Warner Music's Royalty Statements: Works Of Fiction

from the too-much-joy dept

For years we’ve all heard the stories about how bad the major labels are at accounting for royalties they owe bands. There have certainly been a large number of lawsuits from artists claiming that this rather opaque accounting system is used to hide money from musicians, with various multi-platinum selling musicians claiming they never saw a dime of royalties from their albums, thanks to major label accounting. This is, of course, rather amazing in this day and age where technology allows for amazingly accurate accounting practices — even for massively complex operations. But, then again, these are the major labels we’re talking about, and they’re often proud of their technical cluelessness.

Still, it’s quite interesting to see a blog post, sent in by Quentin Hartman and written by the singer for the band Too Much Joy, Tim Quirk. Quirk is in an interesting position. Having been a moderately successful major label artist who is now an executive at digital music company Rhapsody, he’s seen different sides of the business — and in his must-read blog post, he details the absolute fiction that is a royalty statement from Warner Music Group — leading to the flat-out false claim that Too Much Joy earned a grand total of $62.47 in digital royalties over five years across their three Warner albums. You really should read the whole thing, as it’s quite detailed about how the major labels view most bands on their roster.

Back to my ridiculous Warner Bros. statement. As I flipped through its ten pages (seriously, it took ten pages to detail the $62.47 of income), I realized that Warner wasn’t being evil, just careless and unconcerned — an impression I confirmed a few days later when I spoke to a guy in their Royalties and Licensing department I am going to call Danny.

I asked Danny why there were no royalties at all listed from iTunes, and he said, “Huh. There are no domestic downloads on here at all. Only streams. And it has international downloads, but no international streams. I have no idea why.” I asked Danny why the statement only seemed to list tracks from two of the three albums Warner had released — an entire album was missing. He said they could only report back what the digital services had provided to them, and the services must not have reported any activity for those other songs. When I suggested that seemed unlikely — that having every track from two albums listed by over a dozen different services, but zero tracks from a third album listed by any seemed more like an error on Warner’s side, he said he’d look into it. As I asked more questions (Why do we get paid 50% of the income from all the tracks on one album, but only 35.7143% of the income from all the tracks on another? Why did 29 plays of a track on the late, lamented MusicMatch earn a total of 63 cents when 1,016 plays of the exact same track on MySpace earned only 23 cents?) he eventually got to the heart of the matter: :”We don’t normally do this for unrecouped bands,” he said. “But, I was told you’d asked.”

As you hopefully know, with a major record label, the band gets an advance to record the album. From then on, the label no longer pays the band anything. Even though the band accrues royalties on albums sold, those royalties simply go towards repaying the advance. Most label bands never fully repay the advance, and are thus considered “unrecouped.” This does not mean (as record label defenders will claim) that such bands were money losers for the label. The labels still take their own hefty cut from any album sales. They just also hang onto the tiny fraction of album sales that are officially designated for the actual musicians.

Basically, what Quirk notes, is that whether through malice or indifference (or a combination of both), the general major label attitude towards “unrecouped” bands is that the accounting is meaningless, so they don’t even bother. That means they make massive mistakes — such as the time Warner just happened to make a $10,000 mistake in Warner’s favor, and then mocked Quirk for even caring about such a measly sum.

Now, when it came to digital revenue, for most artists, Warner apparently doesn’t even bother to tell artists what their digital royalties are. They’re unrecouped, so it doesn’t matter in the minds of Warner execs. Quirk, by nature of also being an industry exec was able to (thanks to a chance meeting at a conference and 13 months of waiting) get Warner to agree to detail his digital earnings. But, because the band is unlikely to pay off the nearly $400,000 in “unrecouped” advance money, basically Warner did a slipshod job of it all. What this tells you is that Warner either has no serious accounting system to track this sort of thing or has mastered the art of obfuscating everything and purposely acting like their accounting department is run by six-year-olds. I’m not sure which is scarier.

Now, Quirk is reasonably clear that he’s just as likely to attribute all of this to a combination of indifference and incompetence than to malice — and there’s nothing to indicate otherwise. But, you do have to ask how seriously anyone can take any of the ridiculous numbers that Warner Music Group or the RIAA toss around concerning the music industry and “losses” due to “piracy” and such, when it can’t even put together an accounting system that can track (let alone accurately count) the most basic information that it is contractually obligated to both track and report. It also should highlight, for any bands who still actually think signing a major record label contract makes sense, how little regard major labels like Warner Music Group actually have for most of the artists on their label. As Quirk notes in discussing the $10,000 error:

When I caught this mistake, and brought it to the attention of someone with the power to correct it, he wasn’t just befuddled by my anger — he laughed at it. “$10,000 is nothing!” he chuckled.

