seat. A recording has only artificial scarcity. Copying your cd has no effect on you. So this is a good thing. Let them act as promoters.
-Libertarian secular transhumanist
I found this interesting from the article:
... just have to be seen on a big screen.
> While music sales have dropped for three years in a row, from $13 billion to $11.5 billion in
>2002, hurt by Napster-style digital piracy and a lackluster flow of hot new acts, the tour
>business has climbed for four years straight, from $1.3 billion in 1998 to $2.1 billion last year
So in total, money spent on music has gone down from 14.3 to 13.6 billion. A small change in a time of economic uncertainty. I imagine people will always spend a similar amount of money for entertainment, just the patterns of expenditure change. Ripping an MP3 off the net will never compare to a live performance.
Similarly, movie studios don't have to worry. Seeing a decent movie on DivX makes me want to go to the cinema for the proper experience. LOTR, Matrix,
Anyway, the studios should make money where the consumer wants to spend it, and stop whinging when their lack of innovation stops them from earning.
Ponxx
If you're willing to sign away your profits in the future for that fat advance now, the only one to blame is you. On the other hand, maybe the only way to get anyone to listen to your crappy music is to get a major label to spend millions promoting it, in which case giving a percentage of the tour revenues you wouldn't be making without selling your soul to the record company is a good deal anyway.
Remember, we don't have Britteny Spears because she is a musician. We have Brittany Spears because a record company invested millions of dollars in creating her. It's only fair that they get a cut of the tour revenues she never would have had at all without their promotion.
In modern society, there is no reason to make a deal with the devil for fame and fortune - just call up EMI.
paintball
If the artists have accountants as good as the record labels they can surely manage to make a "loss" on all the tours after charging "consultancy" and "music services" etc, and having their own highly paid company of roadies, etc.
Give the record labels a taste of their own accounting!
blog.sam.liddicott.com
A lot of times, the label is putting a fair chunk of change into promoting the tour, booking the appropriate venues, and getting things done in general. I could see a decent tour costing the same as producing a CD, if not more when they go multinational.
Um, no.
The record label is putting a great deal of the Band's future earnings into promoting the band, mostly in promoting their CD sales, of which the band will receive $0.25-$0.50 per copy. Any promotion of the band, be it their CDs (the bulk of the promotion) or their tour is all charged to the band. In the end the recording companies, while taking the Lion's share of the CD profits (and now, soon, the touring profits as well), pays absolutely squat for promotion.
Hopefully this new development will encourage more bands to avoid the clutches of the recording industry and market direct, or use non-traditional channels such as mp3.com once was to reach their audiences. With luck this final act of hubris will be enough to kill those parisites dead, something that would be very good for artists and fans alike.
The Future of Human Evolution: Autonomy
True... Partly... the problem is the record companies see that they are no longer needed. Their main function was to act as a source of loans and to distribute music. Recording music is no longer expensive, and distribution can be done over the internet. Who needs record companies anymore?
Visualize the world of wine
I believe you'll find that this is the norm for all of the "manufactured bands" and "pop idols" that the industry created from scratch. Only the real artists get their own touring revenues, and the writing has been on the wall for them since the labels discovered that they could manufacture bands in just about any popular genre, not just bubblegum.
Personally, I think it's a good thing.
One of the reasons that artists are skeptical of online distribution of their music is the fact that it has the precise effect of making record lables think of those songs as valueless (which they are) and instead focus on tangible things that people will pay for (e.g. a concert with merchandise).
Once artists and labels get used to this arrangement, though, there's no reason that the indy labels can't do the same, and then distributing the music cheap (or even for free) and making their money on the concerts too.
A "label" in the Internet age should be... what? My feeling is that it should be a clearinghouse... a packager if you will that records/collects the band's or artist's music, sees to its quality of recording, adds lots of indexable info and then gets it to all of the online distributors (iStore, mp3.com, etc) that will "retail it". Heck, they could just run a Gnutella farm with a web-site full of reviews and other "value added" indexing, and a client-side plugin for downloading. Boom, instant high-bandwidth music distribution, and as long as the client has some basic incremental checksum system so that it can verify it's getting the exact file that you selected, you can be sure you're downloading what you wanted. That adds ad revenue to the label's list of sources.
