RIAA Accounting: Why Even Major Label Musicians Rarely Make Money From Album Sales

from the going-behind-the-veil dept

We recently had a fun post about Hollywood accounting, about how the movie industry makes sure even big hit movies "lose money" on paper. So how about the recording industry? Well, they're pretty famous for doing something quite similar. Reader Jay pointed out in the comments an article from The Root that goes through who gets paid what for music sales, and the basic answer is not the musician. That report suggests that for every $1,000 sold, the average musician gets $23.40. Here's the chart that the article shows, though you should read the whole article for all of the details:

Source: TheRoot.com

Of course, it's actually even more ridiculous than this report makes it out to be. Going back ten years ago, Courtney Love famously laid out the details of recording economics, where the label can make $11 million... and the actual artists make absolutely nothing. It starts off with a band getting a massive $1 million advance, and then you follow the money:
What happens to that million dollars?

They spend half a million to record their album. That leaves the band with $500,000. They pay $100,000 to their manager for 20 percent commission. They pay $25,000 each to their lawyer and business manager.

That leaves $350,000 for the four band members to split. After $170,000 in taxes, there's $180,000 left. That comes out to $45,000 per person.

That's $45,000 to live on for a year until the record gets released.

The record is a big hit and sells a million copies. (How a bidding-war band sells a million copies of its debut record is another rant entirely, but it's based on any basic civics-class knowledge that any of us have about cartels. Put simply, the antitrust laws in this country are basically a joke, protecting us just enough to not have to re-name our park service the Phillip Morris National Park Service.)

So, this band releases two singles and makes two videos. The two videos cost a million dollars to make and 50 percent of the video production costs are recouped out of the band's royalties.

The band gets $200,000 in tour support, which is 100 percent recoupable.

The record company spends $300,000 on independent radio promotion. You have to pay independent promotion to get your song on the radio; independent promotion is a system where the record companies use middlemen so they can pretend not to know that radio stations -- the unified broadcast system -- are getting paid to play their records.

All of those independent promotion costs are charged to the band.

Since the original million-dollar advance is also recoupable, the band owes $2 million to the record company.

If all of the million records are sold at full price with no discounts or record clubs, the band earns $2 million in royalties, since their 20 percent royalty works out to $2 a record.

Two million dollars in royalties minus $2 million in recoupable expenses equals ... zero!

How much does the record company make?

They grossed $11 million.

It costs $500,000 to manufacture the CDs and they advanced the band $1 million. Plus there were $1 million in video costs, $300,000 in radio promotion and $200,000 in tour support.

The company also paid $750,000 in music publishing royalties.

They spent $2.2 million on marketing. That's mostly retail advertising, but marketing also pays for those huge posters of Marilyn Manson in Times Square and the street scouts who drive around in vans handing out black Korn T-shirts and backwards baseball caps. Not to mention trips to Scores and cash for tips for all and sundry.

Add it up and the record company has spent about $4.4 million.

So their profit is $6.6 million; the band may as well be working at a 7-Eleven.
And that explains why huge megastars like Lyle Lovett have pointed out that he sold 4.6 million records and never made a dime from album sales. It's why the band 30 Seconds to Mars went platinum and sold 2 million records and never made a dime from album sales. You hear these stories quite often.

And note that those are bands that are hugely, massively popular. How about those that just do okay? Remember last year, when Tim Quirk of the band Too Much Joy revealed how Warner Music made a ton of money of of the band's albums, but simply refuses to accurately account for royalties owed, because the band is considered unrecoupable. Sometimes the numbers even go in reverse. If you don't understand RIAA accounting, you might think that if a band hasn't "recouped" its advance, it means that the record labels lost money. Not so in many cases. Quirk explained the neat accounting trick in a footnote to his post about his own royalty statement:
A word here about that unrecouped balance, for those uninitiated in the complex mechanics of major label accounting. While our royalty statement shows Too Much Joy in the red with Warner Bros. (now by only $395,214.71 after that $62.47 digital windfall), this doesn't mean Warner "lost" nearly $400,000 on the band. That's how much they spent on us, and we don't see any royalty checks until it's paid back, but it doesn't get paid back out of the full price of every album sold. It gets paid back out of the band's share of every album sold, which is roughly 10% of the retail price. So, using round numbers to make the math as easy as possible to understand, let's say Warner Bros. spent something like $450,000 total on TMJ. If Warner sold 15,000 copies of each of the three TMJ records they released at a wholesale price of $10 each, they would have earned back the $450,000. But if those records were retailing for $15, TMJ would have only paid back $67,500, and our statement would show an unrecouped balance of $382,500.

I do not share this information out of a Steve Albini-esque desire to rail against the major label system (he already wrote the definitive rant, which you can find here if you want even more figures, and enjoy having those figures bracketed with cursing and insults). I'm simply explaining why I'm not embarrassed that I "owe" Warner Bros. almost $400,000. They didn't make a lot of money off of Too Much Joy. But they didn't lose any, either. So whenever you hear some label flak claiming 98% of the bands they sign lose money for the company, substitute the phrase "just don't earn enough" for the word "lose."
So, back to our original example of the average musician only earning $23.40 for every $1,000 sold. That money has to go back towards "recouping" the advance, even though the label is still straight up cashing 63% of every sale, which does not go towards making up the advance. The math here gets ridiculous pretty quickly when you start to think about it. These record label deals are basically out and out scams. In a traditional loan, you invest the money and pay back out of your proceeds. But a record label deal is nothing like that at all. 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. That's one of the most lopsided business deals ever.

So think of that the next time the RIAA or some major record label exec (or politician) suggests that protecting the record labels is somehow in the musicians' best interests. And then, take a look at the models that some musicians have adopted by going around the major label system. They may not gross as much without the major record label marketing push behind them, but they're netting a whole lot more, and as any business person will tell you (except if that business person is a major label A&R guy trying to sign you to a deal), the net amount is all that matters.


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    Tom The Toe, Jul 13th, 2010 @ 9:29am

    Not Making Money

    Which is why more and more major artists are going independent and working out their own distribution and manufacturing deals. Even a low end independent can get his or her cd's manufactured for around $1.25 each and do the i-tunes, Amazon, Best Buy distribution themselves. The marketing is getting out and touring and cwf+rtb.

     

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      Jon Mitchell, Jul 15th, 2010 @ 3:45am

      Re: Not Making Money

      and thats exactly what ive been doing

       

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      Rik R, Jan 11th, 2011 @ 8:11pm

      Re: Not Making Money

      Hello CPA's and band leaders. I'm doing taxes and have a question. I pay for the hotel rooms, airline tickets, van rentals, baggage and tips on the road. Do I take them as a deduction or do I have to split them up among the band members and count as individual income?

       

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    Joel (profile), Jul 13th, 2010 @ 9:31am

    Can't believe this...

    I'm dumbfounded, I didn't know this is how it worked...total scam. Hope lots of artist are in it for the love of the art and not for the money, it looks like it is not worth it.

     

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      eclecticdave (profile), Jul 13th, 2010 @ 11:23am

      Re: Can't believe this...

      Unfortunately I strongly suspect too many people see the words $1MILLION DOLLAR CONTRACT!!! and fall over themselves in the rush to sign on the dotted line - and don't find out they've been scammed until much, much later.

       

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        SonicTribe, Jul 23rd, 2010 @ 12:38pm

        Re: Re: Can't believe this...

        eclecticdave - You make a great point about the "$1MILLION DOLLAR CONTRACT!!! being, at times, the only focus for some musicians. I can't tell you how many really good bands we've heard from that are absolutely positive their only route to success is through the doors and marketing of a major label. It is near impossible to discuss numbers or provide cautionary suggestions once that hook has been set. It is horrible to receive those types of emails/have those conversations. To that regard, there should be many, many more articles on this exact topic. GREAT POST!!

        Additionally, we've been looking into how the majors are quietly taking over independent distribution channels. Has anyone else seen posts on this topic? This is going to be a very big problem. For you history buffs see Latin American and the railroad industry.

        Cheers,
        Chris

         

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      Xurbatronic, Jul 14th, 2010 @ 6:18am

      Re: Can't believe this...

      Joel, I'm not picking on your comment to have a go at you, but loving music and creating it for the right reasons doesn't mean that you don't mind not getting paid. I hate it when I work for nothing, or get ripped off for royalties (which has happened to most musicians along the way at some point). It really affects a person's well being to not have any financial or social mobility, and whilst music is a wonderful outlet for frustrations of many kinds, it does not assuage the feelings of despair that prolonged poverty can cause a person. You are quite right about the situation, it is a total scam, but it will probably carry on forever! There will always be people taking the proceeds from others hard work, and leaving them nothing, because there is a moral bankruptcy which seems to be the backbone of the music industry's modus operandi. You are better off selling your music independently, but this brings its own problems, not least of which is being able to advertise and distribute your work effectively. Major labels are able to promote your work, but you will probably see nothing back as demonstrated in the article, they will do O.K out of it though! Independently, you can make your music available, just like many thousands of other people, so how do you find your market amidst such a proliferation of music? The answer is, unfortunately, with great difficulty!

       

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      Tom, Nov 5th, 2010 @ 9:13am

      Re: Can't believe this...

      It's pretty much not worth it at all. But, at least for me, being able to tour around the world sharing my music with other people would be the best career ever. And also there is the option to be an independent musician. People who want to be musicians just for the money need to do some research.

       

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      phildafunk, Oct 17th, 2011 @ 9:50am

      Re: Can't believe this...

      i'm in it for the love of music

       

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      Anonymous Coward, Mar 7th, 2012 @ 6:40pm

      Re: Can't believe this...

      WELL, if the band or artists are being provided for in the first place and the label is making back the $$$$$$$$$$, how could you think its a scam? IF someone loaned you money, does that mean you should never pay it back. Paybacks are a b****, huh?

       

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      omg maziin, Apr 8th, 2014 @ 12:23pm

      Re: Can't believe this...

      So accurately said,the major label mainly benefits itself.as an indie artist your paid all way around the board from publishing,cd sales,an shows,online sales,ect.it's just the fact that you have to be a workhorse,tours traveling,other expenses an time,just is real expensive for the artist,but worthwhile.i know because im in this process.

       

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    Tor (profile), Jul 13th, 2010 @ 9:40am

    Here's another interesting article I ran into yesterday on the same subject, although about Hollywood accounting:
    STUDIO SHAME! Even Harry Potter Pic Loses Money Because Of Warner Bros' Phony Baloney Net Profit Accounting

     

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    Simon, Jul 13th, 2010 @ 9:41am

    But stronger DRM laws will fix this, right?

     

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      Anonymous Coward, Jul 13th, 2010 @ 9:49am

      Re:

      ACTA will fix everything (for legacy corporations).

       

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      Anonymous Coward, Jul 13th, 2010 @ 9:50am

      Re:

      Yes. It's all those pirate's fault the artists make no money. We also need much stronger copyright laws to fix that. That way record label...uh...I mean, the artist can make more money.

       

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        Marco Tikkanen, Jul 15th, 2010 @ 12:51pm

        Re: Re:

        no it's not the pirates. it's the labels who screw the consumers with a too high price tag.

         

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        Anonymous, Jan 15th, 2011 @ 1:35pm

        Re: Re:

        No, but it is the pirates fault there is no POSSIBILITY they will get paid. At least with a recording contract and a legal market, there is a reasonable ability for the artist to get paid. With piracy, there is ZERO. Do your own moral math though I suppose.

         

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    John Doe, Jul 13th, 2010 @ 9:47am

    I don't feel sorry for the bands...

    It is hard to feel sorry for the bands, they get themselves into this. They sell their soul for fame and fortune and maybe get fame. Today, they have so many more options available that they have no excuse if they sign deals like this.

    Great post by the way, really makes me feel like pirating is really only stealing from thieves which probably isn't even a crime is it?

     

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      jupiterkansas (profile), Jul 13th, 2010 @ 10:17am

      Re: I don't feel sorry for the bands...

      Except not too long ago the ONLY way to gain fame was to go through this system. There are more options now, but this is still the norm.

       

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        fogbugzd (profile), Jul 13th, 2010 @ 11:49am

        Re: Re: I don't feel sorry for the bands...

        The industry mouthpieces still claim it is the only way to fame. They like to say things like "none of the alternative models are repeatable."

         

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      Anonymous Coward, Jul 13th, 2010 @ 11:04am

      Re: I don't feel sorry for the bands...

      "Well, gee, if she hadn't been wearing such slutty clothes it wouldn't have happened."

       

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        John Doe, Jul 13th, 2010 @ 11:24am

        Re: Re: I don't feel sorry for the bands...

        Nice strawman AC. But being attacked is something done to you involuntarily. Signing a ridiculously lopsided contract is something you do to yourself. But thanks for trying.

         

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      Eric, Jul 13th, 2010 @ 1:49pm

      Re: I don't feel sorry for the bands...

      I do agree that it is ultimately the bands responsibility, but the available options are actually much smaller than you might think. Bands try to tell a story all the time about how they have done something different, when the reality is they have a manager, press agent and booker all working with a label to make the traditional press/release/tour cycle work. There are exceptions, but over all the major label system is just part of the overarching system. People have held onto the same patterns and strategies even though they are quickly proving to be wrong. The problem is that until gatekeepers are able to handle the constant stream of music, there is no way for bands to work their way through the ranks without considering those gatekeepers who make it possible.

      I'm not saying this isn't lame, but rather, I'm pointing out that many people assume that tools available level the playing field and the fact is they don't. Distribution is only one small part of the equation.

       

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      Alan, Jul 14th, 2010 @ 4:52pm

      Re: I don't feel sorry for the bands...

      Well, there aren't a whole lot of alternatives if you want to make a living creating and performing music. To some extent the artists are at fault, but to a greater extent the recording industry has had all of the relevant laws written to favor them over the artists. Unlike almost every other art industry, musicians and songwriters don't even OWN the copyright to their works in the vast majority of cases.

       

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      Fred Fnord, May 26th, 2011 @ 11:57am

      Re: I don't feel sorry for the bands...

      Sadly, the labels have things sewn up so that it's nearly impossible to make a decent living in the US as a musician without signing with one of them. Sure, there are exceptions, but they are either very exceptional indeed, or are in a niche market (jazz combos that play high-class restaurant gigs six nights a week and the occasional festival).

      They have intentionally driven down the reward for small groups playing pubs and coffee houses as much as they can, to the point where, if you have a group of three musicians, you're rarely making more than $100, for a three hour gig with one hour of setup and (say) an hour's drive each way. Plus you have to pay for gas, etc.

      Music isn't worth anything anymore to anyone except the RIAA. If/when they get brought down, I don't think it'll really come back, either. So many pubs are just as happy to have a jukebox, a DJ, and maybe the occasional karaoke.

       

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      Anonymous Coward, Dec 13th, 2013 @ 6:37am

      Re: I don't feel sorry for the bands...

      In one aspect your' stealing from theives' but in all actuality your just making the artist suffer more so it does suck. I mean can legally or illegally do what you want to do but I think it's messed up that if you like the artist music and let them entertain u everyday but u can't help them to create a profit. In my opinion it's just as bad as the label exects. It's like chaining them up and making them sing and dance for you when they want for free. It's highway robbery and for the label exects to do the artist like this… it's damn near slavery

       

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    thejamesingram (profile), Jul 13th, 2010 @ 9:49am

    As someone who works in the music business (not for a label.) In Courtney Loves explanation, I can't believe using a $500,000 budget to record is considered acceptable. While I TOTALLY agree with the general tone of this article, it should be noted that artists have to be smarter about their expenses. Ultimately it is they who decided to sign, if not read, their contracts. Are the labels misleading with all their lawyerspeak? Undoubtedly, but do not just automatically feel sorry for artists who get taken advantage of simply for the fact that they did not safeguard themselves as much as they should. Signing a record deal is not a gift, it is a business agreement

     

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      Vincent Clement, Jul 13th, 2010 @ 10:14am

      Re:

      I don't think that anyone is saying that we should feel sorry for the artists. Just that we shouldn't buy the line from the RIAA that they are doing all of this to help the artist.

       

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      Bob, Jul 13th, 2010 @ 1:13pm

      Re:

      James,

      Are we really at the point where we expect a 15 year-old Britney Spears to outsmart the RIAA's lawyers when it comes to the contract?

      Is that really what you expect? A kid to turn down their dream of being a music star because of accounting techniques? They are still learning algebra.

      The issue isn't even who is to blame, it's that the record companies don't pay the artist any more than pirates do.

       

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      Jake, Jul 13th, 2010 @ 1:17pm

      Re:

      I can't believe using a $500,000 budget to record is considered acceptable

      Remember that Love's article/speech was 10 years ago (June 14, 2000) when major labels could afford to spend tons of money on everything because *NSync was selling a million cds a week. Even now, look how much Top 40 artists pay for hot producers (Dr. Luke, Max Martin, Timbaland, et al). The label execs demand hits and those producers are hitmakers.

       

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      Anonymous Coward, Jul 13th, 2010 @ 1:56pm

      Re:

      If you have ever dealt with legal terms and lawyers. It is not a cake walk. Also costs a lot of money upfront.

       

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      TJW, Jul 13th, 2010 @ 4:49pm

      Re: a business agreement, not a gift

      Regardless of whether or not artists could be smarter about their expenses, Courtney Love's example still says all you need to know about the greed and crooked nature of the recording industry.

      A $500,000 budget to record, for a newly popular band, might not be all that unreasonable. What about said band being in it for the long-haul and deciding it's best to invest that money up-front to put together their own studio and hire their own professional recording engineer to operate it? What about a band that's trying to do "cutting edge" things and wants to produce a music CD with the "Plus" (computer-readable data) content on it? That gets into paying for professional photography to display on it and possibly even things like paying a computer game developer to write a mini-game with the band and album as the theme.

      A lot of the new musicians out there are relatively young people too. They may not really have much experience in dealing with complicated legal contracts, and are prone to believing that "this is the way it's done", courtesy of MTV and their peers (who are just hyped up on the fact that their buddy's band got signed).

      Sure, it's technically a business agreement, not a gift. But business agreements are expected to be reasonable. When you deposit your paycheck in your bank, you expect that the amount you put in will stay in there until you use it. If the bank had fine print in the "totally free checking" account saying they would take 65% of all deposits out for themselves -- how long do you think that policy would last? (Would you *really* just say, "Well, the people should have read the terms of the contract - so no reason to feel sorry for them!"??)

       

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        Anonymous Coward, Jul 13th, 2010 @ 8:06pm

        Re: Re: a business agreement, not a gift

        under your example, the band could go and find a million dollars, do it, and sign a distribution deal without any of the other requirements. even radiohead did that for their last album. dont let mike trick you into thinking there is only one way.

         

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      cormac-simon, Jul 14th, 2010 @ 3:09am

      Re:

      most contracts are in a different language yes. Legalese. it looks and sounds like english. but is actually an entirely different language. so if anyone here is going to sign a deal make sure you take it to someone who understands this messed up language or look up blacks law dictionary.

       

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      KS2 Problema, Sep 18th, 2011 @ 1:06pm

      Re: Why Even Major Label Musicians Rarely Make Money from Album Sales

      I'll agree completely with James I that musicians need to pay attention to the grindingly unglamorous business bits when considering the agreements that can bind them, prevent them from working, assign their intellectual and other property rights to others, and turn their sweat and blood into so many wasted tears.

      In fact, with regard to the music business in general, I would say this: lie down with dogs, awake with fleas.

       

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    Anonymous Coward, Jul 13th, 2010 @ 9:55am

    mike, how often are you going to keep re-tooting this same story over and over again?

    courtney love is not exactly a reliable source of information, considering she often seems to have a problem knowing when she is or is not wearing enough clothes or which day it is. she has had a very nice living off of the recorded music sales money generated by her late husband, that is for sure. she doesnt seem to be exactly lacking for cash.

    what i am not getting here is the question of touring. part of the label money is put up to pay for the first tour (as an advance). if these bands were doing so well, wouldnt they be selling the scarce of concert tickets and raking in a ton of money? play even 500 seats a night for 250 nights a year, at even $20 a ticket, and there is a pile of money (almost 2.5 million). are you suggesting that these bands are not actually able to sell the scarce and make any more? is there perhaps a problem with that concept?

     

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      PaulT (profile), Jul 13th, 2010 @ 10:05am

      Re:

      "what i am not getting here is the question of touring"

      Because it's a completely separate question.

      The issue here is that the artists - constantly paraded out by the major labels when they want to force through draconian laws to protect the *recording* - are not benefiting at all from those recordings.

      Many artists do indeed make a large amount of money from touring - that's never in question - but the labels don't. Hence their lies and the constant complaints that they need to change their business models, not the law.

      "how often are you going to keep re-tooting this same story over and over again?"

      I'm going to guess as many times as it's reported, as many times as suffering artists need to make this point before it gets through the thick skulls of legislators and/or corporatists like yourself.

