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RIAA Accounting — How Labels Avoid Paying Musicians
An anonymous reader writes "Last week, we discussed Techdirt's tale of 'Hollywood Accounting,' which showed how movies like Harry Potter still officially 'lose' money with some simple accounting tricks. This week Techdirt is taking on RIAA accounting and demonstrating why most musicians — even multi-platinum recording stars — may never see a dime from their album sales. 'They make you a "loan" and then take the first 63% of any dollar you make, get to automatically increase the size of the "loan" by simply adding in all sorts of crazy expenses (did the exec bring in pizza at the recording session? that gets added on), and then tries to get the loan repaid out of what meager pittance they've left for you. Oh, and after all of that, the record label still owns the copyrights.' The average musician on a major record deal 'gets' about $23 per $1,000 made... and that $23 still never gets paid because it has to go to 'recouping' the loan... even though the label is taking $630 out of that $1,000, and not counting it towards the advance. Remember all this the next time a record label says they're trying to protect musicians' revenue."
Reminds me of this horrific classic of how recording artists get ripped off:
http://www.negativland.com/albini.html
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TFA is heavily based on a Courtney Love speech from 10 years ago at http://www.salon.com/technology/feature/2000/06/14/love/print.html . Prettier charts in TFA, though.
That may apply in some cases, but one case I have been following (mainly because I'm a huge fan) is Robert Fripp's multiyear odyssey to get UMG to give him a proper accounting of King Crimson's royalties. He has fairly good evidence that the band has not been properly paid out, but because of the complexity involved due to the mergers and buy-outs and such of publishing companies and the like, whether through maliciousness or incompetence, he and his band have been screwed. What's more, there is some pretty good evidence as far as online sales go that King Crimson has not seen royalties at all, and worse, in many cases, the artists were never even asked, despite a good deal of control over the release of recordings that the Crimson still holds. Fripp tried for some time to get to talk to someone, anyone, in a position of authority who could produce an accounting of earnings and royalties, and finally had to sue UMG, and only now is he finally getting some movement.
The general methodology of UMG, at least, is to delay, obfuscate and obstruct, claiming at times that it can't answer questions from subordinate companies, or forcing artists to deal with individuals who ultimately have no authority to answer or compel someone else to answer the artist's requests. While I suppose it could be colossal incompetence, I posit that the system is purposefully set up to steal money owed to artists.
The same thing has happened over at EMI, where the Beatles have been forced to sue over withheld royalties. I'm assuming every record company and major label probably uses the same tactics to screw over artists.
The world's burning. Moped Jesus spotted on I50. Details at 11.
Absolutely nothing new here.
Steve Albini.
Courtney Love.
Both, I believe, 10+ years old.
Of course you can do all of those things without the RIAA or even a record label. And you can do it a lot cheaper. If you've ever seen an expense sheet from a label trying to justify not paying musicians (I have) you wouldn't believe how much labels claim stuff costs. When you do a tour of 5 college campuses and the label says they paid $20,000 to promote the shows when the only promotion that was done was using free spots on college radio stations and printing a single black and white flyer, you realize you're being screwed.
Further, it is quite possible to work with a record label but not with the RIAA. There is no such thing as a "standard contract" and if a label exec tells you that something in a contract is "standard language" run for the door. There are labels out there that will make all sorts of agreements, including I have learned from direct experience, letting the composer license the music via Creative Commons (which, by the way, is not a free license unless you make it so).
And creating your own label has never been easier or more economical. There has been absolutely no need for big record labels since at least 2003, but they keep going because of inertia and uninformed artists. More and more, the big labels are nothing but factories for wholly-fabricated "artists" like Lady Gaga or the finalists of American Idol. They simply skip over dealing with "artists" by fabricating their own. And this does not only apply to pop trash like Gaga. A lot of what's passing for rock and heavy metal is just Archies-style fabricated groups made up of out-of-work actors who basically lipsync and pretend to play their instruments while backing tracks play in concert.
The big music industry has been in its death throes for some years now. The corporations have already socked away the profits and are only padding their quarterly reports now until the end, when they'll just transition into some other scam. Maybe "internet television".
You are welcome on my lawn.
Moses Avalon is a record company insider who has written some very funny books about the industry:
Million Dollar Mistakes
Confessions of a Record Producer
Secrets of Negotiating a Record Contract (maybe not funny, have not read it)
On his web site he as a royalty calculator that allows you to plug in numbers for a recording contact and see how much the band will make:
http://www.mosesavalon.com/calculate.shtml
It includes standard things in record contracts such as 10% record (CD) breakage and 23% production costs. He gives hints how to maximize the return to the band. At standard record industry contract terms with no advance to the band you have to sell over 3/4 of a million records in order to break even. This assumes the band has already recorded the album. Need an advance to do that, then you have to sell more albums in order to break even. It is fun to play with and the hints are funny and eye-opening. His basic point is that the only money the band is likely to see is the advance. So get as large an advance as possible and spend as little of it as you can.
At one time he had an article about the economics of a record contract and touring to support it and the end result is that for the hours the band worked, they would make the same money flipping burgers at MacDonald's. And this is for a band with a million selling record.
Now I do not know how this translates to itunes sales but I would not be surprised if itunes sales still have a 10% breakage allowance.
Moses is a very funny author to read.
RLH