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RIAA Math: Sell 1 Million Albums, Still Owe $500k
An anonymous reader writes "For all the complaints from the RIAA about 'pirates,' who are the real pirates in this scenario? Through a variety of contractual tricks, it's nearly impossible for artists signed to major labels to get paid. The article and video detail how an artist who thinks he's getting a 10% royalty is actually getting closer to 2.5% through various tricks placed in the contract. The labels, then, end up with 97.5% of the gross revenue, and anything they 'spend' on the artist continues to come out of the royalties, not the labels' cut."
This is why I say fuck the MAFIAA.
-uso.
What you hear in the ear, preach from the rooftop Matthew 10.27b
With the ability to distribute online so easily these days, I don't know why artists even bother with major labels anymore. I'm sure with a little investment even the smallest artist can attain a decent marketing campaign. Word of mouth and social networks are a wealth of free publicity as well.
The RIAA is not fully to blame here. If I don't like a work contract I get it changed or walk away. If someone is too eager to be famous to take the time and negotiate I can hardly feel sorry for them.
UNIX/Linux Consulting
This is all the more reason to buy used CD's when possible. Since the artist wasn't going to get their money anyway, you might as well ensure that the label also goes without.
This stuff has been known for a long time
http://www.negativland.com/albini.html Major labels have always screwed their artists, which is why I've always attempted to go it alone - even though I've so far been fairly unsuccessful, that's still better than going with the majors.
Listen to my latest album here
I won't let them touch my music.
It ain't just for Hollywood.
Finally had enough. Come see us over at https://soylentnews.org/
- things that many musicians simply won't know about or understand when they sign their contract.
Years ago, and I don't remember where, Roth said something to the affect of: "You've been a poor and struggling musician all this time. Don't sign the first contract that the record company puts in front of you. Hold out."
These days with these "360" contracts where the artist also has to pay the record company a chunk of their touring and merchandise revenue, they're totally screwing themselves. Lady Gaga has one of those contracts and that's why a few months ago she was complaining about her finances. It wasn't so much her spending habits as it was her shit deal she cut.
This is one of those times where a lawyer who specializes in your business is worth his money.
Most of us are happy to pay artists who have done good work. Very few of of are happy to pay thieves. Those labels are the very reason that so many people happily copy movies and music.
I really do think that everyone (probably inlcuding the labels) would do better if there was more decency and respect in the business, as much more people would be willing to pay for products if the money went where it was well deserved.
When dealing with greedy people be prepared to be bent over a table and f***ed. Or don't deal with them at all.
THE SOFTWARE, IT NO WORKY!!!
So there appears to be no reason to sign with the RIAA now that small artists are able to quickly make a profit by being independent.
The accounting should become as public as possible so that anyone who retains a lawyer to sign the RIAA contract should be advised by their lawyer not to sign the contract. If despite the public information the lawyer stills says sign then you get "paid" out of the lawyers insurance as the lawyer was not acting in your interests.
http://www.negativland.com/albini.html this is an older article but still remains the definitive word on recording industry practices.
Between the 1930s and 1960s the major labels also were money laundering companies for the US mob, guess nothing has changed.
Hollywood's been doing this for years, they call it Hollywood Accounting. For instance, Rain Man, Who Framed Roger Rabbit, Batman (1988), and Forrest Gump all lost money on paper, despite the fact that they took in HUGE amounts of money at the box office.
Why it's allowed, I have no idea. Just another sign of corruption in our regulatory bodies and government...
Rapmasta F-U the lunchbox, Rapmasta F-U the colouring book, Rapmasta F-U the flamethrower.
Well, t-shirt sales at concerts anyway, books, movie rights, that jazz. If you're too dumb to know that before you take an "advance" from a label, then you're going to get ripped off by a 419 scam sooner or later anyway.
If you were blocking sigs, you wouldn't have to read this.
I really hate stories that moan "publishers are evil, they take your advance out of your royalties"!
There's a reason they're called "advances". You're getting advanced on (potential) future earnings, why is this scandalous?
Music publishers make a killing out of CD sales at the expense of the artist. This has always been true. That's not the only way artists get money though.
However they also get you on the radio where there's a straight 50:50 split of the royalties between the writers and the studio for the song. Then there are the concerts where artists make the huge amounts of money. Without publishers promoting you, you stand little chance little chance of getting a venue with a 5 figure capacity.
