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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."
We really need a wider adoption of a system like Flattr. We could download music, and still pay the artists (and only them).
That's more possible now, but back in the day, not a chance.... I have friends dying from depression and destitution because the were snookered by some exec, cut an album or two, never got paid, and then sued for no fulfilling the contract otherwise primarily because the couldn't eat, got sick, and to this day owe money to some one for their intellectual property.
I read "Confessions of a Record Producer" where the dude gives you the step-by-step breakdown of where all of the money goes. One of the interesting ones is that the record companies now take out more for every CD pressed than they did for pressing LP's or cassettes, even though it's actually cheaper to make CD's.
He said that, every time he'd be at a cocktail party and someone would find out he's a record producer, they'd always ask "So, if I made an album that went gold, how much money would I get?". He proceeds to go through the cost accounting (which he describes earlier in the book) to arrive at some number like a 4-piece band making a gold record results in each member getting something like $23,000 or something. Don't quit your day job, fellas!
Also, back when Napster was really rolling, and the RIAA was freaking out, I recall reading an article by Janice Ian (a 70's 3-hit wonder) saying that she never got a statement from her record company that didn't say that she owed them money.
If you watch the RIAA's behavior carefully, you'll see that they're not really about attacking "piracy". They're trying to prevent any kind of delivery mechanism which takes them out of the loop... that connects the artist directly with the listener. "Disintermediation" is the big word for it. I recall several years back, there was a website (I forget it's name) where unsigned bands could post their songs as mp3's and they'd tag them with what known bands they thought they sounded like. So, you could go on there and search for "Dead Milkmen" and you could find all of these undiscovered bands who were influenced by them.
...
... and, of course, the RIAA figured out how to sue them into oblivion, even though they weren't really infringing on copyrighted material.
Speaking as a former "artist", who, to be published, had to sign a contract that reminded one of a ransom note or the plans Genghis Khan drew up for the fair treatment of a raised city... I am somewhat familiar with the industry. Our record sold moderately; not great but OK. It earned a few hundred thousand and I have a photocopy of my one royalty check for a whopping Twenty Bucks! Some years later I got the ASCAP rights for one of my songs reassigned to me, because the label had inadvertently let it lapse after 20 years. That search and work cost far more then I ever earned from it. But it was the principle of the thing. I am very happy the Internet is raining on the parade of these ghouls.
- Minutus cantorum, minutus balorum, minutus carborata descendum pantorum.
look at the incentives here:
it gets to the point that you are about to be paid out $10,000
the executive decides to spend $10,000 on marketing - knowing that it will only generate an additional $5000 of sales
however, the $10,000 is fully deductable - so it comes out of your payout.
Of the new $5000, the executive will see 63% - so he is $3150 better off
However your $10,000 payout has been reduced to 13% of the new $5000 sales which is $650
this means that it is almost always in the interest of the exec to piss your cut away on marketing - even if it is obviously ineffectual marketing.
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Donald Passman's All You Need To Know About The Music Business details all this stuff. They can still rip you off, for example, for breakage (because shellac recordings are fragile!). Nothing is simple, and the contracts are intentionally impenetrable. Great, great book for anyone trying to break into the record business, though I suspect its advice may well be very dated at this point.
Dog is my co-pilot.
Bands can't even trust indie labels. They always have to check their contracts and make sure they can get our of it if they have to. One friend's band got in with a manager they liked on an indie label, worked out some good deals, and everything was looking great. The indie label had another band a major label wanted so they just bought out the indie for the one band. My friends band were left with an album finished, already pressed, and sitting in warehouse, but it wasn't worth the big label's time to even talk to the band about selling those pressed disks to them, let alone going ahead and distributing them. So there they were, their best album to date, finished and ready to go, they can't get it, they can't sell it, they can't produce any more of it, and it was even questionable if they could play the songs in concert because rights were now tied up by a company that would rather just kill it rather than deal with it.
More and more, the big labels are nothing but factories for wholly-fabricated "artists" like Lady Gaga or the finalists of American Idol.
How exactly was Lady Gaga "wholly-fabricated" by big labels? Unlike many other pop stars, she writes all of her own songs and, by most accounts, earned her success through the merit of own performance. She admits that her music is pop but challenges the idea that there's anything wrong with that. Before signing with the behemoth Interscope, she signed with the small, no-name label created by Akon. Sure, her music sounds like it was made in an electronic pop-factory but that doesn't necessarily reflect on her personally.
And as for American Idol, that's the whole point. It's a show about taking someone out of complete obscurity and making them a star, and people love it. There's no skulduggery going on here...it's a case of people asking the industry to fabricate a star for them and then getting exactly what they asked for.