And I'm supposed to be against piracy? I have no problem giving money to people who deserve it but these people do not deserve a single penny from me. The other issue is that by paying for CD's, I'm directly funding the unethical legal bullying that these companies are undertaking.
Really, it's the same issue with the government. I, for one, do not want to fund operations which kill people in foreign countries. I don't care if it's a 'democracy', I don't care if there's a hierarchy and that I'm supposed to vote to make myself heard. I simply want to cut funds to things I don't agree with but the issue is that doing so results in an entity orders of magnitude bigger than me bullying me into submission.
The crazy thing to me is that the deal is structured more like a loan then an investment, and yet they are still only entitled to 10% of net income. Could you imagine a tech entrepreneur accepting that kind of a deal from a VC?
I don't think that you should see it as a loan, because AFAIK the band does not need to pay the advance back.
The band sells the right to its music, in exchange for the advance. If the band's income exceeds 1000% of the advance, it will get 10% of the income as an extra bonus. And when the contract ends, the label returns the rights back to the band.
What does the band get? An advance, possibly a bonus, marketing and promotion for the brand, and usually the rights to some other forms of income (concerts, merchandise etc).
What's the reason behind that statement? Is it because it has more utility to you or that demand/wage is generally higher for a programmer than a musician?
Counter argument: what has more utility than bringing people happiness?
The total revenue of RIAA members in 2009 was about $7.7 billion. At their peak around the turn of the century, they were doing a bit under $15 billion. And that is revenue, not profit. The entertainment industry is tiny. Top artists make a lot of money for an individual, but it's only millions, and there aren't a whole lot of them.
That 2009 music industry revenue would pay for, what, 70,000 programmers? And there are a whole lot more programmers than that earning good money.
(Note: I'm only looking at RIAA figures, and ignoring independent artists, so it's understated to a certain extent. However, I believe RIAA revenue still makes up the majority, probably the vast majority, of total music revenue.)
The mind-boggling this is that a billion-dollar industry is bullying a (many?) trillion-dollar industry around. Say what you want about DRM, it's strange to me that software and hardware manufacturers actually put up with it.
But I sure am glad that the music industry CAN "bully" an industry far greater in the same way that I am glad that I can (if I had time and money) to do it because of the freedom of litigation.
The weird thing is that most of the bullying has nothing to do with litigation. DRM pops up all over the place in standards like HDMI, willingly put there by the electronics companies. If they wanted to, they could all go to the entertainment industry and say, "You guys want DRM, but tough luck, we're not building it. If you want to sell your stuff on the next generation of devices, you'll have to work with what we want to build." But they don't, even though in theory they should be able to.
That's fair. Unfortunately the *AA's are writing the laws so they get their way.
Is it at all reasonable they get to force ISPs to enforce their rules without litigation? Is it reasonable to be legally able to charge me $250,000 in the US to circumvent the CSS "encryption" on a DVD?
I hate this headline. This is not RIAA accounting: its having a bad lawyer and not negotiating a good deal. I've been in plenty of deal meetings and seen the good and the bad.
The good artists retain most of their rights, negotiate a buy out of master recording rights, retain all fanclub/merch rights, etc.
The labels try to gun for 360 rights, but the fact is while there was a brief moment when they could deliver on the promise of the 360, that moment has long passed.
If you are a band, and you want to be a multi-platinum act selling world wide: get a really really good lawyer and sign with QPrime, Frontline, Red Light/ATO, etc.
If you get a good lawyer and he drives a hard bargain that doesn't mean you get the record label deal though. What's more important is determining how much you are willing to give up for a record label deal. The label is perfectly capable of telling you no deal if they don't want to give you all your demands. There are a lot of other artists out there who will drive an easier bargain.
The lawyer is helpful in actually understanding the deal but he can't guarantee the deal you want.
Any illusions that artists had about the big record labels should have been extinguished in 1999, when they snuck through a bit of legislation that made all music recordings "works for hire", thus depriving musicians of the copyrights on their own music.
"work for hire" is what programmers do in the employ of a company, who then assumes ownership of the copyright on the code. The RIAA has always resented the fact that musicians retain ownership of their copyrights, and it defended the legislation vigorously. It was repealed in 2000 under pressure from a coalition of musicians.
The most offensive thing about the episode to me is the way it was done. A congressional staffer named Mitch Glazier snuck the change in at the last minute. Three months later, Mitch was hired by the RIAA. Afterwards, the RIAA coyly refused to admit anything had changed, but were plainly committed to enforcing the work-for-hire language.
Those other options aren't always as easy to execute for everyone as you might think. Marketing, web site building, video editing, tour scheduling, public relations, accounting, etc.
That stuff is hard work and you have to be a jack of all trades. Each band is like a little startup looking for a technical cofounder.
This. Is exactly how it works. A first-time startup gets worse terms then an established entrepreneur, right? A first-time band is the same way. You do well with your first venture, you get better terms the next time. The indie film industry is very much the same way with distribution rights.
A guy named 'merethan' posted a great essay on the subject in 2010. It gives a good explanation of what the music industry is about and why it still operates the way it does, without going too much into the financial details.
Does anyone know why he left out the $300,000 advance from the final calculation on how much the artists make? I'm not sure if that was just an oversight or if there was a valid reason for it.