      Note that this is not exactly the same story - it's a similar story, for a different source, describing different victims. So, different story despite similarities. Or do you also complain every time your other news sources describe a soldier killed in battle, an armed robbery or a rape because it's the "same story over and over agai"?

       

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        AG (profile), Jul 13th, 2010 @ 11:24am

        Re: Re:

        Even if there are zero copyright protections, artists will still make money from touring. And from this evidence, seems like that's where they make their money anyway.

         

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          PaulT (profile), Jul 15th, 2010 @ 12:55am

          Re: Re: Re:

          Yeah, that's kind of my point, sorry if I wasn't clear.

          The RIAA drag out the "poor starving artists" line to justify three strikes, DRM, anti fair-use, civil lawsuits, ACTA and everything else they try to push through to protect their business model. The reality is, it's only their own pockets that are in danger, and this helps to show that.

           

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      Mike Masnick (profile), Jul 13th, 2010 @ 10:10am

      Re:

      what i am not getting here is the question of touring. part of the label money is put up to pay for the first tour (as an advance). if these bands were doing so well, wouldnt they be selling the scarce of concert tickets and raking in a ton of money?

      Many are. This article was just about the question of actual record sales. We didn't address the alternative business models, but it's great to see you've finally come around to realizing that is exactly how most musicians make their money.

       

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        Anonymous Coward, Jul 13th, 2010 @ 4:16pm

        Re: Re:

        but mike, shouldnt the artists then just shut up, sign the recording contract that costs them nothing net, and gets them such massive exposure? if selling recordings is a net zero business, shouldnt they be glad to be getting such exposure that allows them to push their concerts? record labels are dumping millions on the table, shouldnt that be embraced, not shot down?

         

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      Anonymous Coward, Jul 13th, 2010 @ 10:23am

      Re:

      Ah! caps challenged troll, I like replying to you, it makes me feel good about myself, like I do after I pityfucked someone.

      Happy you got someone's attention? Good. Now work your skills, I can still feel too much teeth.

       

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      Anonymous Coward, Jul 13th, 2010 @ 11:06am

      Re:

      "play even 500 seats a night for 250 nights a year, at even $20 a ticket, and there is a pile of money (almost 2.5 million). are you suggesting that these bands are not actually able to sell the scarce and make any more? is there perhaps a problem with that concept?"

      Try paying for 250 venues worth of tour gear, roadies, trucks, etc. with just $2.5M and see how much is left to divide 4 or 5 ways among the band members for their year's worth of time...

       

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        Anonymous Coward, Jul 13th, 2010 @ 11:57am

        Re: Re:

        Try paying for 250 venues worth of tour gear, roadies, trucks, etc. with just $2.5M and see how much is left to divide 4 or 5 ways among the band members for their year's worth of time...

        Any band stupid enough to buy new gear, trucks, etc. every night is seriously in need of a new business manager. What are you, so kind of record company flak?

         

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          bubba, Jul 13th, 2010 @ 1:21pm

          Re: Re: Re:

          that would come to $10,000 per night assuming all tickets sold right? wouldn't the house take around half? so thats $5000 a night. say a band has 5 members and 5 roadies, thats 10 hotel rooms at $100 a night, so you are down to $4000. the roadies aren't free, say $500 for all of them. you are at $3500. a truck and a bus and gas and repairs must cost around $300 a day. you are at $3200. food is $100. crap is $100. you are at $3000 for 5 band members 250 nights a year, that comes to $150,000 a year each before taxes and equipment. its not too bad, not 2.5 million, but decent.

          but im sure i missed out a lot of things, if someone who knows more could add them in it would be interesting. or tell me how close i am, these are just guesses.

           

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            Jesse Townley (profile), Jul 13th, 2010 @ 2:11pm

            Re: Re: Re: Re: Touring

            Whoa, those numbers are way off. It's a lot harder to generalize about tour numbers then it is about the other things in this thread.

            Bands are paid either $ guarantees, percentages of the door income, or a combination of the 2. Depending on the venue & the band, there's hospitality ranging from a couple of free beers to hotel suites. Often the more successful touring bands use a booker for the tours- bookers take a % of each show (often 10%, sometimes more, sometimes less).

            Merchandise is the "cash cow" on tour- generally bands plan on the door income to cover most unavoidable expenses (transportation, fuel, per diems, lodging) and count on the merch for everything else (meals, expenses on off-days, partying, tour profit). Merch companies front shirts & other merchandise for the tour, and are often paid back during the tour (if the band is savvy). Labels usually sell LPs & CDs to bands at a very low "band rate" that is below wholesale & is exempt from royalties- this is usually fronted to the band & paid for the same way as other merchandise.

            Both of these sources of income REALLY depend on the venue, the band's popularity in that town, the tour booker, and what else is going on in the area that evening.

            Expenses include: FUEL!!!! Van/Bus rental/upkeep, roadie(s), merch person, tour manager, sound person, lodging, meals, per diems, and unexpected disasters like equipment theft or vehicle accidents. The non-band personnel depends on a lot of factors too. Bands of equal popularity/draw can take completely different sized crews.

             

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          weneedhelp (profile), Jul 13th, 2010 @ 2:42pm

          Re: Re: Re:

          "Try paying for 250 venues worth of tour gear, roadies, trucks, etc. "
          Sooo weak. You dont pay for it all at once.
          tour gear = Band gear, most of which is already owned.
          roadies = Friends willing to take a chance, and work for very little money, or food & beer.
          trucks = 2 trains of thought here
          1) Rent PA equipment from various locations (clearsound Inc - no affiliation)
          2)Lease it, and use trucks.
          Both are cheaper than you think. Especially if you tour a couple of nearby states.

          "see how much is left" - Not a bad living for doing something you love. And thats before you sell your soul to the labels.

          Case in point, Grape Street, TLA, etc. WNOC, 500 a night each member.
          Sat & sun show 1000. 200 to your roadie, and all the beer he can drink. 4k for the weekend, for the band. 10k to cut an album. Oh yeah, I didnt include CD or t-shirt sales.

          You can do very well being a local act.

           

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            Anonymous Coward, Jul 13th, 2010 @ 4:18pm

            Re: Re: Re: Re:

            the vast majority of soft seat venues have in house sound and lighting. many bands now tour with a single bus and a double axle trailer with the band gear, and nothing else. some go bigger and have a single 24 foot truck of gear they carry. most acts dont appear to bring anything else, until they start playing in arenas and other venues that have no sound and lighting facilities. cost to be on the road right now is the bus, a couple of roadies, and have a nice day.

             

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        Anonymous Coward, Jul 13th, 2010 @ 4:05pm

        Re: Re:

        Very very true.

        Needing to PAY the venues can range anywhere form $1000 - $10,000 dollars a night. So those will get subtracted from your profits.

         

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          Anonymous Coward, Jul 13th, 2010 @ 8:08pm

          Re: Re: Re:

          so what you are saying is that a guy like corey smith isnt making much money performing? that in the end, it costs him a whole lot to be on the road, and he makes very little? try to explain that one to mike.

           

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      nate, Jul 13th, 2010 @ 11:48am

      Re:

      actually that's not true. You have to put in all the expenses that are required for a tour. you have to pay the venues, you have to pay the vendors. you make no money from performing the music itself at a live venue.

      You make your money on t-shirts and other crap that's sold somewhere in the venue. That's how it's always worked and why some smaller bands tour constantly.

      Then tack in the stress of being on a small bus if you're lucky or a caravan of breaking down cars because you can't afford anything else.j

       

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        Anonymous Coward, Jul 13th, 2010 @ 4:44pm

        Re: Re:

        Explain to us how Madonna and bucket full of country musicians can make millions just from ticket sales?

        Heck I even bet that the studios paid her to sign a 360 to lure others to do the same.

         

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      RD, Jul 13th, 2010 @ 1:12pm

      Re:

      "if these bands were doing so well, wouldnt they be selling the scarce of concert tickets and raking in a ton of money? play even 500 seats a night for 250 nights a year, at even $20 a ticket, and there is a pile of money (almost 2.5 million). are you suggesting that these bands are not actually able to sell the scarce and make any more? is there perhaps a problem with that concept?"

      What kind of drugs are you on? Seriously. Because you keep making ridiculous assertions and wild, unsupported scenarios that simply do not exist.

      There is NO band that does 250 nights a year. And even if there were, it is certainly NOT the norm, or even very feasible. 250 live PERFORMANCES a year is insane, that doesnt even allow time to travel properly, let alone all the setup and rest. The only ones who have that kind of schedule are wrestlers, and its a major burnout situation for them at that. And even then, your wild example presupposes that any given band can even sell that many dates. ITs flatly impossible for all but a handful of major acts to even attempt to sell that many live dates, and even moreso in a down economy. You are smoking crack, and then taking Mike and everyone to task for how your insanely impossible scenario "doesnt work" and is therefore invalid. Please, get a clue.

       

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        Anonymous, Jan 15th, 2011 @ 1:44pm

        Re: Re:

        Or Blues Singers. BB King, an 80+ year old man with severe health issues, still does about 200 a year. Regional entertainers (i.e. Mexican banda bands) do this year in and year out. Perhaps in a rock band sense this is nuts, but it is certainly not out of the question as being logistically possible.

        The bands that can't generate enough attention in their market (who which a record/promotion costing millions CAN Do), can't put asses in seats.

         

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      Levi, Jul 13th, 2010 @ 2:06pm

      Re:

      While I agree that Courtney Love is not really someone I'd quote when it comes to math...

      ...and while I agree that $500,000 is a stupid, stupid budget for a record...

      It's nigh unto impossible to tour 250 dates a year once you are at that level. You can hit each major market, usually, twice a year. And if you do hit it twice, you have to take a year away from it (at least) to let demand build back up again.

      That, along with the waning demand for live music ANYWAY, makes that scenario impossible.

      And as for the $2.5 million? the label gets a lot of that as well as recoupable promotion costs. Factor in the transportation, driver, tour manager, sound guy, merch girl, etc - you're looking at a lot less.

      Speaking of merch (Most artists/bands, if they were forced to define their profession by where the money comes from would be known as "Traveling Retail T-Shirt Store", not only do the venues take a percentage (upwards of 20% most of the time), most labels now have a hand in merch sales, too, with the invention of the "360 Deal".

      Again, though... the bands sign it, which is inconceivable to me.

       

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      marc, Jul 14th, 2010 @ 5:46am

      Re:

      The problem is most gigs as "beginning" artist you have to pay to support a bigger atist so you don't make any, your losing money!

       

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      Audio Guy, Jul 14th, 2010 @ 11:32am

      Re:

      The labels aren't paying for the tour, they're just making an advance towards expenses. While it might seem like a pile of money, there's a similar breakdown doing live shows:
      TicketBastard takes a cut of that $20 ticket off the top;
      Promoter gets 50% of the gross;
      Money goes for renting sound/lights/video systems & paying crew;
      More money goes for transportation of people & equipment from city to city, as well as lodging for band & crew;
      Some of those seats are giveaways to local radio/press, friends of the promoter;

      Etc. etc.

      The idea that your favorite musician is running around throwing piles of money in every direction is a fantasy, built up by the very people that this article discusses. Funny thing is, all that money IS going in every direction - which means at the end of the day, the musician is not pocketing very much, if anything at all. And once s/he comes off the road, they're essentially unemployed again.

      Ah, but there's always T-Shirts, right?

      I love how people insist that musicians are getting rich from A so B should not matter, and since they're getting rich from B then C shouldn't matter, and then since they're getting rich from C then they shouldn't complain about not making money from A...

       

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        Karl (profile), Jul 14th, 2010 @ 8:48pm

        Re: Re:

        I love how people insist that musicians are getting rich from A so B should not matter

        More like: they've never earned any money from B, so B should not matter, and they should focus on A instead.

         

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      Anonymouse, Dec 21st, 2011 @ 6:39pm

      Re:

      Sometimes bands have to pay the venue they play in, and sometimes the venue takes a cut of the tickets sold as well as merch. It varies by venue and by manager, but bands do not make as much money touring as people believe. I volunteered at a venue and had to write many contracts for bands. It is much much easier to tour if you're on a smaller label that way if anything happens (car accident, theft of instruments, sickness etc) someone isnt breathing down their back to make up for it.

       

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    Jim, Jul 13th, 2010 @ 10:00am

    Courtney Love's net worth is just over 70 million.

     

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      Anon, Jul 13th, 2010 @ 10:55am

      Re: Courtney Love's net worth

      Ms. Love's net worth is irrelevant here.
      As a 'winner' in the game, she could easily sit back and enjoy the easy life.
      Instead, she is speaking up against unfair business practices aimed at musicians, many of whom will never get to be 'winners' financially.
      Her net worth does not diminish the value of her opinion.

      Anon

       

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    Anonymous Coward, Jul 13th, 2010 @ 10:00am

    perhaps courtney love would be richer if they stayed away from "The two videos cost a million dollars to make" type expenses. videos should be one of those things running maybe 50-100k each. that would have brought her a nice 400k windfall to play with. i guess she isnt worried about the details or containing costs, just about ragging on other people. its easy to blame everyone else, hardcore to admit you spent 20 years too blown out on "stuff" to know or care.

     

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      Anonymous Coward, Jul 13th, 2010 @ 10:17am

      Re:

      You must really know nothing about the industry if you think that a music video can be made for $50 thousand dollars. Sure, if you're willing to use a handheld cam and use volunteers...MAYBE. However, simple, basic fees on productions run way more than that suggested amount. Sorry...

       

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        Levi, Jul 13th, 2010 @ 2:09pm

        Re: Re:

        Disagree. You can make a really great video for next to nothing these days.

         

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        Anonymous Coward, Jul 13th, 2010 @ 4:32pm

        Re: Re:

        Just the other day I say a mini documentary on youtube contradicting what you are saying.

        http://www.youtube.com/watch?v=xBZOlipfjkQ

        People used synthetic voice, synthetic instruments, synthetic everything and it is a phenomenon in Japan it even beat great bands all the way up in the charts.

        More impressive, that is fuelling a whole generation of artists that spend less than 50K to produce things and sell them and they don't expect millions in return.

        I'm guessing that since the U.S. is not producing anymore artists in the background, other places that let people train and discuss what they are doing will be the new hubs of creation.

        You see copyright brings great great richies in the short term and kills the market in the long term.

         

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        Anonymous Coward, Aug 6th, 2010 @ 11:21am

        Re: Re:

        Actually you can make a fantastic video with professional production values for well under 50k.

         

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        Reason, Jan 14th, 2012 @ 11:38am

        Re: Re:

        Bollocks.

         

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    drew (profile), Jul 13th, 2010 @ 10:07am

    re: touring

    re: Comment 10, touring. Either the label is doing the promotion and sorting out the tour, in which case your return as a performer will be next to nowt, or you're sorting it out yourself and you're not going to get either that size or that number of gigs.
    It really fucks me off when people go on about this, touring is not the money making machine that people seem to think it is.

    On a vaguely related note, for a piece of major-label publicity masquerading as news, have a look at the BBC site here:
    http://news.bbc.co.uk/1/hi/business/10581280.stm

     

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    Gary (profile), Jul 13th, 2010 @ 10:24am

    The music companies account is easy to explain in a song.

    Sixteen Tons by Tennessee Ernie Ford. Its all there.

     

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    Skout (profile), Jul 13th, 2010 @ 10:36am

    Ummm...

    Not that I'm ever one to side with the media conglomerates, but the Anonymous One's point is kind of valid, IMHO. You're quick to include their initial fronting for the tour support, but then you totally discount the money the band makes from that investment.

    We all know you side with the people, Mike - but you don't have to hide evidence that doesn't fit. The evidence is still plain enough without it.

    If you're not going to include the profits that the band [and/or label] makes from the tour, don't include the money they get fronted for it. It still comes out looking quite bad.

     

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      Mike Masnick (profile), Jul 13th, 2010 @ 10:42am

      Re: Ummm...

      We all know you side with the people, Mike - but you don't have to hide evidence that doesn't fit. The evidence is still plain enough without it.

      Wasn't hiding it at all. The question was how much do they make from record sales. I've discussed how touring is how many bands make their money lots of times.

      Courtney Love mentioned the tour support in one line of her description, and I left it in to avoid chopping up her writeup. But the overall point stands.

       

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        Anonymous Coward, Jul 13th, 2010 @ 4:25pm

        Re: Re: Ummm...

        but it is fairly dishonest of her to say they make no money. that would only be true if they went out and played all those shows for nothing, sold no merch, and sold no additional albums because of performing and doing other arranged media. basically, she left out a big chunk of revenue, and happily played along. even if ms love nets $1 a ticket per show, and plays to 50,000 people a year, she is getting more than the average working slob, and this for the honor of staying plastered a huge percentage of the time (at least in her past life).

        more importantly, the value of her live shows is absolutely dependent on that recorded music, which allows her to be in the market to start with. otherwise, she might net pennies from every ticket, and be living like a welfare case.

        you miss the basic concept, that it is an integrated piece of machinery. you cannot pull out the support "over here" without the rest of it falling over "over there".

         

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      Dementia (profile), Jul 13th, 2010 @ 10:53am

      Re: Ummm...

      I tend to disagree here. The discussion is with regards to the recording contract. If the initial tour support is included in their contract, it's a relevent inclusion in the discussion as the label will still require it to be repaid, but unless the profits of the tour are included in the contract, then they are rightfully excluded. Also, that was part of the Courtney Love quote, Mike's main point has to do with the article from The Root, not really what she was spouting. Her comments are anecdotal support, not the main story.

       

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      Chronno S. Trigger (profile), Jul 13th, 2010 @ 10:55am

      Re: Ummm...

      The RIAA is pushing the stupid laws by citing the loss of money in the music sales and how it hearts the poor artists. Those sales are from CDs and MP3s since it's the music that's being downloaded. Tours are not being downloaded (since they are one of those finite things that can make money in a digital age), and thus are not being used as an example of the damages of piracy. Thus, tours are not part of this argument on the side of the RIAA, tours are on the side of artists and listeners.

       

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    fogbugzd (profile), Jul 13th, 2010 @ 10:50am

    360 marketing

    It used to be that touring was seen as part of promotion for an album. The labels were willing to let the band keep the ticket sales money because it was an important promotional activity and the labels wanted to keep the bands motivated to tour.

    A few years ago the labels decided they wanted a cut of touring money, too. Fortunately for artists the "360" contracts the labels wanted didn't really catch on.

     

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    out_of_the_blue, Jul 13th, 2010 @ 11:13am

    Regardless of all else: band gets too little, corporations too much.

    But that's capitalism for you, an elaborate charade hiding that the ones most benefitting are putting in almost nothing, and use tricks to steal from both labor and creators.

     

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    Christopher (profile), Jul 13th, 2010 @ 11:29am

    (Don't) consider the source.

    It's Courtney Love and we all hate her for killing Kurt, right? Except, if you get past whatever biases you have, she's been essentially unchallenged in her math. No one from the label side has refuted the arithmetic, either from inability or inattention. And so it stands.

    One band you never see mentioned on this topic is Tool: they not only own the copyrights to all of their music, they've never received any advances. They've done at least their last three albums on their own, labels only handling marketing. Being smart about your contract is very possible. Of course, keeping all of that money also explains why they put out albums every eight years now...

    --#

     

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    Zortag (profile), Jul 13th, 2010 @ 11:39am

    Accounting for recoupment

    One of the things that amuses me is the idea that the labels keep the accounts of un-recouped bands and tout them as "liabilities". They aren't liabilities, they're ASSETS. This is not some complex accounting trick, this is classic "t-account" stuff. Those unrecouped balances are assets on the label's balance sheet. They have already booked the expenses against those assets long ago so they have no incentive to reduce them. If they do teduce those amounts by applying income from artist royalties then assets go down and, overall, the company is not worth as much. Also, where do you think the money from non-applied recoupments go? Yep, like balls through a pachinko machine, it eventually finds it's way to the bottom line. So, it is entirely in the label's favor to be screw-ups on the expenses side and quite diligent in keeping track of recoupment account balances. -*Zortag*-

     

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    Anonymous Coward, Jul 13th, 2010 @ 11:42am

    Makes me feel better about "stealing the album" from the internet, then if I like it, paying to go see the band in person.

     

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    Anonymous Coward, Jul 13th, 2010 @ 11:53am

    1)
    Touring is almost always a money loser. Yes you can name 100 bands that make money that way, but the 10,000 that you don't hear about lose money that way.
    2) "Publishing Royalties" get a tiny mention in Courtney Love's article, but not in the the tech-crunch article (12% of a $0.99 song not chump change). These get paid straight to the songwriters for every single song sold. It doesn't have to recoup. Who is the songwriter? In many cases it is the recording artist themselves.

     

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      Karl (profile), Jul 13th, 2010 @ 3:08pm

      Re: Publishing royalties

      Publishing royalties are nowhere near as high as you think.