The margins on all of that are small to negative, but if they have an alternate source of income, then they can afford to do it, and there's really no reason that foobar label can't compete with EMI on equal footing.
And you wondered why the RIAA was deathly afraid of file sharing... it's not because they thought their members would lose money, but because they KNEW that it had to lead to a decision about the value of music that they didn't want to have to make, and ultimately killing this goose once and for all!
"Bitch betta have muh money" while wearing a big hat with a feather in it
Have you ever been to a turkish prison?
There was just now a segment on ABC World News about The [Grateful] Dead's new model for making money off music. They record their shows every night, take orders from fans at the show, have their audio man master it, ship it off for duplication on CDs, and have it in the mail to the fan within about three days.
Instead of the $1/album typically made by signed bands they make $8-$10 on the three-CD set that sells for $22. They've turned a quarter of a million dollars on the CDs from their performances at Red Rocks over the past couple of weeks.
Not mentioned at the link, but Peter Jennings added that the music companies don't like being cut out of the loop like that.
Sheesh, evil *and* a jerk. -- Jade
My understanding is that what the labels often tend to do is sign a 'quick' pre-contract agreement that pretty much locks up the musicians, then starve them into signing.
Quick, nasty and effective. The trick for the musician is to actually pay attention before signing such 'quick and harmless' agreement in principles -- but the young and eager are often blinded by apparent opportunity.
Free Software: Like love, it grows best when given away.
Wow. That's good.
Did it ever occur to you that most bands starting out have less ability to dictate terms to a record label than people who are getting their first mortgage have with the bank? It works like this:
(label rep) : Here's our terms. Sign right there and we'll bring you onboard.
(band) : Hang on, we are a little unsure about this point here. Can we alter it?
(label rep) : Truth be told, I came to town to cut a deal with a band. If you don't like these terms, there are 3 other bands I'm talking to that I'd be just as pleased to go with.
At this point, the band either signs a draconian contract agreeing to give away God knows what, or the A&R rep walks and does business with someone else and the first band continues to play at dingy nightclubs ad nauseum. Fair? No. Life? Yes.
More here on exactly how that works and how bad the band is screwed.
Soon labels won't sign an artist until they are guarenteed a cut of the tour proceeds, merchandice, etc... stuff that the artists usually took home all the profits on. I guess they figured out that they can't make all that much money by suing college students.
There are only 10 kinds of people in this world... those who understand binary and those who don't
Don't the labels get a fee whenever a song is performed? (Some of which might be back to the writer, if the label feels like it...) Wouldn't that include the artist performing their own song?
Royalties are supposed to be paid when a song is performed. That royalty goes to whoever owns the copyright, which would be the artist if they were smart, or someone else if they voluntarily sold the rights to the song. It wouldn't include the artist performing their own song if they own the copyright.
I guess the new part is wanting a percentage of merchansing? Oh, and the article says sponsorship, too. Ouch. You mean you can't even sell out to Pepsi without losing a cut, now?
This comment makes it sound as if the labels are taking a cut without doing any work, like perhaps mafia protection money. Deals such as these are not extortion, but the record companies branching out into other areas of the entertainment business that have existed for years - merchandising; someone must make, market and sell the stuff - sponsorship; someone must produce the numbers and charts, seek out potential sponsors and sell the artist to them as a good marketing investment. This takes time, people and money.
Right now these things are going on (whoever got Led Zepp their $500,000 fee from Cadillac took a cut), record labels just want to enter that part of the biz. If the artist thought someone else could do these things better, they are free to work with them. I could see big labels being in a good position to excel in these areas as they have lotsa cash to work with and plenty of contacts.
Please notice that this article only discusses mega-huge acts. It could be a sound business move for a major artist and label to enter into all-encompassing contracts which cover recording, merchandising and touring, instead of bouncing back and forth between several companies. This type of deal probably wouldn't be effective with or for smaller acts.
RTFM; please, I beg you.