If you’re like most people — especially people in unrecouped bands — “nothing” is not a word you ever use in conjunction with a figure like “$10,000,” but he seemed oblivious to that. “It’s a rounding error. It happens all the time. Why are you so worked up?”

So, perhaps, the next time that Warner Music claims that it deserves $22,500 for a “pirated” song, someone will point out that according to Warner Music’s own accountants, such numbers are really just a “rounding error” and there’s no need to pay them. Somehow, I get the feeling that Warner Music will take a different view on such numbers about then.

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Comments on “Warner Music's Royalty Statements: Works Of Fiction”

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Ima Fish (profile) says:

the general major label attitude towards “unrecouped” bands is that the accounting is meaningless, so they don’t even bother

I think the intent and purpose of this is to keep such bands unrecouped. If accurate records are kept as to how much is earned, eventually the advance will be repaid. The labels do not want that to happen. Hence, they simply do not keep track of it.

ChimpBush McHitlerBurton says:

Re: Labels

I agree.

I’ve said it before and now again: Upstart bands who hope to “make it big” are well advised to take advantage of the new technology to create a buzz for themselves and develop a fan base well before considering signing with a label, if deciding to do it at all.

Ultimately, you will want to get as big an advance from the label as possible, then *forget* royalties. They are going to screw you with accounting games anyway, so get the money up front. If you have a huge fan base, hungry for your album, you can negotiate a huge advance. Get $600,000 and spend $100,000 recording the album. The band gets $500k and can call that a win.

Also, with a pre-developed audience, you can negotiate a better contract in regards to how many albums you have to record for the label. Best deal? ONE PER CONTRACT.

Labels are corporate rip-off artists, and the more music artists who come to this realization, the better.


senshikaze (profile) says:

what really sucks is that “normal” people don’t care and musicians are going to continue to do sign with these labels!
I am sticking firm in my resolution to never buy(or even pirate) RIAA music.
There are plenty of indie bands out there that aren’t tied to a huge conglomerate organization that has no care for the actual musicians or their consumers.

Anonymous Coward says:

Re: Accounting....

Accounting brought down Al Capone … me thinks its gonna be the death of the recording industry also

Yes, he went to jail based on Accounting, but Accounting is NOT bring down Capone, it’s what the feds were able to charge him with. If they were able to get him on the stuff they were trying to the Accounting would never have come up. If they weren’t trying to get him the Accounting would never have come up.

nasch (profile) says:

Re: Re: Accounting....

Yes, he went to jail based on Accounting, but Accounting is NOT bring down Capone,

What do you mean by “bring down” then? I think most people would consider it to be “the thing he went to jail for”. Tax evasion is not the original reason the feds were interested in him, but it is what got him arrested, convicted, and sentenced. Had he not committed that crime, he may have gotten away with his others, since obviously the investigators were unable to find enough evidence to charge him with those.

slander (profile) says:

Re: Re: Re: Accounting....

The big difference here is that the Feds wanted to take Capone down, so they used the tax evasion charges because they couldn’t get him any other way.

The media industry, however, has Congress in its pocket. The government will not go after the media industry simply because it would be biting the hand that feeds it…

Seth says:

Re: Re:

That’s sort of a good point. The band DID get $400,000 to make the records. And any money from that which is not spent on recording goes into the band members pockets. So whether you’re paid upfront or on the back end, you are still getting paid. Does the Warner’s accounting still screw bands? Of course it does! But I guarantee no one was complaining years ago when the advance check came in

Ima Fish (profile) says:

Re: Re:

I just wanted to point out that the band does not get to spend that advance. The recording studio, the producer, the engineers all need to get paid. The parties thrown by the labels are paid for out of the advance. The packaging of the CDs. All marketing materials, including the CDs sent to DJs and radio stations are paid for out of the advance. I remember reading about a band, which I cannot find now, that after everyone was paid, they ended up getting much less than they were making before being signed.

And then there’s the second part of this. Sure, the label paid $400,000 as an advance, but when there is a hit record/single involved, the label still makes millions off the recordings. And it certainly helps when the label is not keeping track of what is owed to the artist.