Had the artist hired an attorney to review the contract, their attorney would have informed them that they would have screwed.
The labels aren't in the business for the love of music -- they are in it to make money.
As a practical matter, it is difficult to help ignorant people. Since they are ignorant, they don't know need they need help on the business side (e.g., somebody experienced in these matters). FYI -- because your buddy's friend was an assistant manager at a KFC doesn't make him a good business manager for your band.
Finally, when you deal with the devil, expect to get burned.
is actually getting closer to 2.5% through various tricks placed in the contract
Of course- this is just one of the reason they have armies of lawyers. And they also lobby to not give you a chance to go elsewhere. Unfortunately as far as I can tell, this has been the norm for all things publishing; also applies to book authors, not just music artists. And this "artist==poor as f**k" common perception further encourages an "2.5% nets more than I could do on my own" attitude.
If the system ever works, and these corporate asswipes start being taxed the hell out of (as they should, but they are not) then maybe they will replace their lawyers with accountants and their attention will be focused elsewhere.
The three laws of thermodynamics:(1) You can't win. (2) You can't break even. (3) You can't even quit.
I've worked as an IT professional on an royalt processing system for the 3 of the biggest labels. The project failed because the royalty processing algorithms needed are so convoluted and the backlog of unprocessed royalties so large that you would need supercomputer level processing to get through it. Fact #1: Royalty processing systems of today are 25 years old, based on midframe/mainframe technology and would take 3 months to process the monthend of all their artists. What does that mean? They selectively choose what artists they calculate royalties for (read new artists) and shunt the others to their backlog of billions of unpaid royalties. Fact #2: Current system is album based, even a per song sale requires an album in their system, this adds to the complexity. Fact #3: Because they've already collected money for royalty but not processed the artist portion, they are sitting with billions and billions of unpaid royalties...A lot of artists have to sue their own labels for their royalties and the ARTISTS have to prove the royalties were owing. Only then will the label get off its ass, do an emergency processing of royalties for that artist and then pay it out.
unfortunately it's rare to actually be able to contact the artist and then have a means to pay him without one of the dinosaurs taking all the money.
Digital distribution is easy. The biggest problem I have seen is the artists' inability to treat it like a business venture. Therein lies the real problem.
...but how much exposure and success (in the recogition sense - also important) would they get without the labels?
How many indie labels get their work out to a mass market audience? I know we can all quote a few, but really widespread? Major labels are the only way to go.
It't not like piracy makes this better...piracy makes the labels even more paranoid and they take even bigger cuts from the artists because they are afraid of the days when no one pays for music.
This is why you sign with major record labels. Sign up, or your shit won't get played. Low exposure = slow death = do you want fries with that?
Don't believe me? Google Clear Channel Communications. They are the single largest owner of radio stations in the country. Chances are, your favorite radio station is owned by them and guess what? They don't play indie music - or if they do, it's at 2am when nobody is listening.
Your comment is based on the false assumption that the music business is about selling music. Since the artists provide the music, they are entitled to the lion's share of the profits.
In reality, the music business is more of a chump matching service. The music companies match up chumps who are willing to pay for music with chumps who are willing to sign away their rights to music. Since the music companies provide the chumps, they are entitled to the lion's share of the profits.
http://xkcd.com/756//
The record companies have been screwing all but their very biggest artists for decades. Even some of the most well respected of record companies and producers did it.
I would surely send them a donation per each album I have on my iPod collection. I guess artists would end up richer than what they are today, so they can continue bringing more good music to me, and these scumbag dogs from MAFIAA can die alone.
but it also delves into some of the sneakier aspects of record label contracts with musicians -- things that many musicians simply won't know about or understand when they sign their contract.
Musicians are musicians, not lawyers. I'm pretty sure they have to hire someone to read these things and explain them to them. Let's face it, people DO get famous and rich even by signing with the RIAA. No, I think the RIAA is to blame here. Just because someone gets conned doesn't mean they deserve it.
My beliefs do not require that you agree with them.
Reminds me of the drama doc "Story of Anvil" I saw a little while ago. Back in the early eighties, this band was pretty big in heavy metal circles. Then they had almost three decades of utterly horrible management. The film shows the struggles of the band to win back their reputation and achieve some degree of success, however late it came in their career.