Ten years ago, Metallica's original contract with Elektra (signed in 1984), expired and there was a lot of competition from every label in the business to sign them to a new contract (after all, their untitled 1991 album was well on its way to being one of the bestselling albums of all time, and its predecessors were storming off store shelves). Metallica and Elektra reached an agreement that basically made Metallica completely independent of the RIAA. The arrangement that was reached was the creation of a corporation E/M Ventures, with the four members of the band, their management (Q Prime), Elektra being the sole shareholders (IIRC, the breakdown was something like 22% Lars Ulrich, 22% James Hetfield, 16% Kirk Hammett, 10% Jason Newsted, 15% Q Prime, and 15% Elektra). Elektra transferred the copyrights on all the catalog recordings (1983-1991) to E/M as their investment, along with a record deal that would pay E/M Ventures royalties equal to 50% of the wholesale price (in other words about $4 to %5 per album, or $7 to $8 per double album), with no deductions for anything (all record production and promotion expenses would be handled by E/M). This deal only expires when a simple majority of the voting shares decides to terminate it and buy back Elektra's share.
Elektra basically makes little to no money (apart from their share of E/M's profits) on the sale of a Metallica CD... all costs related to manufacturing and distribution are eaten by them. However, they're making this money with little risk; Metallica can put out basically anything and it will go platinum, simply on the strength of a rabid fan-base (much like Rush's, but probably at least twice the size).
E/M owns all aspects of Metallica's business interests. The tours are done by E/M (or subsidiaries thereof). The merchandising revenues are to E/M. Thus, Elektra gets a cut of all those revenue streams, which are actually even bigger than the recording streams. Elektra also gets a cut of international record sales by Vivendi and Sony. Metallica gets out of this what effectively amounts to total independence from the system. Even if Elektra doesn't want to release something, they're obligated to manufacture and distribute it, otherwise they forfeit their share (for no compensation, through breach of contract).
The artists already give a cut to someone, and it's called the promoter. Currently, the big boy in the business is Clear Channel. http://cc.com/
Currently, the way it works is that you have to schedule tours through Clear Channel for the most part. There are some local organizations who will properly get promotion and venue arrangements in place, but even then they have to usually give a cut to Clear Channel for the rights to promote someone. Anyone who's worked in a campus concert promtion board knows that you mostly have to pay off Clear Channel before an artist will schedule a date on their tour in your city. For big artists Clear Channel may get $100k up front, smaller ones maybe as little as a few thousand, but they get paid before a single ticket is sold. The venue then takes their cut of the gate, extracts the costs from the leftover and then gives the rest to the artist, and in some cases a cut of that goes to Clear Channel again, depending on how it was negotiated. Merchandise is usually only split with the venue, but it wouldn't surprise me to see some of it go to Clear Channel also.
There used to be a rate card published for clear channel's upfront fees for an artist, but I can't find it anymore and it may not have been a public site. It is very interesting to see how much it would cost a venue promoter to book an artist, as some of them make quite a lot of money just for showing up.
If anything, I'd see Clear Channel getting pissed before the artists, because at the very least this would give artists an option of who to let them promote their tour in the future. Clear Channel or their record label directly, either way the artist is going to drop at least %20 of whatever the gate is, so you can deal with the devil you know, or....
Just because "many a Slashdotter" has pointed something out doesn't make that statement true.
Most musicians make more from CDs that sell enough to get past the break-even point (i.e., after the label has recouped its expenses) than they do from touring. (Note: I said "most" so put your Phish back in your trousers please.)
Touring expenses are enormous. Living in hotels 200 days out of the year? Not cheap, and you still have morgage/rent payments to make on your primary residence. The venue owners take a massive cut of the gate, and a large part of that goes to their expenses (insurance, union labor, security, etc.).
Touring for the large majority of acts is a break-even proposition at best. The exceptions are the Grateful Dead-like acts that can count on people who are willing to see a dozen of their shows every year and those "top-tier" arena acts (U2, Springsteen, Stones, et. al.) who can charge between $75 and $300 for a single seat. And those dinosaurs still make more from a CD (since they have name recognition and the label's not afraid of spending $1M to promote a low-risk release).
For the rest of the acts on tour, live shows are a means of promoting an album, thus a modest loss is an acceptable cost of doing business. No CD, no tour, unless they can take advantage of the economy of scale afforded by a multi-act tour (like Lollapalooza).
Touring is an extremely inefficient way of reaching listeners. Four to six weeks in the studio can produce a recording that millions will buy (and millions more will hear on the radio). To reach a million concert-goers, a band would have to play 50 nights of sold-out hockey rinks (20,000 seats), which with travel time and days off approaches three months on the road.