Chronno S. Trigger (profile) says:

Re: Re:

If I owed any kind of money, $10,000, $100,000, $1,000,000, I would kill the guy who laughed in my face after I pointed out they lost $10,000. That was just $10,000 that I found, what else may have been lost? A few dollars here, a few there can add up quick (believe me, I went broke $6.75 at a time). Knowing that they were making millions off of my work would just make me kill him that much faster.

Anonymous Coward says:

Re: Re: Re:

When you are behind by $400,000, even $10,000 is just a rounding error in the game. I suspect that the label guy’s comment is directly in that line of thought, that with a 400k debt, 10k isn’t significant.

Obviously, the record companies sank a whole bunch of money into a band that didn’t sell. It would be fairly foolish of them to keep investing money in accurately accounting for their losses, which they have probably already long since written off.

Auditrix (profile) says:

Label Accounting

WMG’s royalty system may be broken and the most outdated of all the majors (it still uses an AS400 system), but it’s not fair to single out just WMG; As a royalty auditor, I think ALL of the major labels have insufficient royalty accounting systems and practices…and it’s not just that the labels improperly account to unrecouped artists; labels similarly underreport royalties to recouped artists and publishers. (In fact, in some instances, unrecouped artists get a better shake than recouped artists. For example, record companies have been known to under-allocate blanket license income to recouped accounts and over-allocate blanket license income to unrecouped accounts because the companies know they won’t have to pay out royalties on the unrecouped accounts.)

Not only do labels lack the technology and qualified staff required to account correctly, but part of their business model seems to be based on the fact that very few artists will audit and even fewer artists will sue. As a result, there is little incentive (besides a new 1.5% late fee for statutory mechanical publishing royalties under Section 115) for the labels to change their practices. In the meantime, the only way you will get even some of what you are due as an artist or publisher is to hire a good auditor and attorney, both of which can be too costly for unrecouped artists.

Incidentally, I don’t see how the issue of underreported record royalties has much bearing on damages in connection with separate cases of copyright infringement, which if I understood correctly was Mr. Masnick’s point in his last paragraph.

CastorTroy-Libertarian (profile) says:

Re: Label Accounting

Well, if you cant do accounting correct (to pay those who are makeing money for you) and is most likely one of the most universal things in business, all your other numbers (piracy number, how much per track a downloader costs) are complete fiction as well.. but to the other point maybe they can patent number game fiction, course the labels most likely taught Enron how to do accounting too…

Of course that brings up a question, if your say Bernie Maydoff or Enron the government literally hangs you for doing this kind of gaming on the books, but if the labels do it its all smiles and nods and the musicians take it in the back… yet all anyone does is SCREAM PIRATES!!

Anonymous Coward says:

I, as a music consumer, was under the impression that when I bought a major-label CD or song on iTunes, the artist would actually get some nonzero amount of money. I guess that’s incorrect in many cases? Is there some way for a consumer to tell if a given album is “recouped” or not?

(And if one buys a CD or song on iTunes, do the songwriters actually get some royalties? How does that work?)

Bill (profile) says:

Why should we believe unrecouped vs. recouped makes a difference?

If they are that cavalier about unrecouped royalty tracking, why is there any reason to believe they are getting the royalty tracking right for recouped bands?

Presumably it’s the same software/process in both cases, so even if I was in a band which was fortunate enough to have had repaid my advance, I wouldn’t believe my royalty statements either.

oxana (profile) says:


The world of music copyright is evolving. Monopolies of collecting societies are under pressure. Songwriters complain about a lack of benefit, music users about non-transparent and high tariffs. Collecting societies are old-fashioned. Now is the time for online DIY copyright management.

VillaMusicRights is a website in English, Spanish and Dutch, and plays a role as a facilitator in the contacts between songwriters and users of their music. This means you can upload your music and arrange your rights. The music will be stored in a database and users can download it.
Downloads for home users are free, but business users have to pay a modest amount of money. Both songwriters and users have to register. Songwriters have to declare to own the rights to the music and users have to declare that they won’t use the music for other purposes than agreed.
VillaMusicRights takes care of payments between songwriters and business users and receives a commission in remuneration of the cost of display, advice and transactions.

A lot of music genres already are represented in the database, from rock to reggae and from blues to easy listening.

Website: http://www.villamusicrights.com

herodotus (profile) says:

“I just wanted to point out that the band does not get to spend that advance. The recording studio, the producer, the engineers all need to get paid. The parties thrown by the labels are paid for out of the advance. The packaging of the CDs. All marketing materials, including the CDs sent to DJs and radio stations are paid for out of the advance.”