      The statutory royalties are $0.091 per song, per unit manufactured. So, if there are 10 songs on an album, and a million albums were pressed, publishing royalties would be $910,000.

      If songwriters are also the recording artists, they will have to sign a "controlled composition" clause, which means they only get 75% of the statutory rate, or $680,250.

      That is split between the songwriters and the publishing company. A typical split is 50%. So, the songwriters would get $341,250.

      Assuming that all bend members are credited as songwriters, and (as per the Root article) there are five band members, that means each band member earns $68,250.

      These numbers are not coming from a disgruntled rock star junkie; they're coming from ASCAP.

      Now, those are the publishing royalties for a platinum-selling album. 99.9% of musicians will never achieve those numbers - we're talking Prince-level stardom here. Most records on a major label didn't make 10,000 units at the height of the industry.

       

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        Anonymous, Jan 15th, 2011 @ 1:49pm

        Re: Re: Publishing royalties

        Yes but your only talking about mechanical rights tied to the album (which is fine for the purpose of this conversation). However, owning those rights to a popular work entitles the songwriter to performance royalties for life (i.e. Radio), Synch (Film/TV), and if recorded in certain territories master rights (i.e. the right to profit from appearing on the sound recording).

        Seen in that light, the initial risk the record company takes SHOULD be tilted very much in their favor. If it works out, there are many avenues the artist/songwriter will participate in for life beyond the record.

        But the point of this article on tech dirt is merely to obscure the truth, put up false assertions and make it seem ok to take what you don't have a right to, since the artist "gets screwed anyway".

         

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      Anonymous Coward, Jul 13th, 2010 @ 4:51pm

      Re:

      1) Sounds like business as usual, the thousands outside of the big 3 don't make money, there was a point there?

       

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      teecee, Oct 9th, 2011 @ 3:44am

      Re:

      actually, the writing is usually done by 1 or 2 members - (mick and keith,
      john and paul), who make ALL the money for as long as the songs get
      radio play. one exception to this is/was the mighty deep purple - they
      split the songwriting credits equally, and get paid equally. but usually the
      drummer/bass player/whoever gets the smelly end of the stick - even though it's a BAND making a popular recording, ie. turning someone's
      home demo into a hit. a classic example is The Band's 'chest fever' -
      written and owned by robbie robertson. you know, the song with the awesome organ intro that makes it a classic. another example is matthew
      fischer's hammond organ on 'a whiter shade of pale' - he had to sue for 30 years to (finally) get some royalties for his once-in-a-career performance that defines the song.

       

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    Anonymous Coward, Jul 13th, 2010 @ 12:00pm

    See, Tim, if you were an otter, none of this would have been an issue.

     

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    Yogi, Jul 13th, 2010 @ 12:01pm

    No respect

    I can understand the bands that signed their souls away to the RIAA 20-30 years ago when recording simply cost a ton of money and there was no way to access the public.

    But in my mind, musicians who sign up with the major labels in this day and age are no better than the labels and i have absolutely no respect for them.

     

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    ChronoFish (profile), Jul 13th, 2010 @ 12:03pm

    Artist need to find lables that are willing to work in reverse

    Instead of the labels controlling the books, the artist need to pay the labels.

    The artist should write the contract and hire out promotion/recording/tour management.

    They may not be much better off - but at least they will be in control.

    Of course the "major" labels won't work this way. But there are thousands of "promotional" companies that would love the chance to promote a potential mega-band.

    -CF

     

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    zenith (profile), Jul 13th, 2010 @ 12:04pm

    Steve Albini

    Here is that Steve Albini rant - don't be scared by swear words...;

    http://www.negativland.com/albini.html

    "Some of your friends are probably already this f****d."

     

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    a-dub (profile), Jul 13th, 2010 @ 12:05pm

    I love how it states half a million spent recording the album. It's easy to see why record companies are so angry these days. A musician can create professional studio quality recordings with equipment that costs a few grand. 15 to 20k will get you a damn nice industry standard Pro Tools setup. Where the hell is this half a mil coming from? Thin air?

     

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      YungN, Nov 12th, 2010 @ 5:04am

      Re:

      this is why rappers are remaining independent. i rap and spent about 2k for my studio set up. i make money off mixtapes and shows. though i remain underground, i recieve 100% profit. as an underground artist, not too much is expected of me so i can get away with recording a video for $500. you have to be smart about how you spend your money and who you let inside of your circle to handle your bizness. you use the internet as your way of broadcast and make the radio stations want you. if people demand to hear you then the radio has to find you and request your music from you the artist. if bands had fewer members, wrote their own material, and were more into the hustle (for lack of a better word), they would see more profit.

       

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    Jay (profile), Jul 13th, 2010 @ 12:06pm

    @Yogi

    I'd say give them a chance. There's been some great talent that went to the labels. Even if I don't like their decision on the business side, it may have made sense to them at the time.

    Flyleaf for instance was just a small band in Texas. Their breakout has lead to a great deal for them right now. Perhaps in the future, they will have enough to form their own indie label or form alliances with other bands that are "label" bands.

    We all have to start somewhere.

    In other news, wow! I'm in a story! *smiles*

    Just had to say that.

     

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    Guitar Player & Song Writer, Jul 13th, 2010 @ 12:09pm

    It should be obvious that the purpose of such organizations is to benefit themselves at the expense of the creative efforts of others. Mafia with MBAs and bow ties. Fast talking, slick gangsters who have wormed their way into political power circles with cash donations to purchase the creation of draconian laws in the formation of a dues paying, mind numbing soulless society.

     

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    herodotus (profile), Jul 13th, 2010 @ 12:13pm

    "It is hard to feel sorry for the bands, they get themselves into this. They sell their soul for fame and fortune and maybe get fame. Today, they have so many more options available that they have no excuse if they sign deals like this."

    This kind of talk shows an abysmal understanding of how the best musicians think and work.

    I don't know why it is that so many people are taking this hard line with musicians. If I had a dime for every time I have read some or other variation on the theme of "you made a stupid mistake, so suffer on dipshit!" I would never have to work again.

    The end result of expecting musicians to be smart business people is a musical culture that emphasizes business-like virtues.

    All of the best musicians that I have known have been hopelessly naive in this regard, because their minds were directed toward developing their abilities as musicians. Hell, even Robert Fripp made stupid mistakes with his first label (Editions EG), and he is one of the most obviously intelligent musicians out there. He made these mistakes because he immersed himself in his musical training, which took many hours a day, leaving only enough time to eat, sleep, tour, and maybe do a bit of reading. And as a result he became one of the most amazingly skilled and expressive electric guitarists in the history of the instrument. Had he spent more time worrying about business matters, he would never have become such a phenomenal guitarist, though he might have made more money. There are only so many hours in the day.

    I realize that major labels have never been the stewards of art that they have pretended to be. Their claims in this regard are a PR scam, plain and simple. Sadly, NO ONE seems to be interested in being such a steward.

    And as these labels die, instead of a bunch of cynical executives overseeing the production of a vast amount of crappy forgettable pop music, we see a vast culture of people voluntarily creating crappy forgettable pop music. Because in the end, that is the smart business move to make.

    The internet and cheap digital audio have done more for musical culture than any technology since polyphonic musical notation was developed in the fourteenth century. But the advantage of the internet for music has nothing to do with business models, whether new and smart, or old and obsolete. The advantage is that it allows musical culture to develop and grow without the need for patrons of any sort, whether they be the aristocracy or the general public.

     

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    risandy, Jul 13th, 2010 @ 12:27pm

    Please cover book publishing next. I'm sure it's the same thing worded different.

     

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    anon, Jul 13th, 2010 @ 12:30pm

    500k of whoop dee doo

    Somehow spending $500k on recording an album makes you too dumb and slutty to deserve a larger piece of the 6.6 million dollars in profit the label makes?

    I'm not following the arguement here.

    Oh, and $15-$20k can get you the tools, but $200k will get you the genius producer, $100k will get you the super talented sound engineer, $50k will get you the studio rental, $50k can get you the set-up crew and interns, the rest is in the margin.

    Or do you think the band is only worth the price of the electric guitars and the drum sets?

     

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      Anonymous Coward, Jul 13th, 2010 @ 5:04pm

      Re: 500k of whoop dee doo

      I know very talented people in the business that have recorded Major bands fur under a total of $50k

       

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    herodotus (profile), Jul 13th, 2010 @ 12:41pm

    "Oh, and $15-$20k can get you the tools, but $200k will get you the genius producer, $100k will get you the super talented sound engineer, $50k will get you the studio rental, $50k can get you the set-up crew and interns, the rest is in the margin."


    200,000 dollars for a producer?

    100,000 dollars for an engineer?


    Why?

    Say that the engineer gets 50 dollars an hour (which is a ridiculous amount of money, but never mind). At that rate, you are getting 2000 hours of time from the engineer. At the rate of 50 hours a week, that gets you 40 weeks worth of engineering for a single album.

    That is wasteful by any measure.

    I am not saying that this doesn't happen. I am saying that there is no good reason for it.

     

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      Rick, Jul 13th, 2010 @ 12:59pm

      Re:

      While $200k for a producer may seem absurdly high, a good, experienced and proven producer is still expensive.

      It's no different than paying a lawyer $400 an hour to keep you out of prison - you get what you pay for...

       

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      teecee, Oct 9th, 2011 @ 3:50am

      Re:

      wrong. engineers aren't paid by the hour, they're not lawyers. they are
      paid terrific sums (100k and up for the a-team) to create their signature
      sound on a project. bob clearmountain comes to mind, as does roger nichols. google them...
      talent costs money; engineering and producing are an art form. these
      aren't the janitors...

       

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      Anonymous Coward, Apr 30th, 2012 @ 7:42pm

      Re:

      Given the amount of training required to become a professional engineer or producer (15-20 years of experience minimum) I'd say 50$/hour is a bit budget rate quite frankly.

       

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    NAMELESS ONE, Jul 13th, 2010 @ 12:57pm

    WELL

    "That's $45,000 to live on for a year until the record gets released. "


    HOW do us welfare people do it on 5000 a year?

     

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    NAMELESS ONE, Jul 13th, 2010 @ 12:59pm

    AND

    p2p cuts out need of the label, and distributor so if a band can get 3 cents a album instead a 2.3 cents then thats a 60% price increase

    THINK WITH YOUR DAMN HEADS MUSICIANS

     

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    norris ewelike, Jul 13th, 2010 @ 12:59pm

    record labels are only half the story - music publishing needs to be considered

    It's a good article but there's two elements that aren't addressed that have a direct input on how much an artist makes (in some cases at least).

    firstly, we have to consider "synchronization" income: this is income from the use of music within a movie, game, advert or whatever. Increasingly this is where the money angle comes in, so you'll find bands that make lots more money from this than any album/single sales. Take for instance the theme tunes to various shows that pushed some (relatively) unknown artists. Record labels (and publishers mentioned below) actively push this stuff all the time.

    Secondly, we have to consider the publishing side of the business. For those writers within the band then they make money from each sale and every radio play so they can earn substantially more than fellow band mates because of it. Even better if somebody covers your song as you'll be the only one getting paid. Ever wondered why some many artists that used to sing other people's song suddenly became co-writers overnight?

    Of course none of this answers why labels pay such small cuts

     

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      Jay (profile), Jul 13th, 2010 @ 1:56pm

      Re: record labels are only half the story - music publishing needs to be considered

      I believe what we're looking at is a revenue stream. Think about it, which do you truly want in the world? A one time fee or charge, such as the advance, that is probably paid fairly quickly without the shady math, or a way to indebt people and continuously force them to make music.

      It's a tollbooth. A very expensive one that has hurt the industry, because it's very unlikely that people will be able to perpetually pay the machine.

      Feudalism doesn't work because people are tied to the ground. From what we see of the corporate side, the execs want us to be indebted to them because that's more money.

      Once you break the tollbooth, watch out! It's why they fight so vigorously for the law. It's also why governments seem to love monopolies. But that's an entirely different rant so I'll just stop there.

       

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    Geddy, Jul 13th, 2010 @ 1:01pm

    Independance

    I wonder how much money the music industry made off RUSH or how quickly they recoup their album sales. They succeeded despite bucking the system. More bands should follow their model if they have the chops for it. If they don't, if they're overly produced and autotuned, then just don't bother...

     

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    Mitch Featherston, Jul 13th, 2010 @ 1:02pm

    Disgusting

    What a disgusting mess this business model has become.

     

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      Jay (profile), Jul 13th, 2010 @ 11:02pm

      Re: Disgusting

      Has become?

      This has been the same model for the last 50+ years. There's nothing new about it. It's always been disgusting, it's just the fact that the internet spreads the truth faster than the RIAA can lie about it.

       

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    RadialSkid, Jul 13th, 2010 @ 1:13pm

    "Oh, and $15-$20k can get you the tools, but $200k will get you the genius producer,"

    Whom you don't need. Produce your own album.

    "$100k will get you the super talented sound engineer,"

    Do that yourself on your own computer.

    "$50k will get you the studio rental,"

    That's a lot of damn money for a studio rental. You could soundproof a room in your home and make your own studio for cheaper than that, and be able to reuse it whenever you want.

    "$50k can get you the set-up crew and interns"

    Also not necessary.

    Why does everybody think that cutting an album has to cost some absurd amount of money? It's not the '80s anymore.

     

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    herodotus (profile), Jul 13th, 2010 @ 1:16pm

    "While $200k for a producer may seem absurdly high, a good, experienced and proven producer is still expensive.

    It's no different than paying a lawyer $400 an hour to keep you out of prison - you get what you pay for..."


    It is actually very different from paying a lawyer to keep you out of jail.

    In the first place, bands don't use 200,000 dollar producers because they need them, but because their label insists on it. Name me a single independent, self-financed band that payed a producer anything like that to 'oversee' their recording. You can't, because it would be daylight madness.

    In the second place, the value of the lawyer is obvious and tangible. The value of the producer is much more nebulous. They aren't there because anyone did a cost/benefit analysis and decided that it made sense to pay out that kind of money.

     

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    Jesse (profile), Jul 13th, 2010 @ 1:35pm

    Indy labels vs. majors

    As a GM of a small indy label, I can confirm that the article's financial model is pretty accurate. We actually use a similar system, but since both our and the band's expenses are so much lower, our bands *usually* recoup within a couple of years. We also don't charge as many expenses against the bands as the majors do. Some mid-sized bands in their initial sales period recoup & make a couple of grand if they keep their expenses down/pay down their expenses from tour income. (Larger bands generally recoup in the 1st pay period regardless of advance/expenses)

    The exceptions are usually bands from a decade or more ago who took tour advances or recording advances that never recouped.

    While the tools are there for bands to d.i.y. (via IODA or other digital distributors, CD Baby, etc), indy labels can & do function as gatekeepers for the flood of bands that are releasing decent-sounding recordings nowadays.

    And yeah, a lot of times when it comes to recording engineers &/or producers, you get what you pay for, especially in a lo-tech setting like a bedroom Pro-Tools set-up.

     

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    Jesse Townley (profile), Jul 13th, 2010 @ 1:41pm

    Comment #65 is mine, by the way

    In case that matters? Jesse

     

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    Anonymous Coward, Jul 13th, 2010 @ 2:55pm

    500 people per show, that is a lot of people for a show, and it takes a pretty big group to fill that space. In San Francisco, a city of 750,000, but the cultural center of 5,000,000 people, there are only a few venues that have more than one show a week that holds 500 people. Fillmore, Warfield(not a lot of shows these days maybe one a week at the Warfield) > 500, Bimbos, Great American Music Hall, The Independent = 500. If you add in the East Bay you have the Fox and the Paramount both seat around 1000. A $20 ticket is pretty expensive too, most shows at the Independent and Great American Music hall are $15.00 and don't forget there is usually a couple of opening acts (one local and one touring) that need to get paid.

     

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    James Bain, Jul 13th, 2010 @ 3:32pm

    music royalties???

    Is it just me, or does this remind anyone else of sharecropping? Or, even, the situation all those poor slobs find themselves in breeding chickens for Frank Purdue?
    Seems the internet arrived just in time for those unwilling to let themselves be scraped raw by those honest record execs. Isn't this why Zappa wrote "Joe's Garage"?

     

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    Anonymous Coward, Jul 13th, 2010 @ 3:38pm

    I know the Harry Fox Agency takes 5% (which do the Mechanical publishing royalty, ASCAP does the public performance royalty) . When I look at a cd, say Tom Waits I see that it is published by, Jamla Music, which is owned by Tom Waits, if we look at someone smaller like The Sadies it is published by "Sadiesmusic" which is owned by The Sadies. The 50% split I think you are talking about gets some of the songwriting royalties to the members of the band that aren't songwriters.

     

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    Anonymous Coward, Jul 13th, 2010 @ 3:50pm

    This article doesn't take into account the fact that the label has paid up front for 11 other bands that have failed in the market, and therefore lost that investment. Just like in venture capital, the successful bands have to pay for the flops.

     

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      Anonymous Coward, Jul 13th, 2010 @ 4:23pm

      Re:

      Yes it does. It says that 'failed' is defined up, and up, and up until it actually means 'haven't succeeded enough'.

       

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      Mike Masnick (profile), Jul 13th, 2010 @ 5:21pm

      Re:

      This article doesn't take into account the fact that the label has paid up front for 11 other bands that have failed in the market, and therefore lost that investment. Just like in venture capital, the successful bands have to pay for the flops.

      That's very, very different. When a VC funds 10 startups knowing that 6 will fail, 3 will do ok and 1 will do great, they don't then keep taking 63% of every dollar earned by all 10 startups, and holding onto all of their IP, do they?

       

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        Anonymous Coward, Jul 13th, 2010 @ 5:38pm

        Re: Re:

        "they don't then keep taking 63% of every dollar earned by all 10 startups, and holding onto all of their IP, do they?" - actually, they often do end up owning the ip. as for the money, well, lets just say every business model has its differences. when a vc company hits the jackpot, they get sometimes thousands times their money back. they can afford to be a wrong an awful lot and still make a good living. record labels are not in the same boat.

         

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          Anonymous Coward, Jul 13th, 2010 @ 7:17pm

          Re: Re: Re:

          Because they're run by morons who are attempting to cross an ocean with a train?

           

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          Anonymous Coward, Jul 13th, 2010 @ 8:01pm

          Re: Re: Re:

          Then the record label should put that in the contract. If the record label is contracted to give artists money per C sale then they are responsible to do so regardless of whether or not they are making money on the deal. They should have considered any losses from the deal before they wrote out the contract.

           

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          Mike Masnick (profile), Jul 13th, 2010 @ 10:38pm

          Re: Re: Re:

          actually, they often do end up owning the ip.

          I've never seen that happen. Can you point to an example?

          they can afford to be a wrong an awful lot and still make a good living. record labels are not in the same boat.

          That's simply not true. The returns on a top recording act are many times greater than the standard returns on a VC deal.

           

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            Jay (profile), Jul 13th, 2010 @ 11:15pm

            Re: Re: Re: Re:

            TBH, it's very few and far between. It's only the best of the best that end up owning their ip back.

            Of those people, the only ones I can think of off the top of my head is Sir Mick Jagger or The Beatles.

            The only other person that comes close is David Bowie who sold his IP right back to the recording industry... Right before the economic crisis dropped in.

            So really, you have to be in the 1% to even have a chance at getting your IP back. Otherwise, be prepared for the shackles that are your recording contracts.

             

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              Anonymous Coward, Jul 13th, 2010 @ 11:18pm

              Re: Re: Re: Re: Re:

              Get enough strings and you can make a rope to hang yourself.

               

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              Brendan (profile), Jul 30th, 2010 @ 6:17pm

              Re: Re: Re: Re: Re:

              GGP: "actually, they often do end up owning the ip." MM: "I've never seen that happen. Can you point to an example?" Jay: "TBH, it's very few and far between. It's only the best of the best that end up owning their ip back. Of those people, the only ones I can think of off the top of my head is Sir Mick Jagger or The Beatles." The OP and Mike were referring to VCs taking ownership of start-up IP, not bands getting their copyrights back. Just wanted to clarify what seemed to be a confused reply.

               

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      Karl (profile), Jul 13th, 2010 @ 7:15pm

      Re:

      In regards to albums, record labels don't actually pay for anything except manufacturing costs. Everything else is taken out of the artists' advances, which must be paid back from their royalties before artists earn any money.

      Now artists may never pay back their advances, but that doesn't mean labels aren't still making money. Labels' cut of the income is about five times that of artists' royalties. So, by the time an artist is one fifth of the way through paying back the advance, the labels have already started to turn a profit.

      The albums that have really "failed in the market" are the ones by superstar celebrities, that labels spend millions on despite the fact that they have no talent.

      If your argument is really "Oh Noes they won't be able to fund Heidi Montag's next album," then you don't have my sympathy.