As for revenue streams, retail sales aren't the only source of income from a recording. There are royalties from airplay (heard any live cuts on the radio lately?), and from soundtrack and commercial uses. I wonder if you asked "any Slashdotter" what a transcription royalty was or the origin of mechanical royalties whether you'd get a correct (or even coherent) answer.
Finally, here's a quite from Robbie Robertson, late of the band The Band about touring:
Of course, I don't see what goes on here making a damn bit of difference with respect to the Byzantine construct known as the music industry. Any Slashdotter could tell you that much.
k.
"In spite of everything, I still believe that people are really good at heart." - Anne Frank
...and all I got was this lousy t-shirt!
No seriously, I did help create a contract management system for EMI in the early 90's. Biggest piece of shit I ever worked on. No access to the subject matter experts (people who know what it should do), but plenty of "interpretation" from middle management types.
It was made clear to us that the only purpose of record label contracts was to fuck the talent and maximize label profits. Advances on publicity costs for tours to promote the album, holdbacks on royalties until the label had turned a profit, "equalization" so that profits from one album were siphoned off to pay "expenses" incurred for others.
On the other hand, there were stories about how the artists would occasionally score a victory. I think it was Dean Martin, beholden to his label for seven more albums, who showed up, dropped seven albums worth of shit tracks on the desk, and said "Ciao!"
And Christ, don't get me started about the VP who would grab us at the end of the workday and shanghai us to Flash Dancers (Manhattan tittie bar) to force us to charge hundreds on our credit cards which we billed as meal expenses.
Yuck, it's not just the talent who feel like we swam a river of shit for the music industry.
No one tell the RIAA but the real money is in scalping tickets for insane prices on Ebay. There are people making a good amount of money by buying tickets as early as possible on web and turning around to get a premium after tickets are sold out.
I should know I just bought 2 tickets to see a Radiohead concert for $200 bucks on Ebay.
Where the Music Matters
Is this as bad a deal as it appears? Notice that the guy voluntarily signed - in order for him todo that, they had to offer something that he felt was worth signing. Maybe promotional things, perhaps transportation costs, etc.
Hi there, Bob, it's me, Chuck, you know, your RIAA rep? Well, Bob, We at the RIAA would like to offere you a draconian contract to suck a little more blood from the wound, if you know what I mean... How's that sound?
No?
Oh, Bob, I'm sorry to hear that, we'll, I guess we'll just have to go without. Oh yeah, before I forget, there is just one little thing...
Remember that whole "five album deal" we made with you when you signed. Yeah, that one. Yeah, remember how in the fine print, it says you can't work with any other recording company until those deals are done? And remember that clause about how an album can't be released without our approval?
Well, you see Bob, it seems that you've only released three albums so far, so you still owe us two more. Now, the way I see it buddy, You're going to need our approval to get those last two out. Now, I can't speak for the rest of the group, but I like you a lot. However, there are a few of us who are saying.. well, saying that they don't think you've got what it takes to get your last two albums approved.
Yeah? Yeah, that's true, you COULD practice more, but Bob, the thing is, they think you just aren't a team player... I don't think they'd feel you deserve approval even if you were really good. Unless you could show us some of that RIAA team spirit...
Yes, Bob? Oh, no, Bob, without those last two albums, you can't work for ANY label, even your for youself. Nope, can't sing another lyric, legally at least. Ah, we'll I wouldn't advise singing Happy Birthday to your grandmother, see that would be a public performance, and all....
Oh, what's that you say? That draconian contract sounds fine to you after all? Oh, excellent! Oh wait a second, I think the RIAA percentages I quoted you before were off by, say, 20% (darn blurry faxes), but I'll have the revised copy sent to your trailer. Oh, I'm sorry, Bob, the line must be going bad, I could have sworn I heard cursing on the other line... It would be a shame if we had to.. oh, you didn't hear anything you say? Ah, so you agree? Right. 25%. Oh you heard 20%? Ah, that pesky line noise must have interfered... Or did I say 30%? That's a good boy, Bob. Yes you can come over later this afternoon and lick my car clean for me, that would be super.
ciao!