And don’t forget, the label dictates how you make the album, where you record the album, who engineers the album, and which songs you put on it. If they think that you need ‘that analog sound’, and that you should use 2 inch tape at 300 bucks a reel (about 15 minutes of recording time) that’s what you use. No matter how stupid you think it is, no matter how wasteful it is to have someone using a razor blade on magnetic tape when they could do all of the editing in seconds using any standard DAW, that’s what you use.

C’mon AC, tell us how all of this good for the art of music. I am looking forward to it.

warner ceo son says:

i like bit torrent

but don’t tell daddy that my rich stuffy wallet needs to steal too
its rich kids like his that annoy me
so the idea came down to UUB and thorttle and cap people so that the poor were off the net then the attitude that its non commercial downloading and i cant aford it go away
and guess what

no more p2p allowed in that world
enjoy it

ACTA is coming whether you want it or not

brokeastunes says:

Those advances

I remember the story about the band who was in the recording studio and this label executive came down to hang with the band and bond with them in the studio-whatever. He brings a case of beer-some natchos-they all share blah blah. Much later they see the beer and natchos carefully accounted for and deduncted form their advance…

Auditrix (profile) says:

Re: Those advances

This is a small example of incorrect charges that my clients recover as a result of my audits, if their attorneys were smart enough to ask for a provision disallowing recoupment of costs in connection with record company personnel. (Normally record companies agree to this provision without much haggling, so if it isn’t in your agreement, you may want to consider getting a new attorney.)

Often these costs are much greater than beer and nachos, LOL!

TonsoTunez (profile) says:

Auditrix - Thank You

Nice to hear the voice of experience on this list … she’s exactly right when she describes how the business works …

Oh, and speaking of business … Tim’s band is (was) a business. Tim and his band owned all their rights before entering into an agreement with Warner Bros in return for certain good and valuable considerations including the payment of royalties.

Entering into an agreement with Warner Bros did not relieve him of his responsibility as the proprietor of a business. He is not a child and should stop whining like a child and act like an adult.

If he is not happy with his statements, as a business person he should first question the record company … If not satisfied with the answers, hire an auditor (although I don’t know her, I would feel comfortable with Auditrix just because of her responses here). If the auditor finds discrepancies that record company won’t correct, he should hire an attorney … We’re big boys, we’re business people, we should act like big boys and business people.

Remember this is show BUSINESS.

I do have one question for Tim … did he ever walk down the hall and ask Rhapsody’s royalty department how much they paid Warner Bros …? I’ll bet it’s near zip. In general long tail acts aren’t generating perceivable income from download streaming or sales …

I don’t want to sound like I am defending Warner Bros… Auditrix is right when she says their equipment and staffs aren’t up to the task of handling royalties appropriately … Much of that has to do with complicated and varied artist royalty provisions in the original recording agreements exacerbated by the overlaying of even more complex royally requirements set up by royalty boards and the courts.

That’s why if you want to be in the business of making music … you have to get your head our of la la land and become a business man yourself – or hire competent, tax deductible, help.

Come on… artists are talking about their own lives here … they have to realize that life in the music business isn’t just making music with your friends …

Joe (profile) says:

Seems odd that the labels give the artists ANY royalties at all if they aren’t going to bother with the accounting. I mean, if they don’t have any plans to pay the artists back, why not just write that up in their contracts? $400k is a sizable chunk of cash, and I’m sure some artists would be happy to sell their works outright to the labels for that kind of money.

I’m NOT saying the labels are right here or that I support Warner or any other RIAA label. I’m just saying is seems like they could do away with the “headache” completely by changing the contract terms they offer. Anyway, I’ve gotta get back to downloading RIAA-backed music and buying indie-label albums. Thank you http://riaaradar.com!

Anonymous Coward says:

So Joe

Joe says: “I’ve gotta get back to downloading RIAA-backed music.”

So Joe … you don’t mind hurting people like songwriters who are not related to the RIAA (that’s all of them) – 70% of whom don’t perform and, therefore, can’t sell T-Shirts? Those people only get paid when money changes hands for the use of their music … whether by the piece or via advertising proceeds.

Anonymous Coward says:

Re: So Joe

If songwritiers are not related to the RIAA then how is downloading RIAA-related material relevant?

Couldn’t they write other things? Like poetry? And perform their poetry? For an audience? And sell them t-shirts? With their poetry on the t-shirts?