Kinda moving to see these old geezers still believing in the lifestyle they had when they were 20 years old. But also, in my opinion, really disheartening to see them try so hard to get signed again to a traditional brick and mortar record company. I wanted to slap the old dudes across the screen and yell at them to wake up and smell the coffee. You see them self-producing their album, writing, playing and recording everything just like they wanted and then... going round to every record label office to get it distributed. Hello ? Sell it on the internet ?
I read a very good book called "Confessions of A Record Producer" by Moses Avalon.
This book breaks down and explains the contracts involved in music production. It is quite informative. It left me with the clear impression that the labels are incredibly greedy and rapacious, but so are the producers and the artists. The only difference is that the labels have all the bargaining power.
they need all that extra cash to keep bribing and pandering off politicians and laws and hiring scum sucking lawyers.
How do you get out of a provably abusive contract?
So many of the "INDIE" labels are derivatives of major labels.
Beware.
If you have talent, the Internet has made the RIAA and MPIAA companies irrelevent.
With a little effort, and if you're not good at it, that effort may mean finding a friend to be your promoter, you can make your own way by starting to peddle your warez on the Internet.
Now the problem with it is, you have to actually have talent. When you go for the *IAAs, they can/will use technology to make you not suck if you have a pretty face, you'll have to do it on your own with out them.
Its not hard for an artist to get a bigger cut, it just takes more work. Unfortunatly, most 'artists' would rather whine about their suffering than put the effort into going it alone. And for most of them its much smarter to do so as most don't have actual talent once you take makeup and autotune out of the picture.
Persistent Volume manager for Kubernetes - https://github.com/dwimsey/openshift-pvmanager
The last piece of music I bought was a "Bushfire Aid" CD and I bought that because I knew the money was going to the bushfire victims (via the Salvation Army bushfire appeal) and not the greedy record company people.
Great way to support a worthy cause AND get some cool songs from some artists I like at the same time (genuine artists, not trussed up "pop stars" like that guy who seems to make more endorsing skincare products than actually making music...)
Does this mean that it is unethical to pay for music?
They're criminals and parasites and should be treated as such. Their tactics, their war against P2P, the censored and ad-laden radio paradigm being focused on while trying to sue MP3 player manufacturers into oblivion, etc... put them at odds with most of us. It was a declaration of war, so our side took up Letters of Marque and started running boycotts and embargoes. I still buy CDs... directly from indie artists selling them for around 50% or more profit. I still buy concert tickets and merch. I haven't bought an RIAA pressed CD in well over a decade now. I haven't listened to the radio willingly in around the same timeframe. I don't support terrorism. My favorite kind of music as a child was sample-heavy rap... guess what they destroyed? Now my favorite genre is completely illegal: mashups. But it's all good... at some point soon, thankfully due to articles like this, and technology replacing the utility of RIAA "services" across the board, they will fall, because the more anyone knows about them, the quicker they turn away. The only thing I've missed out on is knowing who the Top 40 overplayed band of the week is... and whenever I do find out, I'm glad I missed it. :-)
That is *the* classic article on the subject, and it includes the answer to "If the contract is so bad, why would anyone sign it?", namely:
These A & R guys are not allowed to write contracts. What they do is present the band with a letter of intent, or "deal memo," which loosely states some terms, and affirms that the band will sign with the label once a contract has been agreed on. The spookiest thing about this harmless sounding little memo, is that it is, for all legal purposes, a binding document. That is, once the band signs it, they are under obligation to conclude a deal with the label. If the label presents them with a contract that the band don't want to sign, all the label has to do is wait. There are a hundred other bands willing to sign the exact same contract, so the label is in a position of strength. These letters never have any terms of expiration, so the band remain bound by the deal memo until a contract is signed, no matter how long that takes. The band cannot sign to another label or even put out its own material unless they are released from their agreement, which never happens. Make no mistake about it: once a band has signed a letter of intent, they will either eventually sign a contract that suits the label or they will be destroyed.
I do not work on the recording industry but on the film industry. On film there are many similarities with contracts.
Yet, lawyers from the big studios DO NOT EXPECT YOU TO EVER SIGN a contract. They think you would be too stupid by doing so and signing the "standard contract".