       

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    Anonymous Coward, Jul 13th, 2010 @ 5:56pm

    the other part of that this discussion doesnt touch is the long tail: after the big number is paid off and the successful artist continues to sell, what do the numbers look like after that?

    another part of the discussion is the lack of breakdown on the label side: if we are going to show how much each member of the band is making, why not show exactly what the record labels are doing with their part? of that 63%, much of it is just in recouping money spent up front. it isnt like they are taking 63% for nothing, right?

    mike, once again, you manage to be misleading by leaving out key issues. but hey, i wouldnt expect anything less from you!

     

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      btrussell (profile), Jul 13th, 2010 @ 6:58pm

      Re:

      Re-read the article. Your comment shows that you did not read once again.
      I wouldn't expect anything less from you though.

       

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        Anonymous Coward, Jul 13th, 2010 @ 8:10pm

        Re: Re:

        please feel free to show me where, and dont point to the courtney love garbage. where is the nice little graphic just like the band one mike posted?

         

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          Karl (profile), Jul 13th, 2010 @ 9:23pm

          Re: Re: Re:

          please feel free to show me where, and dont point to the courtney love garbage.

          Ha ha, "show me a source, any source. Wait, not that one!"

          For 63% of the gross income, exclusive rights to the music, and veto power over the recording process, the label pays:

          - mechanical royalties (for ten songs maximum, reduced through "controlled composition," and often recouped back into the label's in-house publisher);

          - some of the promotional costs (about half is recouped from the artists); and

          - the manufacturing costs (less "packaging charges" of 25% of the retail price).

          Whatever else the label spends money on, it has nothing to do with music. I'm thinking million-dollar salaries for executives and "donations" to Congress.

          Here's another explanation from TAXI Transmitter:

          How do these costs relate to a million selling album?

          At common discounts, record companies receive approximately $10.00 per CD ($16.95 SLRP). Thus, projected record company gross income is ten million dollars.

          Out of this the record company will spend approximately $625,000 in manufacturing costs; approximately $1,000,000 in promotion (another $1,000,000 will be charged against artist royalties); $1,780,00 in royalties to the artists (at 14% of the SLRP of $16.95, less packaging); and $600,000 in publishing royalties (at 75% of statutory). After subtracting $4,005,000 from its ten million gross income, the record company has a gross profit of $5,995,000. It will recoup its million-dollar advance to the artist and its promotional costs.

           

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      Mike Masnick (profile), Jul 13th, 2010 @ 10:40pm

      Re:

      of that 63%, much of it is just in recouping money spent up front. it isnt like they are taking 63% for nothing, right?

      Reading comprehension is a wonderful thing. You should try it some time.

      No. None of the recouping comes out of the 63%.

       

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        Technopolitical (profile), Jul 14th, 2010 @ 7:13am

        Re: Re:

        The whole post shows all the more reason why Musician -songwriters need full protection of ASCAP to protect song royalties. That is where many songwriting-musicians make their real $$.

        Pro studio musicians do OK -- are they rich ,, no ,,,,,but they make more than 90 % of people who gig music in bars for a living. Studi guys in a union and get scale. But they do not need a strait jib , like bar band dudes do.

        Copyrights & Royalties now and forever

         

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          Karl (profile), Jul 14th, 2010 @ 3:21pm

          Re: Re: Re:

          Pro studio musicians do OK

          True. Then again, studio musicians play on a work for hire basis. They don't hold any rights to the music, so they don't collect royalties, from ASCAP or anyone else. They do not make any money through Copyrights & Royalties.

           

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            Technopolitical (profile), Jul 14th, 2010 @ 9:55pm

            Re: Re: Re: Re:

            Musician -songwriters do ! that was the point.

            and often enough the studio pros do become contributing writers to a song.

             

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          Jay (profile), Jul 14th, 2010 @ 5:42pm

          ASCAP

          ASCAP is even less for the artists than you seem to think. Somehow, it seems you've not read about their attack on the Creative Commons (pro artists and gives them a choice of how to manage their copyright), EFF - (wants to balance copyright laws)and Public Knowledge (copyright advocacy group).

          Instead, if you don't have a hit, you're not even on ASCAP's radar. You're giving money to a group that is killing the little guy for the big artists. How do they kill the little guy? By shutting down the places they can play. So it's a scheme to effectively squeeze out the little man, pay the big man, and the main ones that win are the ones at the top.

           

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          Karl (profile), Jul 18th, 2010 @ 1:24am

          Re: Re: Re:

          The whole post shows all the more reason why Musician -songwriters need full protection of ASCAP to protect song royalties. That is where many songwriting-musicians make their real $$.

          That is where already successful songwriters make money. It's where non-Top-40 acts get stiffed, and their venues get shut down.

          I'll give you an example. Say you run a small cafe in Boston, that hosts indie singer-songwriters on the weekends. As a cafe owner, you want this to be a showcase for new talent, so you don't allow cover songs.

          That cafe will still have to pay ASCAP, BMI, and SEASAC for the possibility that one of the performers might play a cover song, even though it's not allowed.

          Say the cafe doesn't pay. Then there will be one less venue hosting live music. One less method for musicians who only play songs they have written to perform.

          But let's say the cafe does pay. Since they have the right to play covers, they decide to book a guitarist who plays every weekend, and does nothing but covers of Robert Johnson songs. Where does the ASCAP money go?

          Well, because ASCAP can't sit around all day taking notes of live sets, they "sample" the music that is played on the radio. They then pay out the artists according to radio play.

          I have lived in Boston for twenty years, and I have never heard Robert Johnson played on a commercial radio station. Aerosmith, on the other hand, is quite popular around these parts.

          The cafe pays for the rights to have an artist play Robert Johnson songs, but Robert Johnson gets absolutely nothing in royalties. On the other hand, Aerosmith songwriters get paid every time the cafe has a show, whether anyone plays Aerosmith songs or not.

          Are you a member of ASCAP, think this is completely unfair, and want to change the rules? Tough shit. Votes are weighted by income to ASCAP. If you're not bringing in billions per year, you get no voice whatsoever.

          ...Now, you might have been thinking of mechanical royalties, paid to songwriters by record labels, at a statutory rate of 9.1 cents per song, per album manufactured. But this is not handled by ASCAP. It is handled exclusively by the Harry Fox Agency.

          If you are both a songwriter and a performer, "controlled composition" clauses prevent you from earning more than 75% of the statutory royalties on these songs. Also, labels demand a 10-song cap per album.

          For a band that writes its own songs, then with a million records manufactured, the mechanical royalties would be $682,500 at most, split between all the songwriters on that album.

          In other words: that "protection" gains you one-tenth of the label's gross profits. Still, it's better than artists' royalties, which is zero.

           

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            Karl (profile), Jul 18th, 2010 @ 1:53am

            Re: Re: Re: Re:

            Sorry, I forgot to mention this caveat.

            Those mechanical royalties are split between the actual songwriters and the publishing company. Usually the publishing company takes about 50%.

            Major labels have their own in-house publishing companies, and you are required to sign with them in order to get a contract. So, 50% of those royalties will go right back to the label. The actual songwriters are left with $341,250 to distribute among themselves.

            Assuming five band members, and that each band member is an equal songwriter, that means that each musicians gets $68,250. For a platinum-selling album.

             

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    Pete, Jul 13th, 2010 @ 5:57pm

    I don't follow the math

    I tried re-adding up all the numbers and don't get the same result. Forget who loaned whom how much, let's do this on a cash-flow basis.

    What is the band actually writing checks for? I get: recording ($500k), manager ($100k), Lawyer/business manager ($50k), videos ($500k), tour support ($200k). I don't actually know what tour support is but I assume it gets flushed during the tour. I wasn't clear whether each video cost $1 million or the pair cost $1 million, I'm assuming the former. The total is $1.3 million, they get $2 million in royalties, leaving about $175k per musician.

    If the videos cost $1 million each, the picture is worse. The band is left with $200k or $50k per musician. Still not zero but close.

    The label pays for videos ($500k), independent promotion ($300k), making the CDs ($500k), radio promotion ($300k), music royalties ($750k) and marketing ($2.2 million), for a total of $4.5 million. Their net profit is about $4.5 million ($11 million less $2 mil to the band, $4.5 mil for costs). Not a bad deal at all.

     

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      Karl (profile), Jul 13th, 2010 @ 8:19pm

      Re: I don't follow the math

      You're right, I think her math is also wrong. My list is below.

      The band pays:

      $500K (recording)
      $100K (manager)
      $50K (lawyer, business manager)
      $1 Mil (video)
      $300K (radio promotion)
      $170K (taxes)
      TOTAL COSTS: $2,120,000
      ROAYLTIES: $2,000,000

      So, in fact, the band is $120K in debt to the label, which will be carried over to their sophmore album.

      Now, then. The label pays:

      $120K (debt from band's recoupable costs)
      $500K (manufacturing costs)
      $2.2 Mil (promotion)
      $750K (mechanical performance royalties, to songwriters)
      TOTAL COSTS: $3,570,000
      GROSS INCOME: $11,000,000

      So, in fact, the label made $7,430,000.

      But there are a couple of things I'm unclear about.

      First: tour support. This is paid back by the band, but where does the money come from? Mechanical royalties, or tour income?

      Second: I was under the impression that the artists paid for promotion as well. This would tack on that additional $2.2 million to their debt.

      Third: performance royalties. I have to guess how she calculated this. Statutory rates are set by law at $0.091 per song, per copy. If the band is also the songwriters, "controlled composition" clauses limit that to 75% the statutory rate, or $0.06825 per song per record. At a million records pressed, that comes to $68,250 per song; so I guess she figured about eleven songs per record.

      If band members are also songwriters, do those royalties also have to go towards paying back the royalties?

      If they don't, then the band (or the songwriters in it) earned $375K to split between them, since 50% usually goes to their publishing company.

      If they do, then the $120K of debt is no longer carried by the label, and the songwriters in the band earned $255K total.

      However, the publishing company is often a subsidiary of the label itself; in this case, $375K of that cost would go back to the label.

      ...But no matter how you slice it, she erred on the side of the labels.

       

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    Anonymous Coward, Jul 13th, 2010 @ 6:45pm

    dont forget, larger labels suggest you use thier studios, not for free of course, you have to pay them with the money they gave you. use thier sound engineers, thier interns.

    so basically, while these numbers arent accurate it can be an example. label charges you 100 an hour for your sound tech. the sound tech, he doesnt see 100 dollar an hour wage, he sees half or less. the rest goes to the label to cover the sound techs costs above his wage, so if he makes 40 and hour they have to pay another 10 on top of it for him. meanwhile they make 50 dollars in profit for that hour. at least that what i remember from an article

     

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    Fred Hundt (profile), Jul 13th, 2010 @ 6:53pm

    Painfully True

    I spent several years in the record business, and this scenario is so true. You left out one additional cost: "packaging." The labels actually charge back a marked-up cost for the label design, printing, packaging, etc. against the band's royalties!

    You correctly pointed out that the label holds the copyright to the performance. When an act ends up "in arrears" on royalties, the label, in effect, repossesses the masters and can use them without further payment to the artists. I worked for a compilation label that would buy these masters from the record labels...we could then release them without any payment to the artist except songwriting royalties.

     

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    Sean Carton, Jul 13th, 2010 @ 6:59pm

    Steve Albini Said It First: Don't Credit Courtney Love

    I'm usually pretty much in complete agreement with the stance that Techdirt takes on copyright, digital rights, etc., but I found it pretty ironic that Mike Masnick didn't check his sources very well. The Courtney Love article referenced near the beginning of this piece is a pretty blatant rip-off of the article Steve Albini (producer, "Big Black" singer, etc.) wrote back in the 90's in "Maximum Rock 'n' Roll" about where the money goes when a band gets a $250,000 advance. Courtney's article may be a bit more up-to-date, but it's just rehashing what Mr. Albini wrote about 20 years ago. If you doubt this, give it a read: http://www.negativland.com/albini.html .

    I'm guessing that he ever made any money off this article (old school punks who remember Maximum R'n'R will agree, I'm sure) but it irks me that he's not getting the credit...especially when he's referenced in the article quoting Tim Quirk who states that he doesn't want to write a "Steve Albini-esque desire to rail against the major label system (he already wrote the definitive rant, which you can find here if you want even more figures, and enjoy having those figures bracketed with cursing and insults)."

    It's one thing to rail against copyright and the bullmalarkey of the RIAA. It's another thing to not give credit where attribution is due. Maybe I'm just a middle-aged ex-punk with a chip on my shoulder, but I think that crediting the person who wrote the definitive (and original) study on "where they money goes in a recording contract advance" is the right thing to do.

    Thanks! Keep up the good work.

     

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      Anonymous Coward, Jul 13th, 2010 @ 8:15pm

      Re: Steve Albini Said It First: Don't Credit Courtney Love

      both articles are technically correct, but since they attempt to slice out one part of the industry cycle without counting income from some of the cycles that it finances, they are very misleading.

      there is little discussion of royalties, song writer credits, commercial licensing, public performance, and all those other sources of income, none of which would really exist without a recorded product.

      we wont even go face into live performance income, even if the monies cited in both articles include getting the music airplay, exposure, and getting the band or act on tour.

      so yeah, if you ignore where more than 50% of the income is coming from these days, perhaps there is a discussion. but it is misleading to the very end.

       

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        Karl (profile), Jul 13th, 2010 @ 8:29pm

        Re: Re: Steve Albini Said It First: Don't Credit Courtney Love

        none of which would really exist without a recorded product.

        You have that backwards, chum. Without those things, the recorded product wouldn't have been sold at all.

         

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        Jay (profile), Jul 13th, 2010 @ 11:38pm

        Re: Re: Steve Albini Said It First: Don't Credit Courtney Love

        How about this...

        TLC's financial issues Just watch the first 2 minutes.

        They sold 10 million records and received less than 1% of any of that. It's an accounting trick that left them filing for bankruptcy. I wish I could find the interview where they went into details about HOW it could happen but let's face it. This has gone on a LOOONG time. It's not just the singers that have to deal with this. It's the song writers, the ghost writers, the studio for hires and everyone else.

        Rather than working together, the industry keeps others weak and fragmented. It's just funny how they want people to fight for the 20% of the money that they give out, while they clamor to hold onto the 80% that they keep for themselves.

         

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          Jay (profile), Jul 14th, 2010 @ 5:54am

          Re: Re: Re: Steve Albini Said It First: Don't Credit Courtney Love

          Also I remember reading that Steve Albini article. Something of note...

          Steve Albini is an independent and corporate rock record producer most widely known for having produced Nirvana's "In Utero".

          Seems he taught Courtney Love a thing or two.

           

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            vivaelamor (profile), Jul 14th, 2010 @ 10:57am

            Re: Re: Re: Re: Steve Albini Said It First: Don't Credit Courtney Love

            "Seems he taught Courtney Love a thing or two."

            I get the impression that they weren't too fond of each other: 'Steve Albini, on Courtney Love, who Yoko’d up the recording sessions: “I don’t feel like embarrassing Kurt by talking about what a psycho hose-beast his wife is especially because he knows it already."

            Courtney Love, in retaliation: “The only way Steve Albini would think I was a perfect girlfriend would be if I was from the East Coast, played the cello, had big tits and small hoop earrings, wore black turtlenecks, had all matching luggage, and never said a word.”'

             

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              Jay (profile), Jul 14th, 2010 @ 1:21pm

              Re: Re: Re: Re: Re: Steve Albini Said It First: Don't Credit Courtney Love

              ... WOW!

              I withdraw my statement of those two ever being amiable to each other. You can see the poison dripping from their eyes...

               

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      vivaelamor (profile), Jul 14th, 2010 @ 10:53am

      Re: Steve Albini Said It First: Don't Credit Courtney Love

      "I'm usually pretty much in complete agreement with the stance that Techdirt takes on copyright, digital rights, etc., but I found it pretty ironic that Mike Masnick didn't check his sources very well. The Courtney Love article referenced near the beginning of this piece is a pretty blatant rip-off of the article Steve Albini (producer, "Big Black" singer, etc.) wrote back in the 90's in "Maximum Rock 'n' Roll" about where the money goes when a band gets a $250,000 advance. Courtney's article may be a bit more up-to-date, but it's just rehashing what Mr. Albini wrote about 20 years ago. If you doubt this, give it a read: http://www.negativland.com/albini.html ."

      Why would Mike give Steve Albini credit for something Courtney Love wrote, solely because the articles are on related subjects and Albini happened to write his first? There is nothing in Courtney's article that suggests that it is even inspired by Albini's article, let alone influenced by it. I gather that the two are reported to be not fond of each other, but let's not presume she ripped him off without some actual evidence beyond the fact that they can both do basic math.

      'It's one thing to rail against copyright and the bullmalarkey of the RIAA. It's another thing to not give credit where attribution is due. Maybe I'm just a middle-aged ex-punk with a chip on my shoulder, but I think that crediting the person who wrote the definitive (and original) study on "where they money goes in a recording contract advance" is the right thing to do. '

      If you're really intent on staging some sort of pissing contest between Love and Albini then I'd point out that out of the two of them, Love is the one with an actual lawsuit on the issue. As well, while Albini's article is indeed basically a rant, Love's goes a lot deeper and is actually somewhat positive in looking for a solution.

       

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    Sean Carton, Jul 13th, 2010 @ 7:32pm

    New Business Model?

    OK. I guess I can't stop myself from commenting again because this subject really sticks in my craw.

    Anyway...

    The thing that I think is abso-freakin'-lutely hilarious is that the RIAA still wants to think that they're living in a world where they can control the means of distribution. Yeah, sure...back in the day when music was distributed on plastic discs (either black ones or smaller shiny ones), the recording industry had a business model: they controlled the means of distribution by controlling the sale of these hunks of plastic. What they fail to realize now is that they never were selling hunks of plastic...they were selling the information on those hunks of plastic. As soon as another system came along that freed the information on those plastic discs (the music) from the medium they were distributed on, all their power went away.

    This whole debate is a ridiculous attempt at maintaining a system that doesn't-- and can't-- exist anymore. No matter what kind of DRM gets overlaid on their product, no matter how many laws they pay off congresscritters to pass, the fact of the matter is that information wants to be free. And before anyone blows a gasket over the phrase that John Perry Barlow coined so long ago, know this: I'm not naive enough to think that "free" is "free" as in "free beer." Nor is anyone who realizes the truth. When I (or others) say "free" we mean that it's impossible to control information by technological or statutory means. Yeah, you can keep a lid on it for a while, but as so many Bittorrent sites prove, that's just a temporary fix.

    "But what about the artists?" It's a lament that we hear from so many in the industry. What about the artists? It's pretty clear from the references made in this article that the artists aren't the ones who are really losing the money. Even going with the somewhat-more-than-generous graph at the beginning of the article, the "artists" are grossing barely more than half of the money. I'm not really sure about the math in those graphs, but the top one asserts that they're making only 13 cents on every dollar. Either way it's a bad deal.

    But wait. If we read the comments posted by those who seem unsympathetic to the "musicians are getting screwed" model, the musicians should shut their yaps because they're really making money not on the IP they're creating and selling but on the tangible products of their music. They're making money from the shows! They're making money from the merch! Shouldn't the bands just shut the hell up and stop whining?

    Therein lies the problem with the whole argument being made by the recording industry.

    Maybe the bands should stop whining. Maybe they should just be happy with 13% and make their money from stuff that can't be downloaded off the Internet. But if that's the case then the RIAA should quit the BS about how copying is "stealing from the artist." OK. Maybe it is...a little bit. But who it's really "stealing" from is the record label who takes the lion's share of the moo-lah.

    Problem is, I bet that not too many of us are all that sympathetic to the A&R folks. It's one thing to feel badly because Tom Waits can't put food (or booze) on his table...it's another thing to feel badly that the record company who is backing him isn't going to be able to pay for the limos, executive suites, and bonuses that their leeches...errr...executives...aren't going to get if there's no money flowing into the system. Boo-freakin-hoo, right?

    Whatever. Going down that path gets us off of the main topic. The fact of the matter -- and the thing the recording industry (and the entertainment industry in general) can't get over-- is this: there's no going back.

    Yup. No going back. Once information went digital and we had an Interweb to connect people together and allow worldwide distribution of that information, the business model that relied on controlling the means of distribution was dead. Stone cold dead. And it ain't coming back. Really, think of it...can anyone imagine a reasonable scenario that would turn back the clock to where there wasn't an Internet and information couldn't be copied digitally?

    I didn't think so.

    So what do they do? Well, for starters it'd help if they'd try to imagine a different business model that doesn't involve controlling information that can't be controlled. HERESY! Yeah. I know. But it's reality, too. So what now?

