Fair In A Record Deal?
I recently read Courtney Love's famous "rant on the major
label cartel", a fascinating and inciteful criticism of
the major record company contract system from a signed artist's
For those of you who are not up on this drama, Courtney Love
sometime ago expressed her dissatisfaction with her own record
deal and artist deals in general, deeming them to be corrupt,
an "act of piracy" and exploitative. She goes on to
say that it would take millions of record sales for an artist
to recoup promotional money spent in order to see any money
at all from record sales. It is a very long, yet thoughtful
essay on the music business seen through the eyes of a successful
artist. I would like to offer my take on this subject if I may
indulge myself, and offer a personal opinion on what changes
might be made in order to exercise a more fair record contract
Courtney is absolutely right when she talks about artists not
making money from record sales. I think that first I should
quickly point out (for the benefit of lesser experienced artists)
that there are two royalty sources that an artist is technically
able to benefit from. The first (and courtney's main concern)
is "artist" royalties. These are royalties due to
an artist from record sales. Usually an artist can be offered
anywhere between 10 to 20 royalty points depending on his/her
credibility etc. The second royalty source is "mechanical"
royalties. These are royalties payable to the songwriters. Last
time I checked the statutory rate was around 7 cents per song
(possibly changed again by now). A songwriter who writes 100%
of an album's worth of let's say 10 songs will therefore make
70 cents per album sold. This is payable from record one. It
is therefore extremely beneficial for artists to write the music
Anyway, the only real drama with mechanicals is that labels
somehow get away with paying artists only 75% of the statutory
rate, which means labels are effectively witholding 25% of the
copyright income. There is absolutely no reason for them
to do this apart from the fact that they have always got away
with it! This is one thing I would like to see changed. Very
successful artists can usually negotiate 100% of stat. New artists,
very very rarely.
Let's go back to our "artist" royalties because this
is where ALL the problems really lie. Let me explain what the
problem is really all about.
Let's say a major label has just signed your band "The
Ahmesh Conspiracy" and offered you an exhorbitant amount
of money. Your attorney has negotiated an artist royalty of
15 points. Traditionally not bad for a new artist. Here's the
way it works...
Every single promotional penny spent on promoting your record,
be it video costs, indie radio promotion or retail programs
etc, is recoupable from your royalty points in some way,
depending on how your contract is set up. Some things are charged
to the artist at 100%, some 50%. What this means is that in
order for you to recoup let's say $100,000 in promotion, the
record company will have to receive income almost 10 times that
amount before you clear that recoupment. (Don't forget, you
the artist don't see a penny until your recoupment is clear).
How is this so? When $100,000 of income goes to the record label,
only 15% of that goes towards your recoupment. You are recouping
at a snail's pace because you are recouping at 15% of the pie!
That means that realistically, you can never really make money
because if records are selling well, the label will continue
to spend X amount of promotional dollars which in turn gets
recouped at the 15% snail's pace. It's a complete joke! While
you are going more and more in debt, the label may be making
millions! It takes an Elton John or Mick Jagger to make artist
Pretty frightening huh? So how have artists been existing up
until now and what is there to hope for?
Firstly, the smarter artists become hip to the fact that they
HAVE to write their own material. Secondly, once they have a
hit record, if they are really smart they will have their attorney
attempt to re-negotiate certain things in order to keep everyone
pacified. (Let's face it there is nothing more counter-productive
than a reluctant artist!) One of those things may be to "clean
slate", which essentially means to have the label wipe
their recoupment bill from a previous record. This is only possible
from an artist with a very successful CD however. There has
to be a tremendous amount of positioning to pull this off.
Aside from living off publishing income (mechanical royalties)
a successful artist can always tour. The more successful an
artist is the more the band can be "guaranteed" high
performance fees. A successful artist touring can command thousands
of dollars per show which record companies do not take a hand
in. This is important revenue for artists.
So this is the way it has been up until now. I say "up
until now" as nothing has changed yet, but with people
like Courtney Love going to court over this, things may indeed
take a turn, whether it be now or later. I would personally
like to see two important things changed in standard recording
Firstly, regarding artist royalties, artists should be able
to recoup at (at least) 50% (50 artist royalty points) until
their debt is paid. Once their debt is paid, then a lower artist
royalty rate might then be acceptable. The sheer fact that labels
recoup from artists at such a pathetically low rate means that
there is no hope for artists to make money this way. There has
to be a new higher percentage to recoup at.
Secondly, regarding mechanicals, as I mentioned before, I would
like to see it made illegal that labels can even offer
75% stat. It HAS to be 100%, non negotiable.
Finally, and something I want to say that Courtney will probably
disagree with, is that labels should make the lion's
share. Why? because I believe that anyone who stumps up the
money in the first place should make the larger percentage.
Otherwise artists should do it on their own (and of course are
doing that now, but usually with complications as there is little
money to play with). I am more than happy to see artists sign
a record deal where a record label makes more money than them,
especially if an artist is new, undiscovered and needs a huge
promotional break. That takes a ton of money. Money artists
don't have on their own. That's why we have record deals. HOWEVER,
this aside, I want to know I too can not only eat, but make
good money if I am signed to a label that has me signed to a
contract for 7 frickin' albums!! That's a long long time to
be tied up let me tell you. Especially if CD's are selling and
you 'aint collecting!
So, sure, I want to see big changes, it's high time! I think
it has to be in perspective that's all.
The Author: Chris Standring is the CEO and founder of A&R
He is also a contemporary jazz guitarist presently signed to
Ultimate Vibe Recordings. For more info on Chris' recording
career go to his personal website at www.chrisstandring.com
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