They know the standard contract is a low ball on the artist, and they know that anyone with the head on their necks would not sign, yet, once the artist have come to the point to sign, the studio lawyers are NOT authorized to back down and not sign a contract no matter what.
So the customary practice is for you to get the "standard contract", not sign it, and pass it on to you entertainment attorney, who knows all the small details of contracts like this, and who on your behalf negotiates a contract with the studio.
That negotiation can take six months.
Eventually the studio comes up with a contract that meets the terms of your lawyer, and of you... then you sign.
I bet is the same with the recording industry.
Want to fight piracy, pay your artists. I've know this for years, used to play WoW with a singer for a band that averaged around 300,000 albums sells per release. He told me about 75% of his income was t-shirt sales at the venue, 20% earnings for playing on tour and less than 5% were CD/Online sales; on a good year he'd make low 6 figures. If you want to support record studios, the RIAA and media companies by all means go out and buy every CD you can afford. If you want to support the artist, steal the CD and go to a concert; buy a shirt while your there. The artist is likely to make more off that shirt sale then if you bought their entire discography. CD releases are a promotional tool, only the biggest artists make any real money off them but the studios clean up regardless. Listen free on youtube, pandora or one of the other free options and go to concerts, buy an overprices t-shirt or two and you will be doing more to support an artist then anyone sitting around listening to their iPod or CD player. This analogy works for movies as well, like an actor see their movie in the theater when they get their biggest cut. Want to support MGM, Sony, ect... buy the DVD or Blueray. This the reason the production companys are in such an uproar over piracy, they are losing their share while crying save the artists.
Not that I would ever come down on the side of the RIAA, but this issue isn't as simple as it seems.
Keep in mind, when the record company signs a band, the contract the band signs states that the band will pay for the recording and other upfront costs. In exchange, the record company will pay them an advance and issue them what accounts basically to an interest free loan (which the band never has to pay back if enough copies don't sell). The record company handles all of the marketing, sale, and distribution of the product and the band will get a small royalty percentage which gets applied toward the loan.
Of course, the record company is in the black on the deal long before the band has recouped the costs, but technically, the band is in the black from the moment it signs. Since the marketing of the CD (and therefore the band) is at the record company's expense, a popular band that tours frequently will be able to do quite well, and the royalty payment from the record company if and when the costs are recouped, would just be a bonus.
As far as all of that goes, I have no issue with the RIAA's side of things. That's all a simple, straightforward contract, and a band that is actually good will benefit from the arrangement. However, the RIAA are still vultures in many other respects, the least of which involves locking bands into a contract for multiple albums, and of course, the abuse of the legal system with regards to suing their own customers.
As it stands, the average band has a lot more options available to it today than it did in the past. Marketing and distribution, which are about the only things the record company are really useful for, can now be accomplished very well via the Internet. If a band is able to afford their own recording studio time (which can likely be done at a significant discount from what the average record company would charge for that service), they could avoid the whole record company fiasco and possibly make more in royalties in the long run, even if they sell far fewer copies. Still, that's a choice for the band to make, and if the proverbial teenage rockstar wannabe wants to follow his stereotypical dream of getting signed by a record company to chase the future possibilities of being a coked out celebrity hasbeen before he's 30, well, lets not lay all of the blame at the feet of RIAA.
-Restil
Play with my webcams and lights here
Yeah but this MafiAA is just a form of market bringing together various buyers and sellers. It is no different than markets such as eBay, Amazon, Apple iTune store. There is nothing prevent you from creating your own MafiAA but good luck getting others to participate in your market. Just remember there are 500,000 "artists" out there trying to compete for the same venues and studios. (And imagine in a world where there are only 10 people wanting to be the artist, who will rule?)
If you are an artist, a better strategy is try to get popular and famous, very famous, with as little resources as possible, i.e. grow like a cancer, then if you outcompete other cancer cells and end up on top, you will rule and the MafiAA will give in to whatever demand you have. Because if you are popular and famous, you are the market on your own and MafiAA needs you to attract people to pay and visit their venues.
It is a cruel world out there!