    If the industry finally comes to its senses it'll realize that if they want to make money they're going to have to concentrate on selling things that can't be duplicated in the digital realm. Stuff like merchandise. Stuff like live performances. Stuff like killer packaging and added-value goodies that accompany the information-container (read "CD" or "DVD") that they're selling. It's pretty obvious when you look at ticket sales at theaters for 3D movies and cinematic "experiences" that can't be replicated at home (no....3D TV's don't count. Your home ain't an IMAX theater no matter how much you spend) or live performances or even box sets that it's possible to make money on things other than the music. Ask all those bands so many of the comments reference that are making money off their shows, off licensing, or off of sponsorships.

    Perhaps the new business model that record labels need to embrace is this: they become the "filters" that point us to new talent and then promote that talent (using their music) to make money on the tangible stuff. In some ways it means that labels need to stop worrying about making money off the intellectual property of the artists that they sell and start figuring out how to promote them so that they can make money off of the other stuff. Record labels should start thinking of themselves as promoters and ad agencies...not purveyors of plastic discs.

     

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    Anonymous Coward, Jul 13th, 2010 @ 8:20pm

    Broken system is totally broken.

     

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    Anonymous Coward, Jul 14th, 2010 @ 2:53am

    Courtney love is an attention whore and an idiot. This article is complete bullshit. It anti-capitalism and anti-american. The bands that are broke never sold that many records anyway.

     

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      Jay (profile), Jul 14th, 2010 @ 5:49pm

      Re:

      I really hope this is sarcasm...

      Look at TLC above then get back to me if you're serious.

       

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      teecee, Oct 9th, 2011 @ 4:08am

      Re:

      wrong. engineers aren't paid by the hour, they're not lawyers. they are
      paid terrific sums (100k and up for the a-team) to create their signature
      sound on a project. bob clearmountain comes to mind, as does roger nichols. google them...
      talent costs money; engineering and producing are an art form. these
      aren't the janitors...

       

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    Bengie, Jul 14th, 2010 @ 7:42am

    Hmmm

    Seems to me, having MysteryGuitarGuy from YouTube record/edit a music video and post on YouTube, then have a free 96kbit downloadable album with a link to purchase a 24bit/96khz FLAC version would be A LOT cheaper....

     

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    John Drefahl (profile), Jul 14th, 2010 @ 10:52am

    Square forced into a circle hole

    I think what people don't realize also is the over all influence of the Major Label accounting system effects the independent industry. While many people will say that the indies have their own value chain sorted.. (indie labels, indie artist, indie distributors, indie retailers) they are all forced to comply to RIAA publishing standards. If they even hope to get a hint of that licensing money.. they have to sign up with ASCAP or BMI.. Right there, you are forced into the major label financial environment. As people are exposed to competing with the majors for placement in brick and mortars.. The corners get shaved off the indie square as the label/artist tries to compete in the major world. This transition is usually a costly one and one reason why many otherwise successful indie ventures go belly up when trying to take it to the next level. Because the expectations change.

     

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    mistuhp, Jul 14th, 2010 @ 1:40pm

    Studio costs....

    The thing about $500,000 studio cost these days is that often times a major basically pushes you into their studio, that they own and profit off of. If you're a newly-signed band and you're trying to play nice with the studio, you won't really avoid this, even though in most cases, you can get an equal quality production at no more than $100,000. $500,000 is like rent a mansion for two months and have a big name produce it there kind of money.
    I've heard plenty of albums recorded in smaller independent studios for no more than $20,000 (plus about $5,000 in mastering) recorded within the past five years that are comparable in production quality with anything coming out of the majors' favored people/places. The market for recording time is not what it used to be, but the big guns push you away from it.

    Also keep in mind that almost all of the other "expenses" are through companies that are somehow subsidiaries of the major label, which means that built into those costs are actually bottom-line profits to the label. You're not being billed for man-hours or anything like that, and since there's no accountability for it, the label can pretty much just make up whatever numbers they want. Effectively, the majors have for decades set up this system to guarantee ridiculous profit margins. As an unknown band, though, it's very difficult to avoid, especially since there are a million non-band "bands" on the internet spamming the hell out of people and turning people off to listening to new stuff unless it's marketed to them in the right way (package tours, connections to other media, etc.).

     

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      Jay (profile), Jul 15th, 2010 @ 7:50am

      Re: Studio costs....

      Let's not forget Timbaland, who is a big guy for his beats for Missy and others, started out with nothing more than his laptop and creativity of the mind.

       

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    JohnGault, Jul 14th, 2010 @ 2:23pm

    A raw deal...

    This is a horrible deal and an artist should fight to locate a better deal.

    However, the article only evaluates one side of the equation. Yes a single successful artist can end up with nothing, but how many successful artist are there compared to unsuccessful artists? For every $1,000,000 they front and get recouped, how many $1,000,000 are never recouped? So even though they made a tremendous profit on a single successful artist, they may have lost money overall.

    The music business is one of the most competitive businesses on the planet. The level of competition pushing to be the number one musical artist is probably up there with oil companies fighting for the next oil lease. The music industry makes Wall Street look like childs play and the payout is much less (not to mention the probability of a payout).

    At the end of the day, a musician just better love the music and if they get paid, it's just gravy on top. Kind of a sad reality.

    My favorite quote from Hunter S. Thompson is "The music business is a cruel and shallow money trench, a long plastic hallway where thieves and pimps run free, and good men die like dogs. There's also a negative side."

     

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    Haco, Jul 14th, 2010 @ 4:23pm

    maybe I'm totally wrong here: but if you get a $1 million advance you earn at least: $ 1 million. only if the artists share from sales exceeds $1 million (minus all the expenses) than the artists would earn (more) from sales. on the other hand, even if the record doesn't sell well, the artists would still keep the advance.

     

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      Karl (profile), Jul 14th, 2010 @ 9:02pm

      Re:

      maybe I'm totally wrong here: but if you get a $1 million advance you earn at least: $ 1 million. only if the artists share from sales exceeds $1 million (minus all the expenses) than the artists would earn (more) from sales. on the other hand, even if the record doesn't sell well, the artists would still keep the advance.

      They wouldn't "keep" the advance, because they spent all of it on the rehearsal space, recording studio, mastering engineer, radio promotion, etc. None of this is paid for by the label.

      Sure, the band can keep whatever is left over. But labels won't give bands an advance that is much different than the recording costs. And they would know, since they control the recording costs. (For example: if you want to choose your producer, you have to give up "points," or small amounts of your royalties.)

       

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    artistrights, Jul 14th, 2010 @ 8:02pm

    One Sided?

    1. What about record label taxes? Courtney counts the band's taxes on royalties but conveniently omits those of the label (i.e., $10,000,000 after taxes based on her percentage is more like $6,000,000 for the label).

    2. What about record label overhead? Again, Courtney counts how much the band has to pay to its lawyer, agent, and manager, but omits the labels' same expenses. Major record labels employ hundreds of people, including lawyers, marketing reps, A&R reps, etc. You may not agree with the model, but the costs still exist, and should be considered in a balanced discussion.

    3. Finally, what if the artist/band totally flops (as most do)? Assuming they spent $500,000 on a record, they walk away with $500k cash. The label is out millions. And the band NEVER has to pay the label back on an "unrecouped" account.

     

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      Karl (profile), Jul 14th, 2010 @ 9:36pm

      Re: One Sided?

      For 1: Assuming the label is actually paying taxes, and not cooking the books to create "losses" like Hollywood does... Well, they're still earning at least 60% of $6.6 million, while the artists earn nothing at all.

      For 2: It's not like these things are public knowledge. You could ask the Harry Fox Agency about it, I suppose; they're allowed access to labels' financials.

      For 3: If an artist/band spends $500K on an album, it's very likely that the label won't advance them more than $500K. The labels almost always have veto power over the recording process. Plus, they've been crunching these numbers for decades, so they know what they're doing.

      And the label could not possibly be out "millions," because the label doesn't actually spend millions. They can't be out more than what they advance the artist, since that's what pays for the album.

      Also, keep in mind that labels still earn a profit on an "unrecouped" band. The label is allowed to keep all their share of the sales (which is about five times the artists' share), but the artists are not allowed to keep any of their share until the advance is paid back in full. Or didn't you read the Too Much Joy post, linked in the article?

      And the band does have to pay the label back on an unrecouped account. That balance is carried over to the next record on the contract, and usually is subtracted from the next record's advance.

      When you buy a toaster with a credit card, you don't "walk away" with a toaster. You still have to pay back the credit card company. And if credit cards were like record labels, after you paid your bill, the card company would own your toaster.

       

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        artistrights, Jul 15th, 2010 @ 6:40am

        Re: Re: One Sided?

        Karl:

        You're missing the point. I know you hate labels, but arguments are much stronger when you use legitimate arguments. For purposes of making a valid point, you can't count artist/band taxes/overhead and skip those that the label pays, even if you don't know them precisely.

        Putting aside conspiracy theories of "cooking the books", lets assume that the label makes $6.6 million on the album after taxes. That is GROSS. Then, you must finish the arithmetic -- deduce all of their costs, including overhead, mechanical royalties (publishers), manufacturing costs, etc. Using Courtney's numbers, that leaves the label with $2.2 million before paying overhead. Courtney takes another 30% or so off of the artists royalties for overhead (manger, agent, lawyer), so lets do the same for the label. After overhead, the label makes $1.5 million and the artist/band makes $180,000. Now, that's not a 50/50 split, but that number is far more accurate reflection of what the label walks away with.

        Finally, as for my third point, you need to remember that an advance is paid out BEFORE the label knows if the artist will flop or hit -- the band uses that money to MAKE the album, remember? So, the label will advance the soon-to-be flop $1 million, because it's an investment (and it follows Courtney's example above). The label pays tour advances, marketing costs, mechanical fees, video fees -- which amounts to millions of dollars. If the band flops, they still have their $500k before overhead. The label would then likely cut them from their recording agreement (if they flop, this happens regularly). Therefore, at the end of the day, the label is out MILLIONS even if they sold 20,000 records (i.e., the average flop these days). The band, on the other hand, walks away with their $500k in cash and owes the label NOTHING -- an unrecouped account is internal label accounting, not a legal debt.

         

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          Karl (profile), Jul 15th, 2010 @ 12:51pm

          Re: Re: Re: One Sided?

          Putting aside conspiracy theories of "cooking the books", lets assume that the label makes $6.6 million on the album after taxes. That is GROSS. Then, you must finish the arithmetic -- deduce all of their costs, including overhead, mechanical royalties (publishers), manufacturing costs, etc.

          No, $11 million is the gross. $6.6 million is what you have left over after you deduct all the label's costs for recording, manufacturing, and distributing the album.

          Now, you still have to pay the same overhead all businesses do - office space, employee salaries, etc. But most of these things are not public knowledge.

          Finally, as for my third point, you need to remember that an advance is paid out BEFORE the label knows if the artist will flop or hit (...) If the band flops, they still have their $500k before overhead.

          That's assuming that the label gave them an advance that was $500K over the total production costs. That's unlikely to happen - since the label usually hires the recording studio, producer, marketing department, etc., even though the band is paying for it.

          Therefore, at the end of the day, the label is out MILLIONS even if they sold 20,000 records (i.e., the average flop these days).

          If they did spend "pop star" money on a record that sold 20,000 albums, then yes, they are. But "flops" like that are pretty rare, actually. Of course, most albums don't sell even 20,000 records, but labels rarely spend more than a couple hundred thousand on the average record if it's not designed to be a Top 20 hit.

          And either way, the label owns the masters, so they can continue gaining income on those records, but the artists can't.

           

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            artistrights, Jul 15th, 2010 @ 1:35pm

            Re: Re: Re: Re: One Sided?

            Okay, so let's take $11 million gross, and take taxes out (as Courtney did for artist royalties). She used a 48% tax rate in her example. 48% of $11 million is $5,280,000. That leaves the label with $5,720,000. Minus costs of $4.4 million leaves $1,320,000. Now we have to deduct overhead, which Courtney neglected to do. Assuming it's 20%, that's around $200k, 10% is $100k. Now the label is making closer to $1 million on that album. Yes, I understand the separate issue of IP ownership and unrecouped balances. But contrast that with the $6.6 million figure Courtney came up with in her article. Let's be honest in our analysis.

            Obviously these estimates aren't perfect. But Courtney's figures are no better. And yet, many believe her lopsided accounting because it makes it easier to justify copyright infringement.

            Of course, a culture of non-paying consumers only makes these disparities worse for artists. Fewer record sales means less investment, smaller advances, and fewer risks by labels. And independent artists certainly can't rely on copyrights to protect them. They have to "hope" that their fans like them enough to support them, their management, and their songwriters for the rest of their lives. Furthermore, all software, movies, books, patents, and trademarks are all up for grabs too, right? After all, they often have lopsided contracts as well.

             

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              Karl (profile), Jul 15th, 2010 @ 5:11pm

              Re: Re: Re: Re: Re: One Sided?

              She used a 48% tax rate in her example.

              Um, what? She used a 17% tax rate ($170K on $1 million). That tax rate leaves the label with $9.13 million, not $5.7 million.

              Do you know of any business whatsoever that has to pay a 48% tax rate on their gross income?

              many believe her lopsided accounting because it makes it easier to justify copyright infringement.

              Of course it doesn't justify infringement. But any claim that the labels have ever worked on the "artists' behalf" are just as blatantly false.

              As is the claim that infringement "takes money" from artists on a major label. As we can see here, artists usually don't earn anything from CD royalties.

              And Love's "lopsided accounting" is pretty much square with all the other sources. Sources such as Steve Albini, Diane Rapaport, KnowTheMusicBiz.com - or even Danny Goldberg (who is solidly on the labels' side).

               

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                artistrights, Jul 15th, 2010 @ 7:57pm

                Re: Re: Re: Re: Re: Re: One Sided?

                Okay, fair enough. Do you see my point though? Can you (or anyone here) admit that the "lopsided accounting" does NOT in fact account for the label's taxes or overhead (which you concede is in the MILLIONS)? That's the point. It's misleading and no one else here figured that out?

                As for working on the artists behalf, I ask you to prove your point: what is the average salary of a non-signed artist compared to that of a signed artist? Do you have any proof that labels don't provide benefit to artists on the whole? Correct me if I'm wrong, but the Billboard 100, 200, 300 consists of all signed artists... even a $200k advance is more than more struggling artists make in a decade.

                 

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                  Karl (profile), Jul 15th, 2010 @ 8:53pm

                  Re: Re: Re: Re: Re: Re: Re: One Sided?

                  Can you (or anyone here) admit that the "lopsided accounting" does NOT in fact account for the label's taxes or overhead (which you concede is in the MILLIONS)?

                  I honestly have no idea what the label's taxes are; I don't know how that is figured for a business, especially a multinational conglomerate like a major label.

                  And they are a business, so of course they have overhead. But nobody knows exactly how much except their accountants. Does the cost of renting office space justify taking five times the artists' amount of royalties? Are the salaries so bloated that they literally can't make money if it's not a gold record?

                  If so - that's a problem with their business model. They should have cut out the deadwood, years and years ago.

                  what is the average salary of a non-signed artist compared to that of a signed artist?

                  Neither one earns a salary, so I don't know.

                  Correct me if I'm wrong, but the Billboard 100, 200, 300 consists of all signed artists...

                  That's disingenuous, and I'm pretty sure you know it. The reason that the Billboard charts are all signed artists, is because ever since the 1970's, major labels were the only ones who could gain access to music channels.

                  During the 1990's, even larger indies (Sup Pop, Touch and Go, etc.) could not get played on the radio. The Big Six (at the time) were the only game in town, and that's the only reason artists signed with them.

                  So, yeah, they "helped" artists... the way that company towns "helped" residents.

                   

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                    artistrights, Jul 15th, 2010 @ 10:26pm

                    Re: Re: Re: Re: Re: Re: Re: Re: One Sided?

                    Karl:

                    The fact that you don't know labels' exact overhead or taxes is reason enough to discount it entirely? You can't compare artist revenues after taxes and overhead against the gross revenues unless you deduct taxes and overhead. Period. Especially when you are trying to prove how much a label makes off the same album. If it's not known, don't rely on a study that doesn't account for it.

                    I find this apropos: $10 million+ = 38% tax bracket: http://www.smbiz.com/sbrl001.html

                     

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                      eclecticdave (profile), Jul 16th, 2010 @ 2:29am

                      Re: Re: Re: Re: Re: Re: Re: Re: Re: One Sided?

                      I could be wrong when it comes to large multi-nationals, but corporations generally pay tax on their profit, not their turnover. So that would be after costs and overheads were deducted, wouldn't it?

                      On top of that the label employs the best accountants who undoubtedly make sure that the maximum amount possible goes on lavish expenses and non-deductables.

                      It seems to me that although you might have a point about the specific numbers, whichever way you cut it, it still ends up that the label earns millions from the artist but the artist makes very little (40K each band member, bearing in mind that's only on the first album, for subsequent albums they start off in debt, so don't even get that).

                       

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                    artistrights, Jul 16th, 2010 @ 6:51am

                    Re: Re: Re: Re: Re: Re: Re: Re: One Sided?


                    Neither one earns a salary, so I don't know. Well let me suggest that you consider the alternatives before blasting labels for ripping off artists. From the New York Times:
                    Some musicians who don't land a [record] contract have been asking their fans to supply grants for developing new music -- and Web sites like Kickstarter, SellaBand and PledgeMusic aid the process by providing the software tools ... Fan financing of music seems best suited to exceedingly small projects. [One band member] said that in 2009 the group's 70 to 75 performances had brought in $6,000. Selling CDs added $2,000. For the year ... While it is cheering to see the success stories at Kickstarter and other sites, it is dismaying to see just how modest are the goals of the most successful.

                    Source: http://www.nytimes.com/2010/04/04/business/04digi.html

                    Um, what? She used a 17% tax rate ($170K on $1 million). That tax rate leaves the label with $9.13 million, not $5.7 million.

                    She most certainly did not calculate a 17% tax rate on the million (or at least, she shouldn't have). First, who do you know that pays income taxes of 17% on one million dollars? (See http://www.smbiz.com/sbrl001.html#pis10) Second, why would a band pay income tax on $1 million in gross income, when $500k of it is spent on an album (a business expense)?

                    Does the cost of renting office space justify taking five times the artists' amount of royalties? Are the salaries so bloated that they literally can't make money if it's not a gold record?

                    No, the nature of investment capitalism does. Look, start-up companies don't have to sign with a venture capitalist firm ("VC"). They don't have to give away 55% of their shares and the top spots on their board of directors to a VC in exchange for millions in upfront capital, but they do. Apple did, Microsoft did, and Google did. The VCs made billions off those deals, and maintained control over the board for some time thereafter. The justification is that any of those companies could just as easily have failed, and the VC would have to bear the entire loss. It may sound trite, but the profitable ventures have to pay for all of the unsuccessful ones, all expenses, and turn a profit for the company.

                    If one party is going to bear the entire financial risk of making you successful, it is not inconsistent to ask for a windfall on the back end if you make money. You don't get a 50% cut of the profits when you put 0% down on the investment. That is a business model that works in venture capital, book publishing, movie production, and music production. Indeed, it is the financial backbone of our intellectual property system (see patents, trademarks, copyright). But it's not the only system, and no one forces artists to sign. It's just incredibly successful. If that model doesn't work for you, try fan funding (see above).

                     

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                      Karl (profile), Jul 16th, 2010 @ 10:13am

                      Re: Re: Re: Re: Re: Re: Re: Re: Re: One Sided?

                      The fact that you don't know labels' exact overhead or taxes is reason enough to discount it entirely?

                      Okay, then let's ignore taxes or overhead.

                      For a million records sold: after expenses, but before taxes or overhead, here's what's earned:

                      Artists: $500K (left over from advance)
                      Labels: $6.6 Million

                      ...to be distributed among all relevant "employees."

                      Well let me suggest that you consider the alternatives before blasting labels for ripping off artists.

                      No artist, on a label or not, has ever made a "salary." That's what I meant. Their income is entirely speculative. That's why it's so easy to rip them off.

                      And it's not all labels I'm concerned about. The indies can be pretty good for artists. The majors are not.

                      She most certainly did not calculate a 17% tax rate on the million (or at least, she shouldn't have). First, who do you know that pays income taxes of 17% on one million dollars? (See http://www.smbiz.com/sbrl001.html#pis10) Second, why would a band pay income tax on $1 million in gross income, when $500k of it is spent on an album (a business expense)?

                      An advance is not "gross income." It is more like a loan. When you get a loan (e.g. from a bank), you are usually taxed on the entire loan, so I assumed that's what was happening here. (I'm not an accountant by any means.)

                      But, you're probably right, 38% actually does sound more likely. If it's on the net, the labels would be taxed 38% on the income made after operational expenses. I'm not a shareholder, so I don't know what those are.

                      But if operational expenses and taxes eat up anywhere near $6.6 million per record, then your business is bloated.