Uncreative people are terrible for the creative industry.

Anonymous Coward says:

Re: Re: Re: So Joe

Because they’re the exact same thing!

If I could “steal” his ability to lay bricks to lay my own bricks then I may see how you had a point but you’re being rather disingenuous.

Or if I created a robot to lay the bricks instead of hiring your friend then maybe, no, still disingenuous.

Not everyone can lay bricks but everyone can write a song. Except for the morons.

Anonymous Coward says:

Re: Congress investigate music companies

I remember when EMI was bought out by that private equity group and went through their books. They found quite a few expenses that referred to “fruits and flowers” which, of course, were euphemisms for hookers and cocaine. Or vice versa.

You’ve just got to love the music business. I don’t but still.

Anonymous Coward says:

“this doesn’t mean Warner “lost” nearly $400,000 on the band. That’s how much they spent on us..”

So he admits they did spend $400K on his sad little band.

“..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.”

IF…that’s the operating word here. He doesn’t say how much many copies Warner sold. Surely if they had sold enough, he wouldn’t have to “work for a reasonably large corporation myself.”

“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.””

How does he know they didn’t lose any? It’s likely they didn’t sell many records of this pathetic little band, and are probably not making much money off downloads either, since “five years’ worth of digital income from our far more popular major label albums would at least make a small dent in the figure. Our IODA royalties during that time had totaled about $12,000 – not a princely sum, but enough to suggest that the total haul over the same period from our major label material should be at least that much.”

$12K in 5 years!!! What a loser!

“And I also knew that IODA was able to tell me exactly how much money my band earned the previous month from Amazon ($11.05), Verizon (74 cents), Nokia (11 cents), MySpace (4 sad cents) and many more.”

And this guy has the gumption to make a blog post on how the labels are screwing him and his sorry little band, when the fact of the matter is the world doesn’t give two hoots. Pathetic little loser!

And he goes on to say: “Even with the band receiving only a percentage of the major label take, getting our unrecouped balance below $375,000 seemed reasonable, and knocking it closer to -$350,000 wasn’t out of the question.”

Mike, before you castigate others on their reading comprehension skills, perhaps you should try and cure yourself of the disease of selective reading.

This was just a case of too much pain for the label, despite your attempts to paint it differently.

ABSIL Fabrice says:

digital royalties from majors & others

Based in FRANCE , I do many auditing royalties of all sorts( publishing , physical & digital royaltie sales,neighboring rights etc .;) for artists & producers( big names & smaller ones from various countries). Digital statements are a nightmare and full of heavy mistakes but that’s not the only part of statements where monies are missing . In a declining market that’s for sure that majors are doing their best not to be as transparent as they should be in a perfect world, as it’s one of their sources to keep revenues as high as maximum for them .So the story of TOO MUCH JOY is just one case among thousands. Good to point it out but the only way to get your monies is to audit.

The eejit (profile) says:

So,let me put this into perspective; WMG can;’t account because they’re incompetent at money. And yet, they are complaining about ‘Teh Evul PYRATES!!!!!!11!!!one!!111!!!1!1!111!!!!oneeleven’

LAst time I checked, if a business had such creative accounting, the people wer supposed to be arrested for fraud and negligence.

But, because these morons have money, they buy some politicos and change the law to suit themselves, right? Because that’s clearly the fairest solution to the world’s woes.

TonsoTunez (profile) says:

So Joe

Anonymous Coward writes:
“If songwritiers are not related to the RIAA then how is downloading RIAA-related material relevant?”

70% of the songs used on recordings distributed by RIAA member record companies are not written by the artists who perform them. Songwriters are paid by the piece … so, they don’t get paid when a song is illegally downloaded. Those songwriters who don’t perform, therefore, are shit out of luck when it comes to getting paid for their work.

Is is a crime against humanity for songwriters to have their songs recorded by artists whose music is distributed by an RIAA member company? Should they say, “I refuse to have my songs recorded by any artist whose label is related to the RIAA?

Stand along songwriters are thrilled when ANYBODY cuts one of their songs… it happens so infrequently. They don’t deserved to be raped as a result of your vendetta against the RIAA.

bhull242 (profile) says:


They sold well, just not well enough for the small portion of the revenue that should go to the band to cover the advance. Many albums sell well enough to more than cover the advance when you consider the amount of revenue the record labels earn from them but still not enough to recoup the advance when using the revenue earmarked for the band. In other words, the band loses money but the record label makes money.

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