So Why Can't Major Record Labels Provide Accurate Accounting To Bands?

from the because-that-would-mean-paying-them-accurately dept

The more you learn about the way major record labels work, the more ridiculous it seems. Unlike pretty much every other creative deal making situation, musicians who sign major record label contracts basically hand over all their rights to the label. The label gets the copyright. It gets to determine the type of music the musician plays. It handles much of the marketing and promotion. And... the biggest thing of all is that it handles all the accounting and payments (if there are any). Over the years, that's resulted in many, many accusations from artists that the labels are flat out lying about how much an artist actually earns. That's why you hear stories of artists selling millions of albums and never seeing a dime in royalties or of artists suing record labels because of sneaky accounting tricks to hide how much an album has earned.

Dave Stewart, from the Eurythmics, has written an article for Billboard where he points out that any retailer in the world has access to amazingly detailed technology and tools to track transactions and settle details with credit card company merchant accounts. He notes how ridiculous it is that such systems have been available for nearly thirty years... and he still can't get an accurate transparent accounting of what a record label has sold.

In the past, the major labels could get away with this, because they were the only real game in town, if a band really wanted to get big. But that's changing. This, of course, is the major labels real concern over new innovations and technology. It's not piracy. It's that new technologies take away the biggest scam they've had going for ages: the ability to keep tons of money that never belonged to them. And that's changing. As Stewart notes:
In the future, all incoming revenue streams will be reported in real time, with transaction costs pre-defined and competitive with the market. In the old model, content distributors have been slow and/or reluctant to adopt new media. Distributors frequently take significant portions of creative control out of the hands of the artist, placing restrictions on format, functionality, interactivity and other components. Copyright controls inherently limit the models and methods of release and distribution of artist products. Digital distribution and rights management methods have failed to leverage technological and business advancements to serve consumer, artistic and corporate interests. With many distributors, the feedback loop on consumer usage is also limited. Buyer profiles, habits and usage patterns are not shared with artists, who are then forced to use other means (surveys, focus groups) to determine how their content is being received by the fan. Especially troubling is that, in many cases, artists are not entitled to any control over precisely what happens with their creative work, or to apply some of the new and innovative ideas in the digital landscape due to restrictions from rights holders. Digital media technologies for distribution, asset management, security and monetization have matured to the point that an easy-to-use, scalable, fully featured digital media gateway and financial tracking system is now possible and should be demanded by all artists.

Filed Under: accounting, dave stewart, eurythmics, labels, music


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  1. identicon
    OtherKevin, 19 Jun 2009 @ 1:46pm

    Re:

    Considering that the records are sold in literally hundreds of different markets over the world, with the money collected at various levels, moved up, consolidated, moved around, etc, it is probably very close to impossible to say exactly how many sales any single record gets in a week with any certainty - on a worldwide level.

    Don't be ridiculous, it's easy to tell how many copies of what were sold and when and where. Record Companies deal in finite, physical goods. The only way they can do so efficiently is via supply-chain management. They need to know what the demand for a particular CD is for each market that they serve so that they can provide the appropriate supply. Not only that, but they need to be able to accurately forecast demand so that they don't run out, and they can't do that without detailed sales and market data. It really shouldn't be that difficult at all.

    Of course, if they fully embraced the digital distribution model they could not only reduce distribution costs, but they could simplify their supply-chain model because they are distributing infinite digital goods. And they would probably have more up to the minute demographic and sales data as well.

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