                      If one party is going to bear the entire financial risk of making you successful, it is not inconsistent to ask for a windfall on the back end if you make money. You don't get a 50% cut of the profits when you put 0% down on the investment.

                      If a VC said a start-up could only keep 13% of the profits, none of the IP, and that the VC would control the entire board of directors - well, no start-up would agree to that.

                      Not unless the VC held a monopoly on the entire market. Which is what labels did.

                       

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                        artistrights, Jul 16th, 2010 @ 12:03pm

                        Re: Re: Re: Re: Re: Re: Re: Re: Re: Re: One Sided?


                        Okay, then let's ignore taxes or overhead

                        No, let's not. Let's not compare apples to oranges. Let's look at all relevant factors when making a point, including the high overhead, expenses, and taxes labels must pay. What seems painfully obvious is that there is not nearly enough data available to make the sweeping generalizations embodied in this article or in your responses. And whether you do or not, the comments on this page make clear that consumers read this and see "justification to infringe music from the 'man' who rips off artists."

                        Other considerations omitted from the article include the value of $2 million in marketing that may benefit an artist for the rest of his or her life; the value of tour advances (in conjunction with promotion) that reap ticket and merchandise sales, etc.

                        I'm not getting into IP ownership, but the same is true in the motion picture industry. You have 10+ people working on an album (producers, mixers, sound engineers, musicians, background singers) that the label funded. The Work Made for Hire Doctrine exists to avoid constant litigation over joint-ownership issues: the one who funds the entire project is the owner of the IP. If artists want it otherwise, they don't have to sign with a label. But if they want millions in promotion, they do. And, of course, they are free to leave at the expiration of their contract and go on to own all future copyrights they create, but without the labels' investment. (And hopefully, they get their joint-creators to sign the same papers the labels had them sign if they don't want to end up in court when the album blows up and royalties start coming in)

                        Finally, how is this any different than the motion picture industry? If a movie studio makes $1 billion on Avatar, and the actors made $100,000 each (before taxes) aren't you outraged? The studio even gets to keep the IP! Actors deserve better, don't they? Certainly the ratio of profits between the parties is even more egregious in this situation. Let's make a pie chart for that disparity...

                         

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                          Karl (profile), Jul 16th, 2010 @ 2:44pm

                          Re: Re: Re: Re: Re: Re: Re: Re: Re: Re: Re: One Sided?

                          No, let's not. Let's look at all relevant factors when making a point, including the high overhead, expenses, and taxes labels must pay.

                          Okay, then explain to me how a record label can eat up $6.6 million per album in operational expenses and taxes. Don't include any costs associated with recording, manufacturing, or distribution, because those have already been included.

                          Until you can show me - in dollars and cents - why the labels should take all the money, I'm going to keep believing that they're ripping artists off.

                          Other considerations omitted from the article include the value of $2 million in marketing that may benefit an artist for the rest of his or her life; the value of tour advances (in conjunction with promotion) that reap ticket and merchandise sales, etc.

                          The artists benefit from marketing and promotion, to the degree that they benefit from what is marketed and promoted. For example: if CD's are what's marketed and promoted, and they never earn royalties from CD's, then they don't benefit from the promotion.

                          You have 10+ people working on an album (producers, mixers, sound engineers, musicians, background singers) that the label funded. The Work Made for Hire Doctrine exists to avoid constant litigation over joint-ownership issues: the one who funds the entire project is the owner of the IP.

                          The label did not "fund" any of these people. Every single penny of their paychecks was taken out of the artists' share of the royalties. The artist funded the project, yet the artist does not own the IP.

                          Finally, how is this any different than the motion picture industry?

                          Well, for one thing, movie distributors don't demand that the studios hand over their IP.

                          And if you're an actor or director, the movie's costs aren't taken out of your wages.

                          But there's also a fundamental difference between the art forms. Music albums (unlike films) aren't promoted as one-off collaborations. They're promoted as creations of the recording artist.

                          That's why people think music copyright is about "artists' control," or "making sure artists get paid," even though it's not. And the labels know it. They've been deliberately exploiting this confusion to broaden copyright laws.

                          consumers read this and see "justification to infringe music from the 'man' who rips off artists."

                          When the people who are the main draw are the very ones who earn the least, it seems dreadfully unfair. When labels claim piracy primarily hurts artists, they are lying. Take these two together, and it's no wonder that nobody feels guilty about infringement. Why should they?

                           

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                          Anonymous Coward, Jul 16th, 2010 @ 3:09pm

                          Re: Re: Re: Re: Re: Re: Re: Re: Re: Re: Re: One Sided?

                          See response at the bottom of the comments -- this is getting too small.

                           

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                        Guest111222, Dec 13th, 2011 @ 9:25pm

                        Re: Re: Re: Re: Re: Re: Re: Re: Re: Re: One Sided?

                        "Okay, then let's ignore taxes or overhead."

                        Never ignore taxes and overhead. For taxes, you should assume 50% (if you're in California or other high tax states) since even middle class Americans are very close to this bracket. And don't come up with BS spin on "write-offs", etc. Paying for a limo or fancy dinner might be lavish, but it's still an expense if it's business related. And also, don't make the common mistake of thinking that a write-off implies free money. Even when you hear terms like 100% write-off. That means you only save 50% of whatever you spent/then wrote off; once again, if you're in the highest tax bracket. Write-offs are considered, "buying quarters with dollars". The moral being, never spend money on something for business that's of no benefit because although you didn't waste all of it, you wasted some of it.

                         

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                    Guest111222, Dec 13th, 2011 @ 8:58pm

                    Re: Re: Re: Re: Re: Re: Re: Re: One Sided?

                    "I honestly have no idea what the label's taxes are; I don't know how that is figured for a business, especially a multinational conglomerate like a major label."

                    Their taxes are going to be like most other businesses. If it's an LLC and you make over $379K that puts you in the 35% federal tax bracket, and if you're in California and make $47,056 to $1,000,000 that puts you in the 9.3% tax bracket (over $1,000,000 and you're at 10.3).

                    So....

                    At the highest tax brackets you will pay more than 50% of your income to the State and Federal government (35% Federal, 9.3% to 10.3% California, the rest is AMT and other BS misc taxes and "fees", etc).

                    A C-Corp is worse: 25%-39% Federal, 8.84% California, then the share holders are taxed a second time on distribution of income (dividends) at 15%. This is considered double taxation.

                    It's all set up to where the government takes more than half of what you make (not including sales taxes, property taxes, hidden taxes in gasoline, etc). In the end 75% of all income probably goes to government, a lot of people speculate.

                     

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                      Guest111222, Dec 13th, 2011 @ 9:04pm

                      Re: Re: Re: Re: Re: Re: Re: Re: Re: One Sided?

                      I forgot to mention social security, medicare/medicaid. I guess you can lump it in as part of the BS taxes I mentioned.

                       

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                  Karl (profile), Jul 15th, 2010 @ 9:19pm

                  Re: Re: Re: Re: Re: Re: Re: One Sided?

                  I found this link apropos:

                  The Money Sponge

                   

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                Guest111222, Dec 13th, 2011 @ 8:32pm

                Re: Re: Re: Re: Re: Re: One Sided?

                "Do you know of any business whatsoever that has to pay a 48% tax rate on their gross income?"

                No one pays taxes on gross income, it's the net. Plenty of business pay 50% fyi.

                 

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    Anonymous Coward, Jul 15th, 2010 @ 5:04am

    On the flip side, im in a position wherei have an album and can't afford to release it properly, without a record company i have to become an expert in things i dont like doing, like graphic design, promotion, getting money. Give me small record company and a good manager anyday, but the big ones look a bit scary.

     

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    Bjorn Roche, Jul 15th, 2010 @ 9:58am

    So you signed a deal with the devil and the complaint is...

    ...that it didn't go as expected? Not that I am without sympathy, but artists want these deals. If they didn't, the deals would look a lot better because artists would be in a better position to negotiate them. Labels dictate the terms because artists want a contract, any contract. If a band sits down before signing and says, "wait, that seems unfair" the label might change it, or might not sign them. The label can find another artist, but can the artist find another label? OTOH, the band doesn't have to take the contract lying down, and small changes can make a big difference. Still, some bands don't negotiate at all because they think the label is on their side, or something.

    http://blog.bjornroche.com/2010/07/i-signed-deal-with-devil-and-now-he.html

     

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    Buddy Logan, Jul 15th, 2010 @ 4:05pm

    And it's been that way for years

    A friend grew up in an honest-to-god, live-on-the-road family band many years ago. They were not real well known except for the areas they frequently made appearances in, and they sold their records off the bandstand. My friends dad and Hank Williams were good friends. One day, at the height of Hanks career, the two were discussing record sales. When his friend told him what his profit from record sales had been the following year, Hank looked at him in disbelief. "Damn!", he said "you made more money on records last year than I did!"

     

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    s.muso, Jul 16th, 2010 @ 9:16am

    more freetard spin

    Another warped article created by digital industry apologists, to make filesharing freetards feel better about stealing from artist and labels.

    Techdirt get paid by tech companies adverts so trots out the digital spin.

    Please remember
    The article doesn't mention that the main benefit the artists on major labels deal would get ( using the example quoted) is $2-$5M of marketing, which allows artist to book in larger size venues, sell concert tickets and merchandise. and publishing royalties from sale of records, and from the airplay that the label gets.

    None of which is income that this article credits.

    Why else is that its mainly only artists that have been sacked from major labels, or never stood a chance of getting major label deals that whine on about them.

    If your lucky enough to be a beneficiary of that major marketing spend and are the sort of musician that wants major label exposure, and can handle the pressure, being on a major is a good business option for an artist.

    Most artists may not want to sell them themselves out, in major type deals, but artist simply can't afford to take the risk of investing ÂŁ5M dollars in themselves to make a hit record.

    If you dear reader are prepared to invest, then put your money where you oh so big mouth's are.

    But the fact is you wont because when it comes down to it very few people know that an artist's next record is going to be successful.

    the fact is you dear reader are as fickle as music buyers come, just because an artist had one big record doesn't mean the next one is a smash, and that you will buy it? If you wont why would you expect a label not to work a deal to reflect the reality of the fickleness of the consumer?

    Also artists rarely produce consistently great records.

    Are you prepared to take the risk that labels do in keeping an artist going, even if their record doesnt sound as bog as te next one?

    Also I don't see (m)any digital company support and market artists with $M's?
    yeah sure they stick em online on a fancy site but that's it.

    I don't see any digital company developing artists over long period of time, they cherry pick what's hot, and and try and suck a big % out of the artist or give away music they don't own since they get paid on a different model.

    Most of you here don't want to get it, because reality will compromise your justification for not paying for recordings because you can get away with it so far.

    Some of you are just building your business model on stealing music because you can.

    Very few artists or labels are selling huge quantities of recording these days, especially when 80% of recording distributed are unpaid for/stolen. the majority of this income is going to ISP's for the use of Pipe or companies that using stolen music to sell advertising.

    When you talk about sticking it to the RIAA, remember that google is bigger than all the RIAA companies put together, and any of your major telecom companies is larger that any individual record label - so when your sticking it to the man by stealing or sharing music without permission, you are still just ripping of musicians , just paying a different ever bigger "man".

     

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      Karl (profile), Jul 16th, 2010 @ 10:22pm

      Re: more freetard spin

      Your post is pretty easily debunked, but I don't have the inclination to do that right now. Maybe tomorrow.

      But this statement is really alarming:

      Some of you are just building your business model on stealing music because you can.

      Who exactly do you think you're talking to? None of us (Mike included) are running pirate sites. Most of us don't even download from pirate sites. What "business model" are you talking about?

       

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    Musi-source, Jul 16th, 2010 @ 9:22am

    Excellent, and very insightful article.
    Even for an indie musician doing it on his own, has many costs and rarely breaks even. You must have a really big meag hit or HITS to make money.
    http://musi-source.blogpsot.com

     

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    scarpenere, Jul 16th, 2010 @ 10:29am

    This scenario is based on a model that thrived perhaps 20 years ago, for bands that actually sold records, but it's not the reality for most deals made today. Further, budgets for albums, videos, etc. are seldom this large any more. Still, many bands need publicity, marketing, promotion and tour support, and no other entities (especially managers!) have so far stepped up to the plate to venture money on artist development. Its a high risk investment, and always has been.

     

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    s.muso, Jul 16th, 2010 @ 11:39am

    One Sided?

    "If a VC said a start-up could only keep 13% of the profits, none of the IP, and that the VC would control the entire board of directors - well, no start-up would agree to that."

    Plenty of startup's get diluted to less than 13%, by multiple fund raisings, before they become anywhere near profitable.

    and as for musicians;
    Go around anywhere and ask for $5m to invest in a band and see what you get?

    You'll get next to zilch from any digital start up or ISP.

    The reason is plain the competiton is staggering eg, 10 million acts on myspace.

    Most musicians would grab anyone that offered them a 13% royalty for anywhere near a $5m investment in their career at little- no upfront risk to the musician.

    The $5m profile boost mean the Musician's makes on the publishing and live shows & merch, even if they never see a dime on the records. It ain't the promoters or publishing cos that usually take that marketing risk.

    Its only the uninformed, the stupid, musicians that haven't had the benefit of that sort of investment, or a few very wised up and business minded musicians who are prepared and capable of doing a huge amount of additional work, that would argue.

    And don't count most of the mediocre musical nonsense that spends all their time online whoring around facebook, rather than songwriting - mediocre musicians that are better at twittering than performing.
    sure it give revenue to social media moguls,and benefits a few artist that would never have got arrested otherwise, but does little for the art you all bang on about.

    Major deals may become tough deals for artists if they compromise their art, or become hugely successful, but the fact is only 0.5% are successful, and ones that have careers, renegotiate.

    And that success rate isn't down to labels as much as to do with relentless competition, and little loyalty from the consumer. Not that I'm suggesting Artist's or label's deserve any loyalty, all art has always been tough for producers. that's the biz.

     

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    artistrights, Jul 16th, 2010 @ 4:05pm

    Re: One Sided

    Karl:

    Okay, then explain to me how a record label can eat up $6.6 million per album in operational expenses and taxes.

    This is not a zero-sum game. The labels don't have to break even to carry on a legitimate business. My point is simply that Courtney completely omits these necessary considerations, no matter how difficult they are to ascertain. I would assume someone with her experience, with such intimate knowledge of label costs, would have some idea of the taxes and overhead the labels must pay, and would compute them accordingly.

    The artists benefit from marketing and promotion, to the degree that they benefit from what is marketed and promoted.

    No, because labels market an "artist" as much as they promote an individual record (which is in everybody's interest). Even assuming the artist makes no money from an album (which through proper negotiation and re-negotiation won't happen), risk-free promotion is a fantastic way to cement celebrity status across the country -- something that won't happen touring non-stop to pay the bills. If you knew that Lady Gaga was making zero dollars off her first album, would you really argue that the millions spent by the label in promoting her name and likeness was worthless to her? Come on. Artists that "break away" from labels (Radiohead) are only able to do so after obtaining national prominence. Fans know the name, know the music, and know where to go to buy it. Are you saying that has no value outside "what is being marketed and promoted" at any given time by the label?

    The label did not "fund" any of these people

    Of course they did! You are only looking at one side of the equation. If the artist is unsuccessful, and album sales turn no profit, who paid all the bills? Who paid all the taxes? Who paid the advance to the artist? The label and the label alone. The artist owes NOTHING to the label. This is not a loan, it need not be repaid. The fact that 17 out of 20 bands FAIL explains why the entire recoupment system exists in the first place. It designates the risk taker as the one who gets the windfall in the short term. If the artist is successful, they can renegotiate for a higher royalty percentage, require the label to split video costs (or pay them entirely), and negotiate what expenses are recoupable. Artists do this regularly as the label's risk decreases and their profit increases.

    When labels claim piracy primarily hurts artists, they are lying.

    This argument never makes sense to me: the artist makes little, so I'm going to take their music for free, and ensure that the artist gets nothing. What do you do if you don't like how Wal-Mart treats its employees? Take products from the store in hopes it will drive them out of business? Is that "moral"? Do you regularly take CDs from Target or BestBuy to protest the large record companies business methods? If not, why not?
    If you don't like the big labels, don't buy their music. The result is the same -- the market will drive them out of business. But it is more than a little hypocritical to condemn the labels business, only to consume the very product they distribute.

    [D]istributors don't demand that the studios hand over their IP.

    This is a bad analogy. Distributors for music are: iTunes, Target, BestBuy, Rhapsody, etc. They also don't demand that the labels hand over their IP. Movie studios, however, own all IP in the movies, notwithstanding the role that leading actors play in them.

    When the people who are the main draw are the very ones who earn the least, it seems dreadfully unfair.

    What is dreadfully unfair is the number of struggling artists playing shows in a hole in the wall every night with two other jobs. Artists are adults who sign with a label for the chance to get big. If it wasn't for the label, most would never have had an opportunity at all. They would have no opportunity to quit their jobs to focus on their art, much less record a contract and tour -- all, by the way, with no risk of loss.
    So now, once the artist is famous due to the huge risk and millions in promotion spent by the label, you look at the artist's first album paycheck of $180k and say, poor, poor artist. Time to take a more circumspective look. Unfortunately, no one does.

     

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      Karl (profile), Jul 16th, 2010 @ 8:33pm

      Re: Re: One Sided

      See response at the bottom of the comments -- this is getting too small.

      Finally, something we both agree upon.

      This is not a zero-sum game. The labels don't have to break even to carry on a legitimate business.

      If they are screwing over artists because they waste money on non-music related operating expenses, then calling it a "zero-sum game" is not such a stretch.

      I would assume someone with her experience, with such intimate knowledge of label costs, would have some idea of the taxes and overhead the labels must pay, and would compute them accordingly.

      For the cost of goods sold, she did compute them. The overhead that is not related to the cost of goods, she probably wouldn't know. But if you know how much of their expenses go towards company jets, Rockefeller Plaza office spaces, million-dollar executive salaries, RIAA lawyers, and Washington lobbyists, then I'm all ears.

      Fans know the name, know the music, and know where to go to buy it. Are you saying that has no value outside "what is being marketed and promoted" at any given time by the label?

      Well, we were talking about record sales.

      What you are now talking about is artists giving away their music (to labels), in exchange for promotion, so that they can make money on selling something other than the music itself. From an artist's perspective, this is not any different than releasing your album on The Pirate Bay so that you can make money touring and selling T-shirts. Except with the Pirate Bay example, the fans get music for free instead of the label, and you get to keep the masters.

      Now, the promotional value gained from giving your music away to a major label, is not trivial by any means. The question is whether it's worth it. To top artists, it might be, but for everyone else, the answer is probably no. They didn't have a choice until recently, which is why many are now leaving, or not signing in the first place.

      Plus, in most cases this was already true of the band to some degree, or else the label wouldn't be interested in the first place.

      If the artist is unsuccessful, and album sales turn no profit, who paid all the bills? Who paid all the taxes? Who paid the advance to the artist? The label and the label alone.

      In Courtney's example, the record would have to sell roughly 435,000 records to break even on all recording, promotion, and distribution costs. (This includes the costs of the videos, but in reality if they sold "only" 435,000 units, they would never make a video.) Every album sold after that is gross profit. But at this point, the band is still over a million dollars in debt to the label.

      What happens when that record sells "only" 200,000 copies? Well, at this point, the label may do you the favor of dropping you. You and your bandmates could take your $45K each and run. But more likely, they'll keep you on for the other six records, but slash the budget to what they would have made money on if they'd sold 200,000 records. (The other albums would have, say, a $150K advance, no videos, no tour support, and a bare minimum of promotion.) They'd also demand more control over the music, to make it more "commercially viable."

      This means that even if you started from zero, you wouldn't have any of the advance money left over after recording costs. But you won't start from zero, you'll still have to pay off that previous balance on your original advance.

      This cycle will continue: the artist will go deeper and deeper into debt to the label, continue to earn absolutely nothing from either record sales or advances, lose creative control over their music, and have no option to get out of the contract. And the labels would still hold all the rights, so they'd have 35 years to recoup their losses, while the artists would be prevented from making money off of their music (e.g. through synchronization royalties from commercials or TV).

      Quite obviously, this is not benefitting musicians in the least. Yet it is the story of most musicians on a major label. If it wasn't benefitting the labels, then why do they do it? Why don't they just let the artists leave?

      It's because the labels are still making a gross profit off of most "flops." Maybe not very much gross profit, but more than what it takes to create and distribute the album.

      If they're too bloated to turn a gross profit into an operating profit, that's their own damn fault.

      This argument never makes sense to me: the artist makes little, so I'm going to take their music for free, and ensure that the artist gets nothing.

      It's not that the artists make "little," it's that what they do make is not impacted by piracy. The artist would make the same amount of money either way.

      Distributors for music are: iTunes, Target, BestBuy, Rhapsody, etc.