I thought the deal with record companies was that they paid for things up-front -- i.e. an "Advance". The article seems to confirm this when it says, "but if the advance is $1 million... the band still technically "owes" $500,000"". So, in most cases, the label is setting up the contract so the artist won't get paid any royalties, but they band still have the Advance money to keep (and they don't have to pay back the money they "owe", which is why the word is in quotes) and the record company is paying for promotion in various forms. This also means that if a band flops (earning, say, $100,000 in sales), and the record companies paid an advance of $200,000 and another $200,000 in promotion, then the record company eats that $300,000 loss. According to a recent article written by OK-GO, that's the value of record companies - they're funding a lot of bands to try to make them famous, even though 95% of them will flop.
Have you seen the quality of the artists on major record labels? They aren't famous because they're talented musicians, they're famous because the record company made it happen. The record company provides the hype, the song writing, the interviews, the concerts, the costumes, maybe even the scandals. You just show up and look pretty. They should be glad they're making any money at all.
People want to badly to score that record deal or acting contract that they don't care how badly they are getting raped. If the movie industry would go on strike or the artists would band together and attack the RIAA over owed wages perhaps we could get somewhere. Instead the RIAA will sue the most trivial people for the most ridiculous amounts because they are greedy. In addition the only people with enough balls to strike over wages are sports athletes would are the least deserving. I like sports as much as the next but to argue that the 5 million plus contract you have is not enough that is just petty. They need to teach money management to the rich and pride to the the rest so they can stand up for what they are due. Both sides screw the fans.
You must have missed the episode when the band bests the devil and his contract for their souls due to their long experience with a far greater evil: record companies.
But I was never offered a contract. But then again I never sought one! From very early in my music 'career' if I can call it that, I wanted to have complete creative freedom and never expected to make any money. Well, these days I do make just a little money (thanks to the internet) and can still do whatever I want musically. This is still gratifying and fulfilling for me but others might have given up in the same situation. It is all a matter of what you want from it. So I don't make a living from it. But I get fulfillment and perhaps more importantly I have met a number of really good people over the years through my creative efforts. Can't beat that! See sig if you want to check out my commercial releases, jams, free tracks etc.
http://www.acetonestudio.com
It's so easy for us to sit here and think we wouldn't do the same thing, but lets face it we would. Being famous, girls, parties, cry me a river. If they didn't want to go that route, the band would be sitting through a trade school learning to be America's next Top nurse. The labels can do what they want because all of us want to be famous, and when you wave that carrot in front of our faces, we'll pull the cart until we're cast to the side because no one cares about us anymore.
Stop linking to techdirt. TD is an irreputable news source (it tarnishes the concept of "news"). Thanks.
Often wrong but never in doubt.
I am Jack9.
Everyone knows me.
It was plain when Napster ended that the record companies wanted a war with consumers. I refuse to finance their war, and haven't bought a single piece of music since then.
http://www.wired.com/entertainment/music/magazine/16-01/ff_byrne?currentPage=all
Very interesting stuff. David is a very smart guy and has been there and done that in the music biz, from all sides of the equation. He interviews several folks in the industry as well.
Palaces, barricades, threats, meet promises
Technology is an amplifier, so what is happening in music will eventually happen in many other paid professions as technology (including robotics, AI, and evolutionary design tools) allows fewer people to do more and more.
My thoughts on how our economy might change:
"Five Interwoven Economies: Subsistence, Gift, Exchange, Planned, and Theft "
http://www.youtube.com/watch?v=4vK-M_e0JoY
A 21st century issue: the irony of technologies of abundance in the hands of those still thinking in terms of scarcity.
That's exactly as it should be, as the vast majority of "music" sales aren't due to anything about the "artist's" unique talent, but due to the fact that consumers mostly buy whatever packaged and promoted sound/image the producers feed them. So the producers rake in the profits for their ideas. And the A-list wannabee musicians pay for their PR, rather than vice versa.
There's lots of good new music, just as good as the stuff that the *IAA promotes, hidden on indy sites, but almost nobody buys it. So there's really no money to be made in good music these days, only in good promotion/advertising using some "musicians" fronting as scripted personalities, video actors, and dancers.
I watched the video, saw all the charges racking up. They're arbitrary right enough, but it's not to say that there's no underlying basis to support what the artist actually gets. I'm kinda playing devil's advocate here, I really dislike and distrust the labels but at the same time the arguments made here have major flaws.