      No, those are retailers. Distributors are EMI, WEA, UNI, RED, Koch, Allegro, etc. Rhapsody et. al. are more like movie theaters.

      What is dreadfully unfair is the number of struggling artists playing shows in a hole in the wall every night with two other jobs.

      I'm one of those struggling artists, and I can tell you right now, there's nothing unfair about it. Sure, it sucks, but it's not like the world owes us a living. It's far less unfair than major label economics. Frankly, I've yet to meet a single musician who disagrees with me about that.

      If it wasn't for the label, most would never have had an opportunity at all.

      That used to be true - because the major labels made it true. Now that we all can bypass them, there are more opportunities than ever before.

       

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        artistrights, Jul 19th, 2010 @ 7:11pm

        Re: Re: Re: One Sided

        And so we agree to disagree. Unfortunately, those who despise record labels are adamant, and insist on painting all the majors with a single, broad brush. To them, labels are nothing but fat cats who care nothing for music or artists. Such generalizations are used to justify plain and simple copyright infringement.

        Whether it's music or movies or books or software, it is easy to make generalizations, argue about business models, and spout moral arguments to justify illegal behavior online. Record labels have been in business for decades, and yet people have never stolen CDs in protest of the "greedy" record labels. People take music online because it is easy and they don't get caught. That's it. Indeed, those who commit infringement are not only not helping artists, but they are also cowards.

         

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    Grace Bawden, Jul 17th, 2010 @ 9:17pm

    RIAA Accounting: Why Even Major Label Musicians Rarely Make Money

    This was a fantastic explanation into something that simply makes no sense, but I guess its not meant to... it just is.. It really puts things into perspective for us indies. Thanks.

     

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    Eccentric, Jul 18th, 2010 @ 5:27am

    Record royalties

    Hmmm...without wishing to defend scurrilous record companies, it helps to get a few facts right.
    Most royalty deals are based upon resale prices less packing deductions (typically 10 or 15%). Courtney's pi chart assumes the label is pocketing and therefore accounting on the basis of resale price. Wrong. So let's deduct 30% fromthe gross. We then need to deduct the song publishing element of the sale price (which may or may not go in whole or in part to the artists, if he or she is also the writer). So that's another 10-12%. And MPL - a few more points.
    The label nets far less than hte figures presented suggest but yes - if the act is profligate and the management poor, there will be a bucketload of recoupable expenses and a hit album will gross muchos filthy lucre for the label. BUT...this ahs to pay (often inflated) overheads (offices, staff, shareholders etc) and also subsidise the 90% of signings and releases that sink without trace. Because the process is a lottery.
    There are plenty of other, more dubious, accounting practices within these companies (phony intra-company licensing deals, dodgy subsiduaries salting money into executives private accounts etc) and the current scandal - massive interest fees payable for absurd funds raised by arbitrage and private equity buyouts designed to enrich fat cats. The worst example is that all those acts signed to EMI are busting their creative guts to flog albums purely to service ridiculous loans to Citi Bank.
    The Music Business long since ceased to be about music.
    Surprised? You shouldn't be.

     

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    Eccentric, Jul 18th, 2010 @ 5:28am

    Record royalties

    Hmmm...without wishing to defend scurrilous record companies, it helps to get a few facts right.
    Most royalty deals are based upon resale prices less packing deductions (typically 10 or 15%). Courtney's pi chart assumes the label is pocketing and therefore accounting on the basis of resale price. Wrong. So let's deduct 30% fromthe gross. We then need to deduct the song publishing element of the sale price (which may or may not go in whole or in part to the artists, if he or she is also the writer). So that's another 10-12%. And MPL - a few more points.
    The label nets far less than hte figures presented suggest but yes - if the act is profligate and the management poor, there will be a bucketload of recoupable expenses and a hit album will gross muchos filthy lucre for the label. BUT...this ahs to pay (often inflated) overheads (offices, staff, shareholders etc) and also subsidise the 90% of signings and releases that sink without trace. Because the process is a lottery.
    There are plenty of other, more dubious, accounting practices within these companies (phony intra-company licensing deals, dodgy subsiduaries salting money into executives private accounts etc) and the current scandal - massive interest fees payable for absurd funds raised by arbitrage and private equity buyouts designed to enrich fat cats. The worst example is that all those acts signed to EMI are busting their creative guts to flog albums purely to service ridiculous loans to Citi Bank.
    The Music Business long since ceased to be about music.
    Surprised? You shouldn't be.

     

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    Eccentric, Jul 18th, 2010 @ 5:30am

    Record royalties

    Hmmm...without wishing to defend scurrilous record companies, it helps to get a few facts right.
    Most royalty deals are based upon resale prices less packing deductions (typically 10 or 15%). Courtney's pi chart assumes the label is pocketing and therefore accounting on the basis of resale price. Wrong. So let's deduct 30% from the gross. We then need to deduct the song publishing element of the sale price (which may or may not go in whole or in part to the artists, if he or she is also the writer). So that's another 10-12%. And MPL - a few more points.
    The label nets far less than the figures presented suggest but yes - if the act is profligate and the management poor, there will be a bucketload of recoupable expenses and a hit album will gross muchos filthy lucre for the label. BUT...this has to pay (often inflated) overheads (offices, staff, shareholders etc) and also subsidise the 90% of signings and releases that sink without trace. Because the process is a lottery.
    There are plenty of other, more dubious, accounting practices within these companies (phony intra-company licensing deals, dodgy subsiduaries salting money into executives private accounts etc) and the current scandal - massive interest fees payable for absurd funds raised by arbitrage and private equity buyouts designed to enrich fat cats. The worst example is that all those acts signed to EMI are busting their creative guts to flog albums purely to service ridiculous loans to Citi Bank.
    The Music Business long since ceased to be about music.
    Surprised? You shouldn't be.

     

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    Joey Ayoub (profile), Jul 18th, 2010 @ 11:51am

    What can WE do about it?

    None of this is new with record companies. They have mastered the art of the old bait and switch routine. They do it to artists and consumers alike. There are small ways a consumer can help the artists out a little. For instance, if you steal someone's songs (we've all done it in one way or another), be honest, then purchase any item you possibly can from them, be it a sticker, t-shirt, lanyard, wristband, anything. We all know that nowadays bands try to sell ANYTHING with their name on it. The reason to do this is that a bands merchandise royalty is usually a LOT higher than their music royalty...... Especially bands that aren't signed at all. On a final note, WE DO NOT NEED RECORD COMPANIES. I'll say it again : WE DO NOT NEED RECORD COMPANIES. Great music will never die and people will easily find it with today's communication technology.

     

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    Joseph, Jul 22nd, 2010 @ 1:01pm

    obviously out-of-date

    I can't read all 200 comments above, so I'm hoping that people are mentioning this is horrendously out of date. I stopped reading as soon as I read this:

    So, this band releases two singles and makes two videos. The two videos cost a million dollars to make and 50 percent of the video production costs are recouped out of the band's royalties.

    ok... so this was accurate in 2000. Not today. I don't know any bands making even ONE video that would cost that much, let alone TWO.

    then the follow-up line is brilliant:

    The band gets $200,000 in tour support, which is 100 percent recoupable.

    wait a minute, I thought that touring was where bands could MAKE BACK all the money that is being lost through digital file-sharing? At least, that's what Masnick says. So why is this band taking $200,000 to tour on ?

    anyway, lets update this for 2010 please. The numbers look quite different now.

     

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    Richard L Walker, Aug 4th, 2010 @ 9:09pm

    Totally correct about RIAA non-deals

    -/ every expense goes directly to the band ... regardless
    -/ scam artists like Sonny Bono attempt to retain copyright (mostly for the RIAA) FOREVER rather than 75 years.
    The sooner all recordings are sold online giving the finger to the RIAA ... the better.

     

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    Drew, Aug 9th, 2010 @ 2:26pm

    re: In Defense of the Major Label

    On the behalf of the major...don't forget they pay taxes too. Have Salaries of staff to pay. Rent and Utilities. So it's not all profit-it's walking a fine financial line considering all the work put in and you own no real assets except Masters after all that money being spent.

     

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    herbert, Jan 12th, 2011 @ 2:40pm

    same happening here as with movies. making millions but cook the books to make out there losing money. then blame file sharing. politicians, governments and courts then believe the bullshit without even asking for proof.

     

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    Industry Professional, Jan 13th, 2011 @ 11:24am

    TRUTH

    So many wrong points of view here:

    First one responder tried to include publishing in the configuration from this article.

    Absolutely wrong! Publishing is not part of record sales, it is completely separate! Publishing is just what it is (performance royalties from radio, television, video, movies, commercials, sheet music, etc.) which is entirely separate from record royalties! Publishing is collected from one of the several performance rights agencies (ASCAP, SESAC, BMI,etc.) and then distributed to those owners and contributors of the song itself.

    PERFORMANCE RIGHTS AGENCIES WORLDWIDE - http://www.royalty-free.tv/rftv/performance_rights.htm

    NMPA (National Music Publishers Association)
    http://www.nmpa.org/legal/music101.asp

    Second artists need to learn the business, PERIOD!

    Most don't know what the 5 exclusive rights of protection in the copyright law are, what music publishing is (and that by law you don't have to give up more than 50% of it), that the distributor owes you money upfront not to be considered an advance or recoupable for mechanical royalties (royalties collected from the immediate and actual physical manufacturing of your copyrighted works at 9.1 cents X the number manufactured), etc. The Harry Fox is the largest agency for collection of mechanical royalties: http://www.harryfox.com

    Numerous others as independent artists don't know that release scheduling is important because you are now competing with the majors. They don't understand that leveraging your business is highly important, and that you must register your music with BDS to track radio airplay or with Soundscan to track record sales, or join NARAS to be nominated for a Grammy, to make sure that you get in contact with a radio consultant because no matter how many dj's, music directors or program directors tell you they are in control of their station's "play list', they are not telling the truth, because the majority of stations now belong to a broadcasting company network and must go through a corporate board that gets it's suggestions from a radio consultant (wonder why all stations sound the same now?).

    United States Broadcasting Companies: http://www.rbr.com/broadcasting-companies.html

    BDS & Sound Scan: http://www.nielsen.com/content/corporate/global/en.html

    The internet is a viable tool, and should be utilized to leverage your business so that you will be able to fully benefit from it.

    The majority of artists find themselves in what is called a "non-recoupable" status in the industry today. What this means is that the artist is responsible for whatever costs are incurred by the distributor and record label. So let's say an advance of 1 million dollars is given to the artist, then 2-3 million dollars is put of for marketing, promotions, advertising, and tour support (mini tours to help support the pending release of an album and build the artist's buzz), then another 1-2 million is put into the creation of the videos, branding materials, etc., the distributor and record label would first need to recoup all costs from whatever they spent, and only then would the artist be able to earn any money from the sale of their music. The artists would need to sell a ton of albums and digital downloads in order to recoup what was spent, but thew sad thing is that most don't or ever will, because the same process goes through for each consecutive album that they are contracted for.

    One more tragic scenario is that a lot of artists don't even own the masters to their music, or even the publishing, or have such a small interest in it because they didn't take the time to find out what it is. Michael Jackson through several business deals and acquisitions (ATV, Pye Records, Baby Mae Music, Acuff-Rose, Dial Records, Four Star Records, Challenge Records, Famous Music, etc), owns a large majority of the publishing or a large stake in it of some of the biggest artists today, which includes a list of who's who in the music industry: The Beatles, Lady Gaga, Willie Nelson, Charlie Pride, The Back Street Boys, Eminem, Rick Ross, Justin Timberlake, Gretchen Wilson, Hank Williams, Roy Orbison, Elvis Presley, The Everly Brothers, Jay-Z, Lil Kim, Flo Rida, India Arie, Hillary Duff, Gorillaz, Jessica Simpson, Jennifer Lopez, Patsy Cline, Beyonce, Black Eyed Peas, Tim McGraw, Jonas Brothers, etc. etc. Besides his genius as a performer, composer and writer, this displays Jackson's desire to be the best in business by asking what was needed to know for him to to succeed through Paul McCartney, Berry Gordy and others in his circle. All artists should strive to be the busineman that Jackson certainly was. http://www.sonyatv.com/

    No person or entity, other than the copyright owner, can use or employ the music for gain without obtaining a license from the composer/songwriter.
    Inherently, as copyright, it confers on its owner, a distinctive 'bundle' of five exclusive rights:

    (a) to make copies of the songs through print or recordings
    (b) to distribute them to the public for profit
    (c) to the 'public performance right'; live or through a recording
    (d) to create a derivative work to include elements of the original music; and
    (e) to 'display' it (not very relevant in context).

    Where the score and the lyric of a composition are contributions of different persons, each of them is an equal owner of such rights.
    These exclusivities have led to the evolution of distinct commercial terminology used in the music industry.

    They take four forms:
    (1) royalties from 'print rights'
    (2) mechanical royalties from the recording of composed music on CDs and tape
    (3) performance royalties from the performance of the compositions/songs on stage or television through artists and bands, and
    (4) synch (for synchronization) royalties from using or adapting the musical score
    in the movies, television advertisements, etc. and with the advent of the internet, an additional set of royalties has come into play: the digital rights from simulcasting, webcasting, streaming, downloading, and online "on-demand service.

    If more artists would first learn the business than having the burning desire to be famous first, then a lot of "one sided" contracts would not exist in the music industry. They would then have more leveraging power through them already securing the rights to their music by completely protecting it, and the rights to their "brand" by trademarking their name and image before stepping to a major label. No major distributor (EMI, WEA, SONY, UNIVERSAL) or any of the record labels they distribute (Tommy Boy, Bad Boy, Def Jam, Cash Money, Maverick, Road Runner, etc.) holds a gun to these artists heads and make them sign on the dotted line without understanding what they are signing. Then most get their family members, friends and "homies" to represent them as personal managers, and they too have no clue as to what the artist may be signing and agreeing to.

    Third, the entire infrastructure of the business is broken due to the MAPS agreement made between what was then 6 major distributors to level the median price of the compact disc, but the FCC caught them in price gouging and forced them to abandon it, but by then it was too late. The internet and various technologies P2P, etc., had already infiltrated the market place, and the rising cost of music forced the hands of these new technologies and consumers began to pirate, trade and exchange files over the net, while at the same time the majors railed against the digital revolution instead of embracing it. They too had the same opportunity to get on the learning curve and be ahead of these file sharing sites but instead chose to sit back and let it blossom into what it has become today. They definitely would have not stopped all piracy, but they could have curtailed it tremendously by being more fair and competitive with the pricing of their products. This has directly affected the traditional radio industry, the physical retail market, and several sub industries formerly supported by the success of the music business as a whole.

    Fourth, the RIAA is not to blame here. It is acting as a union should, to protect it's members, just like the Teamsters, the Screen Actors Guild, etc., that stand as a direct representative for it's members rights. Bottom line, you can't go into Sears and get a free appliance, you can't walk into McDonalds and get a free meal, you can't go to your dentist and get a free cleaning, or to your doctor and get free surgery, you can't go into a car dealership and drive out with a free car, so why should you be entitled to receive free music unless it is part of a promotion? Just as you would hurt the employees and the executives at the aforementioned companies and industries, so you do the same to these artists, executives and their individual families because they are depending on the sale of music to take care of their responsibilities.

    Even the RIAA admits that the decrease in record sales can't be attributed wholly to P2P sites: http://www.zeropaid.com/news/91984/riaa-admits-p2p-not-solely-to-blame-for-decreased-music-sales/ We are in one of the worst economic times in the history of this country over the past several years, but don't think for one second that P2P sites have not put a dent in the business, because they have.

    Fifth, the big problem that the industry faces today is the sudden exodus of brand-name artists away from the traditional recording companies. The digital revolution has opened up more avenues for artists today, that already have a brand name. In the case of both Prince and Radiohead, they have made inroads on how to survive and prosper without depending on the wings of a major distributor. Their business models that were launched by them, have been a guide for all artists to follow or at least gain some insight on how to conquer the marketplace without the "eyes" of a major hovering over all facets of your music business career. Record companies have always depended on the revenue and cash flow generated from platinum-selling artists to finance new talent. If that revenue stream disappears, how can they compete with the new digital technologies that are already here and on the horizon?

    You do not get into a for profit industry just to be a provider of "free services", you get into a for profit industry because it is what you chose to do with your life, as these individual artists chose to be in the business of music, and you want to make a good living at it. Bills do not pay themselves, and no matter how creative an artist may claim to be, trust that they want to earn a living at what they are doing.

    Sixth, sorry but most of these digital distribution sites are collecting royalties and charging upload fees to a large majority of artists that actually never even break even in what may have cost them 'out of pocket' to launch their music business. The CEO's and founders of these online entities have gone on to become multi millionaires while most artists still struggle to make a living with their music. For instance, the artists distributed to iTunes by these online merchants, make more per download than ANY major label artist ever will and are happy for it. However its a volume game and 100 downloads will not pay the bill no matter how high the royalties are. So you still need to be known and loved by a substantial amount of people before the fact that your song is “For sale on iTunes” is going to make a difference to your Wallet. Also, the advantage of releasing in a digital platform like iTunes is the lack of prints and advertising costs, not to mention distribution. Distributors are immediately reimbursed for their costs before skimming the remaining gross for overhead and profit. Self-pressed CDs would all still have the same expenses, one way or another, however the disadvantage is the same, because as previously stated you still need to account for some form of advertising and promotion, and just doing it on Face Book, My Space, you Tube, etc.. just isn't going to cut it, especially when you are still competing against the juggernaut of the major distributors. Not saying that it isn't possible to earn a living, but it won't be a field of roses either.

    The revenue per fan is clearly higher, the more direct the relationship is with the fan. The argument for an artist right now is about reaching new fans, more fans, online fans, other bands' fans that have a similar brand or music. Yet, too often the chase is on for transient fans, those that tend to be band wagon jumpers and more than likely account for the majority of P2P sharing and piracy. Instead the focus should be on building long term relationships with those who have shown interest in the music – loyal fans, not transient ones.

     

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    Industry Professional, Jan 13th, 2011 @ 12:09pm

    TRUTH

    So many wrong points of view here:

    First one responder tried to include publishing in the configuration from this article.

    Absolutely wrong! Publishing is not part of record sales, it is completely separate! Publishing is just what it is (performance royalties from radio, television, video, movies, commercials, sheet music, etc.) which is entirely separate from record royalties! Publishing is collected from one of the several performance rights agencies (ASCAP, SESAC, BMI,etc.) and then distributed to those owners and contributors of the song itself.

    PERFORMANCE RIGHTS AGENCIES WORLDWIDE - http://www.royalty-free.tv/rftv/performance_rights.htm

    NMPA (National Music Publishers Association)
    http://www.nmpa.org/legal/music101.asp

    Second artists need to learn the business, PERIOD!

    Most don't know what the 5 exclusive rights of protection in the copyright law are, what music publishing is (and that by law you don't have to give up more than 50% of it), that the distributor owes you money upfront not to be considered an advance or recoupable for mechanical royalties (royalties collected from the immediate and actual physical manufacturing of your copyrighted works at 9.1 cents X the number manufactured), etc. The Harry Fox is the largest agency for collection of mechanical royalties: http://www.harryfox.com

    Numerous others as independent artists don't know that release scheduling is important because you are now competing with the majors. They don't understand that leveraging your business is highly important, and that you must register your music with BDS to track radio airplay or with Soundscan to track record sales, or join NARAS to be nominated for a Grammy, to make sure that you get in contact with a radio consultant because no matter how many dj's, music directors or program directors tell you they are in control of their station's "play list', they are not telling the truth, because the majority of stations now belong to a broadcasting company network and must go through a corporate board that gets it's suggestions from a radio consultant (wonder why all stations sound the same now?).

    United States Broadcasting Companies: http://www.rbr.com/broadcasting-companies.html

    BDS & Sound Scan: http://www.nielsen.com/content/corporate/global/en.html

    The internet is a viable tool, and should be utilized to leverage your business so that you will be able to fully benefit from it.

    The majority of artists find themselves in what is called a "non-recoupable" status in the industry today. What this means is that the artist is responsible for whatever costs are incurred by the distributor and record label. So let's say an advance of 1 million dollars is given to the artist, then 2-3 million dollars is put of for marketing, promotions, advertising, and tour support (mini tours to help support the pending release of an album and build the artist's buzz), then another 1-2 million is put into the creation of the videos, branding materials, etc., the distributor and record label would first need to recoup all costs from whatever they spent, and only then would the artist be able to earn any money from the sale of their music. The artists would need to sell a ton of albums and digital downloads in order to recoup what was spent, but thew sad thing is that most don't or ever will, because the same process goes through for each consecutive album that they are contracted for.