Firstly, the royalty being on wholesale rather than retail is totally fair and logical. Almost nobody in any industry is paid based on the retail price apart from retailers. Neither the artist nor the label has, or at least should have, any control or even ability to monitor the retail price - you absolutely do not want to have your royalty based on retail price on a product that has basically no per-unit cost, I'll run through an example at the end *1.
Sure, if labels are telling prospective artists the headline "10%" royalty and not mentioning the deductions, this is misrepresentation. The explanation of the charges also appears to be a fabrication, there's various guesstimate deductions, mostly for things that the label is supposed to be taking the risk on and (if we believe this guy's figures) clearly what really happens is the artists gets an effective 5% royalty. But lets not pretend that if laws were enacted and labels had to only pay a royalty, no deductions allowed, the money you make is not going to change, you'll just be told the 5%.
So moving onto the question as to whether the 5% is fair? No idea. Seeing as labels' are claiming big losses in the financial statements, there's basis to presume 5% is fair but I'd need to spend a lot of time with a very detailed look at a few label's accounting records to form a view on that.
A couple of other annoyances with the video. I dislike their own sleight of hand with the $300k artist advance. It's presented in a manner to allow the viewer to believe that the artist actually makes a $500k loss. Even if the figures are right, he still got $300k at the start so even if he did have to repay that $500k the loss would be $200k.
Anyway, while I don't wish to imply certainty, my understanding is that $500k is non-recursive. It's not a loan, it's a charge applied against future royalties only. If all your next albums flop the label writes it off. Most of that huge chunk of the revenue that goes to them from successful artists pays up the losses incurred on the unsuccessful ones.
Even if you did have to repay that $500k, losses are things that can happen when you go into business. When you start getting paid based solely on sales and costs then fundamentally you're in business. Businesses with a turnover of $1m can rightly be expected to get advice from lawyers and accountants. When you can get big rewards from commercial success you take on some risk too. What, you think you just have to work hard and develop your talent and then the world owes you riches? Sorry, world doesn't work like that. The vast majority of everybody who have made a lot of money through commercial success (musicians, actors, sportsmen, businessmen, anyone) either are extremely savvy at the business side or have someone loyal who is.
If you don't want to take on the risk of losses, sign over your royalties and sign an employment contract instead. Sure, if you're really successful you'll make a lot less, but then if you don't work out you still made a bit. That's the breaks, risks & rewards and all that.
____________
*1 consider what happens when royalties are based on retail price. Lets pretend currently a retail store pays $10 for a CD and this comprises $1 in unit variable cost plus $1 royalty to you plus $8 contribution for the label. The store can do what it wants to the price but you get $1 and the label makes $8 contribution. Sell 0.5m records in Store A + 0.5m in Store B for total 1m units = $20m retail sales which is $10m wholesale sales and you (kind of) get $1m. Store A and B each made $5m contribution.
Should Store A decide to reduce the price to $11, B's customers flock over and if sales units remain at 1m you s
We should force the industry to be legally required to include the lyrics to "Have A Cigar" in the contract and the artist must read and sign acknowledging that they have read those lyrics.
If you are not allowed to question your government then the government has answered your question.
>>"- The MafiAA control the vast, vast majority of sound studios. Want to rent time and the equipment to record your album? Their >>response will be "fuck you, you're not under contract, get lost till someone signs you."
Lol whut? Studio time costs way more than most sandwich artists have. More like get lost until you come up with that $5k per track.
"if you don't like them then find something you do agree with and support that."
Just sent a 50.00 check to GTK-Gnutella.
Boy do I feel better. Thanks
so naive ;). Seriously, didn't you notice when the RIAA took out MP3.com like a tonne of bricks? Did you know that, shortly after the RIAA took over MP3.com, several of the bands that were successful without a record contract had their MP3.com accounts suspended w/o explanation (I don't mean without a good reason, I mean they got a letter saying thank you and good by with no reason).
The RIAA wants, and has, control over the CULTURE of music in America. They want to make sure every tune you listen to filters through them. They're also terrified of the industry balkanizing. One Britney Sprears album sold 10 mil times is super profitable, but if there's 20 Britneys to choose from you're marginal costs start to suck.
And BTW, why the hell does the world have to just suck for everyone but the top 1% anyway?
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