    One more tragic scenario is that a lot of artists don't even own the masters to their music, or even the publishing, or have such a small interest in it because they didn't take the time to find out what it is. Michael Jackson through several business deals and acquisitions (ATV, Pye Records, Baby Mae Music, Acuff-Rose, Dial Records, Four Star Records, Challenge Records, Famous Music, etc), owns a large majority of the publishing or a large stake in it of some of the biggest artists today, which includes a list of who's who in the music industry: The Beatles, Lady Gaga, Willie Nelson, Charlie Pride, The Back Street Boys, Eminem, Rick Ross, Justin Timberlake, Gretchen Wilson, Hank Williams, Roy Orbison, Elvis Presley, The Everly Brothers, Jay-Z, Lil Kim, Flo Rida, India Arie, Hillary Duff, Gorillaz, Jessica Simpson, Jennifer Lopez, Patsy Cline, Beyonce, Black Eyed Peas, Tim McGraw, Jonas Brothers, etc. etc. Besides his genius as a performer, composer and writer, this displays Jackson's desire to be the best in business by asking what was needed to know for him to to succeed through Paul McCartney, Berry Gordy and others in his circle. All artists should strive to be the busineman that Jackson certainly was. http://www.sonyatv.com/

    No person or entity, other than the copyright owner, can use or employ the music for gain without obtaining a license from the composer/songwriter.
    Inherently, as copyright, it confers on its owner, a distinctive 'bundle' of five exclusive rights:

    (a) to make copies of the songs through print or recordings
    (b) to distribute them to the public for profit
    (c) to the 'public performance right'; live or through a recording
    (d) to create a derivative work to include elements of the original music; and
    (e) to 'display' it (not very relevant in context).

    Where the score and the lyric of a composition are contributions of different persons, each of them is an equal owner of such rights.
    These exclusivities have led to the evolution of distinct commercial terminology used in the music industry.

    They take four forms:
    (1) royalties from 'print rights'
    (2) mechanical royalties from the recording of composed music on CDs and tape
    (3) performance royalties from the performance of the compositions/songs on stage or television through artists and bands, and
    (4) synch (for synchronization) royalties from using or adapting the musical score
    in the movies, television advertisements, etc. and with the advent of the internet, an additional set of royalties has come into play: the digital rights from simulcasting, webcasting, streaming, downloading, and online "on-demand service.

    If more artists would first learn the business than having the burning desire to be famous first, then a lot of "one sided" contracts would not exist in the music industry. They would then have more leveraging power through them already securing the rights to their music by completely protecting it, and the rights to their "brand" by trademarking their name and image before stepping to a major label. No major distributor (EMI, WEA, SONY, UNIVERSAL) or any of the record labels they distribute (Tommy Boy, Bad Boy, Def Jam, Cash Money, Maverick, Road Runner, etc.) holds a gun to these artists heads and make them sign on the dotted line without understanding what they are signing. Then most get their family members, friends and "homies" to represent them as personal managers, and they too have no clue as to what the artist may be signing and agreeing to.

    Third, the entire infrastructure of the business is broken due to the MAPS agreement made between what was then 6 major distributors to level the median price of the compact disc, but the FCC caught them in price gouging and forced them to abandon it, but by then it was too late. The internet and various technologies P2P, etc., had already infiltrated the market place, and the rising cost of music forced the hands of these new technologies and consumers began to pirate, trade and exchange files over the net, while at the same time the majors railed against the digital revolution instead of embracing it. They too had the same opportunity to get on the learning curve and be ahead of these file sharing sites but instead chose to sit back and let it blossom into what it has become today. They definitely would have not stopped all piracy, but they could have curtailed it tremendously by being more fair and competitive with the pricing of their products. This has directly affected the traditional radio industry, the physical retail market, and several sub industries formerly supported by the success of the music business as a whole.

    Fourth, the RIAA is not to blame here. It is acting as a union should, to protect it's members, just like the Teamsters, the Screen Actors Guild, etc., that stand as a direct representative for it's members rights. Bottom line, you can't go into Sears and get a free appliance, you can't walk into McDonalds and get a free meal, you can't go to your dentist and get a free cleaning, or to your doctor and get free surgery, you can't go into a car dealership and drive out with a free car, so why should you be entitled to receive free music unless it is part of a promotion? Just as you would hurt the employees and the executives at the aforementioned companies and industries, so you do the same to these artists, executives and their individual families because they are depending on the sale of music to take care of their responsibilities.

    Even the RIAA admits that the decrease in record sales can't be attributed wholly to P2P sites: http://www.zeropaid.com/news/91984/riaa-admits-p2p-not-solely-to-blame-for-decreased-music-sales/ We are in one of the worst economic times in the history of this country over the past several years, but don't think for one second that P2P sites have not put a dent in the business, because they have.

    Fifth, the big problem that the industry faces today is the sudden exodus of brand-name artists away from the traditional recording companies. The digital revolution has opened up more avenues for artists today, that already have a brand name. In the case of both Prince and Radiohead, they have made inroads on how to survive and prosper without depending on the wings of a major distributor. Their business models that were launched by them, have been a guide for all artists to follow or at least gain some insight on how to conquer the marketplace without the "eyes" of a major hovering over all facets of your music business career. Record companies have always depended on the revenue and cash flow generated from platinum-selling artists to finance new talent. If that revenue stream disappears, how can they compete with the new digital technologies that are already here and on the horizon?

    You do not get into a for profit industry just to be a provider of "free services", you get into a for profit industry because it is what you chose to do with your life, as these individual artists chose to be in the business of music, and you want to make a good living at it. Bills do not pay themselves, and no matter how creative an artist may claim to be, trust that they want to earn a living at what they are doing.

    Sixth, sorry but most of these digital distribution sites are collecting royalties and charging upload fees to a large majority of artists that actually never even break even in what may have cost them 'out of pocket' to launch their music business. The CEO's and founders of these online entities have gone on to become multi millionaires while most artists still struggle to make a living with their music. For instance, the artists distributed to iTunes by these online merchants, make more per download than ANY major label artist ever will and are happy for it. However its a volume game and 100 downloads will not pay the bill no matter how high the royalties are. So you still need to be known and loved by a substantial amount of people before the fact that your song is “For sale on iTunes” is going to make a difference to your Wallet. Also, the advantage of releasing in a digital platform like iTunes is the lack of prints and advertising costs, not to mention distribution. Distributors are immediately reimbursed for their costs before skimming the remaining gross for overhead and profit. Self-pressed CDs would all still have the same expenses, one way or another, however the disadvantage is the same, because as previously stated you still need to account for some form of advertising and promotion, and just doing it on Face Book, My Space, you Tube, etc.. just isn't going to cut it, especially when you are still competing against the juggernaut of the major distributors. Not saying that it isn't possible to earn a living, but it won't be a field of roses either.

    The revenue per fan is clearly higher, the more direct the relationship is with the fan. The argument for an artist right now is about reaching new fans, more fans, online fans, other bands' fans that have a similar brand or music. Yet, too often the chase is on for transient fans, those that tend to be band wagon jumpers and more than likely account for the majority of P2P sharing and piracy. Instead the focus should be on building long term relationships with those who have shown interest in the music – loyal fans, not transient ones.

     

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    Cleon (profile), Jan 14th, 2011 @ 2:49pm

    Though the premise is essentially correct the pie chart is wrong in at least one or two areas. The producer does not make 3%(average) of the band's share but 3 (or more) per cent of the dealer price of the unit sold. Also 13% is an incredibly low royalty. The entry level these days is around 18%.Many new deals are stronger in favour of the artist than that and there are others that are more adventurous that involve profit sharing as well. Having said this I still would strongly advocate doing things indie if you can afford it and you have the financial backing to make and promote your own product.

     

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    dave, Jan 18th, 2011 @ 2:42pm

    As entertaining as this was to read, it is extremely misleading. And to Truth's comment above, you've uncovered many of them. Cortney Love is certainly not that reliable a source.
    Having worked with many touring bands, signed to major and independent deals...as well as strictly independent bands (I have since moved onto another job), this article is extremely inaccurate and misleading.
    At the risk of rambling on for hours, if you are in a band and looking to get mass exposure, the internet is a fantastic tool, an unbelievable advancement for artists to have their art shared globally.
    The whole slam of record companies is just growing tiresome, we get it, they make a lot of money while the artist makes little. it's just so boring nowadays.

    the music industry is just that, a business...much like anything else. to anyone who say "I'll buy a band t-shirt at a show to support them" isn't exactly as they see it either. Between the cost of printing, shipping, taxes and venue fees - YES, that club that you saw your favorite band at for $40 and sold you a $5-6 bottle of beer is taking 20-25% of every single t-shirt they sell to fans(anything they sell in fact, be it CD, wrist band, hat shirt...bla bla bla). That said, the $25 concert t-shirt...likely sees a band walk away with about a $3 profit...certainly better than what they make on CD sales...but very little.

    i've had this conversation with many bands and have heard many opinions and many different interpretations as to "what a record deal is." this one stuck with me and upon mentioning to many of the other bands i worked with, it makes sense...so here it is.

    any band looking to get out of playing their tiny little town in the middle of nowhere, where they've worked their way up to charging $2-5 at the door...think of a record contract as a means to an end goal. In order to get out of that town and tour around the world it take the millions of dollars for marketing, making posters, getting you on bigger tours, aligning you with bigger and better bands to get you to the next level. these millions have to come from somewhere so do you forego the CD sales royalties in exchange for the millions of dollars in marketing/support?

    SO...yes, in theory, you can make money without a record company...absolutely. and yes artists can sell their own music on itunes etc...but that also boils down to the "0+0=0" analogy. if no one knows who your band is...it's going to be tough being profitable.

    however, with someone backing you properly, that could be next year....by playing regional shows, with no one helping you whatsoever...you're a dime a dozen.

    much like any business partnership...there is a deal to be made.

     

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    jDjD, May 17th, 2011 @ 6:08am

    Stay away from record labels. Use services like Jamendo.com or alike to reach the world!

     

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    Anon, May 26th, 2011 @ 2:36pm

    Don't forget...

    Don't forget taxes! The artist would get $23.40 and then have to pay income taxes, medicare, and social security on that. When all is said and done that's another 35% or so (if they are in the US, more elsewhere with VAT) depending on how poor they are. So really the final number is more like $15.21 per $1,000... I've seen pyramid schemes that are more profitable than that:

    Sell 50 albums, get a free T-shirt!

     

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    Cries of Solace, Jun 21st, 2011 @ 6:29am

    Yikes there's some truth to this.....

    I believe it! I had some friends/bandmates here in Houston that were signed to labels back in the mid 90's, one band was signed to Geffen a major label and what they told me was eye opening...after hearing their horror stories getting signed was not a high priority....believe me it would be nice but not only is it hard to get a deal with a major label but it's much harder staying there because once they decide they don't need you the strings are cut quickly!

     

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      Cries of Solace, Jun 21st, 2011 @ 6:33am

      Re: Yikes there's some truth to this.....

      I also forgot to add all now have reg. jobs and the little money they made off royalities is long gone and wasn't very much to begin with for all their hard work, effort!

       

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    Bernie, Aug 30th, 2011 @ 7:44am

    Play for Pay

    Musicians should only get paid when they play. I have been playing semi-pro since 1970. Used to be that whenever someone had a party, dance, wedding etc they hired a band. Now they hire a DJ. Whenever I play some joker has a video cam and posts my performance on facebook or utube. People watch recordings instead of coming to hear me play.

    I repeat: Musicians should only get paid when they play.

     

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    b, Nov 10th, 2011 @ 6:59pm

    there is so many options out right now for selling your music but the promotion is the key radio promoters want a whole lot of money. you can have a brilliant track that will sell and put you on the map but the promoter wants 100k in a virtually free music world I dont get it

     

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    Stefan Herwig, Jan 28th, 2012 @ 6:53am

    OMG, Mr Masnick, PLEASE stop spreading this misinformation

    I will keep this brief, beause I already feel like an idiot resonding to an article written 1 1/2 years ago, but the figures in the article itself are UTTER bullshit.

    I work in the music industry since 1993, I also run a manegement company, AND do conercert booking. So I know the business from more than a single perspective. I am from europe, but figures and business are quite comparable. I have toured the US and work with various US companis as well.

    Please trash the digram above, it has VERY little to do with the actual reality.

    1.
    The division of earners from Cd sales does not include physical retail, which is taking a large cut from sales, actully more than the record label is making. The same goes for digital distribution btw.

    I dont see retilers or digital portals (iTunes) in this cut at all.

    2.
    Additionaly, record companies are paying high fees for the copyrights to copyright institution societies like GEMA (Germany), PRS(UK) or the Harry Fox Anency. That money (or to be precise: approx. 90% of it) is then forwarded to the authors and composers, who are - most of the time - the artist themselves. So the artists are having another income source from the CD sales, the so-called "Mechanical royalty".
    This is missing completely, and only 1 & 2 show that Mr Masnick has ZERO CLUE about the music business. But he certaily likes to make bold statements nonetheless.

    3. Artists are not only making money via CD sales itself but also movie and computer games licenses, compilations, international sublicenses, radio broadcastig, live, mrchandising sales etc. There are several streams of income for artists and most of them are highly depending on the success of their CD album and on the level of promotion that artists are getting. And the party investing into recording, promotion, marketing, licensing, syncing, etc. is usually the record company. They put in 6 digit budgets for promotion, allowing their artists to make some serious money off tconcerts and merchadising. anyboody who has ever been on tour knows that it makes a big difference for artists if they play in front of 100, 500 or 2000 people. Only very few artiss without record companies can afford to reach a touring level that allows them to make serious money.

    4. Artist are having three major income sources, CD sales, live and merchandising (and some minor like syncing, etc.). But the only one really investing serious budgets in those artists careers are record companies. Concert agencies are not investing in artists careers, merchandising companies arent neither. And no, social media has tunrnt out to be an unjustified hype for 99,8% of the artists. (Bu that is another story)

    5. Record cpmpanies spend not only money on artists they also have A&R experts motivate and guide artists to make better albums. This is obviously a delicate balance, as many think that A&Rs are wateding down artistic expression but - beliebe it or not - record cpompanies are actually benefitting from "good records", so they have an interest in artists making good albums, and A&R scouts finding new talents.

    Nine Inch Nails has been hailed as one of the best examples in music culture to liberate from the evil Music Industry, but both of his "free albums" where crap compared to their albums released on record labels and the band simply dissolved after the last tour lost money for them. Nobody points out facts like that. It does not fit the new media hype, so lets brush it under the carpet.

    5. If you people want to really judge if payments of artists are "justified" or not, you should at least try to understand, what each party is bringing into thia equation. If a 60 people large record company funds a record, works on it for four tp six months (production, promotion, marketing, distirbution, licenses, accounting, A&R, etc.) than a five piece music band can not just expect to get the largest part of the cut, because that would mean the record company would not make enough money to sustain itself. And if an artists record company goes bancrupt, it means the artists get nothing.

    It makes much more sense for an artist that the record company make enough money, so that they can keep investing money into artists for three or four records, so that the artists can build up careers for themselves.

    Interestingly enough, many of the commentators in the thread are making the decision to notbuy but steal record, meaning the artists get NOTHING, and nobody invests in newcomers music. And that is exactly where we are right now.

    Now, on a metalevel of this discussion: Is it not interesting that the internet is supposed to be this superior information tool, and yet we have so mich false and misleading information being released? Well Mr. MAsnick, lets ask the question, if you are realy interested in ACCURATE information, or if a "black and white" situation does not serve ur blog a little better.

    Sincerely,

    Sh

     

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      Anonymous Coward, Feb 19th, 2013 @ 9:35pm

      Re: OMG, Mr Masnick, PLEASE stop spreading this misinformation

      Not buying, or downloading. On the other hand, this "misinformation" as you call it is regularly spewed out by the local intellectual property offices on their secondary school talks, saying that artists don't make much money and therefore please buy their albums.

      So if you're not seeing any money from me, while complaining why the above chart is everyone's impression of how things work in your industry - guess what, it's not because of piracy, and your proponents are spreading and agreeing with the data you claim is misinformation.

      Posting two years late doesn't matter. You could have posted your response the day the article was posted and you'd still look like the jackass you are.

       

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    Vanmind, Mar 16th, 2012 @ 11:31am

    Kill the RIAA and its member companies. Upload your work to & download your songs from sites like jamendo.com.

     

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    John Parks, May 11th, 2012 @ 7:25pm

    Deceiving numbers...

    While they do not make much money from album sales, they DO make money from touring and live concerts, merchanidizing, endorsements etc.

    Everyone in the industry who is a business savvy musician knows that making a CD is not to make money, but to merely create value for your "brand". Yes, you may be the guinea pig for the label, but the label provides you the catalytic exposure to have the type of industry leverage to carry on with your art on a live performance basis and through other lucrative means. This is where "studio" artists (Kim Zolciak, Kim Kardashian, Paris Hilton etc.) who can't perform live worth a damn end up high and dry... and it's also why people like Beyoncé actually make money.

    This is the big picture many "indie" artists miss when they are so adamant about not selling out to a major label. They sacrifice the increased value the label provides for their band over the long term for marginal short term profits.

    BUT... this does make a good case for why people are staying away from labels, but it's only half the story.

     

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    Erik Kluiber, Jun 21st, 2012 @ 2:57pm

    Misleading Fraudulent Journalism

    This is a misleading article with exaggerated and completely fabricated examples that have no relevance on how a reputable label operates in today's times. This article was written with an agenda to paint a distorted picture of record labels. Don't buy into these lies.

     

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    joe mop, Jul 1st, 2012 @ 10:25am

    who is in charge here?

    RIAA, and who is in charge of RIAA, doesnt matter how many people's theories get posted here, at the end of the day, you have to bow down to the people making the rules and who are they? what planet do they come from?
    Gone are the days, of the Rolling stones and the Beatles, that is folklore...
    Now this is all about profit and profit always finds it's way to the top of the pyramid and who sits on top of the pyramid???
    When you answer that question grasshoper, you will know how deep in shit we all are...

     

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    Kappa, Jul 13th, 2012 @ 5:15am

    The record labels are not wrong for this practice. All of this is a gamble and the only ones who will lose is the label. Say for exmple they spend $5 million signing you and promoting and marketing, etc. and your career flops, the record label potentially lose $5 million, but if you're a successful artist, the record label could make $5 million. Its a gamble just like if you were in Las Vegas, except its the record labels money that is being used for this risk.
    Besides, this is nothing new. Everyone knows that artists doesnt make their money from record sales, they make their money from concerts, air time, merchandise, etc. and they make damn good money this way. They make theirselves seem like the victims saying they dont make money from record sales, but they dont tell you that they have hundreds of millions of dollars from other avenues and they live in big mansions with houses all over the world, driving Mercedes and Porsche and all these wonderful things.
    I guarantee you that artist like Lady Gaga, Madonna, Britney Spears, Beyonce, Coldplay, etc would not be the MEGASTARS they are without those "monsterous" record labels

     

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    identicon
    nemesis321, Jul 19th, 2012 @ 12:08am

    A question...

    I understand what the record label companies are doing...but if that is the case, then how would you explain the super-swank life style the famous musicians are living?justine beiber just bought a 10,000 sqft mansion.The boy already own 3 sports cars...where does all this money come from?would somebody please explain?

     

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    identicon
    k6, Jul 24th, 2012 @ 3:26am

    i am nigeria super star

    hello my name is kayode i am from nigeria africa i am also a super star in my country well my song is on air well if u want to here my song pls go to www.naijapal.com click it and search for k6 u will see my pics and my song there if u wnt to help me for business just contact me for ur show this is my email wapagone@yahoo.com

     

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    identicon
    Anonymous Coward, Jun 9th, 2013 @ 9:33am

    what a joke! A to Z hilarity.

    2 videos for $1,000,000., lol

    "May as well work at 7/11" - what about the $750,000. in publishing income?

    etc etc etc etc etc

     

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    Mark New, Aug 29th, 2013 @ 6:44pm

    This report is incorrect in many areas

    Sorry folks I can speak first hand as I am a person who has worked with major labels and artists, negotiated artists contracts, made music videos and the list goes on and not a single thing in this report is correct ESPECIALLY the cost break downs and what the artist etc gets.... A false report made by some silly fool

     

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      identicon
      Anonymous Coward, Nov 1st, 2013 @ 3:45am

      Re: This report is incorrect in many areas

      If it's incorrect, then please offer some information? An appeal to authority (You, speaking first-hand) isn't of any use.

       

      reply to this | link to this | view in chronology ]

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    identicon
    Anonymous Coward, Dec 29th, 2013 @ 2:42am

    So most artists are leaving them, and they want the public to pay for their existence?

     

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    identicon
    Sik Style, Apr 7th, 2014 @ 4:42pm

    I am getting signed. I think it is worth it

    I am getting signed. I think it is worth it BC i dont know enough people to get me out there. We should all sign a deal if offered then break off and do it solo when the world knows you. I get 100+ likes a day but when the world hears me i will get millions then i can sell my own stuff..

     

    reply to this | link to this | view in chronology ]


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