Even so, for a 5 member band, assuming they took the whole advance, (no manager fees, etc) they've earned $60,000. Which considering there's usually 2-4 years between albums, and they still owe the label money, that's a pretty shitty wage of $15k - $30k P/A.
Sure, but in the meantime the label made the band famous, which is worth a lot of money. They have a much larger audience at concerts, can sell merchandise and possibly have other sources of income. And, when the record contract expires, they can negotiate better terms.
No question, any band will tell you that record sales is their least significant income source, for most merch is the big earner.
What bothers me most about this situation is that musicians would exist without labels, where as labels would not exist without musicians, the balance of power is all wrong.
Honestly, I can't imagine how any band could be stupid enough to sign a contract with a big label and expect to make money off of album sales. The money is in touring and selling merch - bands should learn to look at selling albums as a promotional expense that helps them line up tours and sell overpriced t-shirts. Or, there is always the indie fortune 500...
So, the question I have is: how many of those bands/artists make it?
The article mentions an advance of $1M. I think the $20 per CD rate claimed in this album (1M CDs sold is claimed to be $20M in sales) is a bit high (then again, I haven't bought a CD in a while). Suffice it to say, I'd lower that to $10-12M gross and maybe $7-8.4M when costs are accounted for. Even with digital distribution, I think the iTMS/Amazon are taking 30% which would lower $12M gross to $8.4M after Apple takes its cut. Correct me if I'm wrong, but from what I've heard/seen an album costs around $10-12 on iTunes and Apple takes 30% of that. I can't imagine physical stores (who have the overhead of real-estate and employees) taking less. I mean, 20% breakage fees are outrageous, but arguing that selling 1M albums equates to $20M gross is also outrageous since CDs don't cost $20 a piece.
So, how many of these bands succeed? If I gave a $1M advance to ten bands, would nine of them sell a million albums or only one of them? Thinking of it like an investment, that's an important question. If only one of them sold a million albums (and the rest failed), it would mean that I've put out $10M while the CDs sold grossed $12M (and probably $8.5M after the selling store takes its cut, before any other costs). In this case, there isn't a lot of money for the successful band to be well rewarded. Even though they brought in 8x what was invested, there was only a 1 in 10 chance of them succeeding and a lot of that money is going to subsidizing the investment in the failed bands. However, if 9 out of 10 sell a million records, around $75M is being brought in (after the selling store's cut) while $10M was invested and so there should be plenty of money for the bands/artists to be well-rewarded for their success.
I'm not saying that there aren't dirty tricks being used. I simply don't know how often bands that get these advances do well. If the risk is that most ventures are very unprofitable, it means that the ventures that do become profitable don't get well-rewarded because of the risk involved.
There's also the issue of the amount of money. In this case, it's $1M. That isn't a sum that most people can come up with and, as such, commands a premium. A lot of the larger VC investment comes after a team has shown that it can get a bit of traction. Places like YC invest early, but it's small amounts.
In the end, if you believe in yourself and think there is little risk, it's always best to invest in one's self. However, it can be hard to stomach the risk if the costs are high and the industry failure rate is also high. I'm sure that the record companies are making off with loads of money unfairly, but what's absent from the article is a sense of how many bands that get the advance make it and how many fail. That's a critical piece of information that could turn their whole argument on its head. And without that information, it's impossible to realistically evaluate fairness. I'm no fan of record labels. I think they're an antiquated system in an age where digital recording, editing, and distribution can allow people to create high-quality media. However, if the article wants to convince me of its merits, it needs to offer some statistics about the success/failure rate of the bands/artists getting the advances. If the success rate is 90%, they have a good point. If the success rate is abysmal, it casts some doubt. I'd say it casts more doubt on the system of offering advances (than offering a defense of record labels) and argues for a more efficient initial production, but that's the hacker ethic in me.
The key issue is that the advance from the label is neither a gift nor an investment; it's a straight up loan (most likely with interest) that is expected to be paid back, but the loan terms are horrendous. I get the feeling you think that the band receives a $1M investment that the label will recover at a certain rate from the generated profit, but that's not the case. After selling for $1M, the artists are still at $0, and they still owe the record company $1M. If the record company brings in $1M in profit from an album, they have covered their expenses. That $1M wouldn't even begin to repay the loan the artist have, though, so now the label is UP $1M - the artist still owes them most of the advance.
At least, that's how I understood the situation, correct me if I'm wrong.
The general outlook I hear from people who are signed to deals that pay advances is this: get as large an advance as you can, because you won't be getting anything else. Sure, if you go double platinum it might be worthwhile to audit the label and squeeze some more money out.
Although recoupment provisions make it technically a loan, just like a VC, the label won't come after you forever if you don't recoup. At a certain point, they'll write it off and let it go; they won't be after you forever like a collection agency.
As to how bands can earn a living, the answer is of course touring, merch (t-shirts, etc.) and for those with music with mass appeal, licensing to films, tv, and commercials. If you can self-produce, you can also do a licensing deal (P&D - pressing and distribution) for the record as well.
The way to stay in control, of course, is to bootstrap it and form your own record company.
Anyone curious about how these deals work in more detail should check out "Confessions of a Record Producer" by Moses Avalon (a pseudonym).
Worth noting - non-RIAA bands actually lose money touring. Smaller bands signed to RIAA labels still do not do very well with touring.
In many smaller scenes, a successful tour is one that breaks even. They sleep on promoters floors, eat shitty food, and play in bars. I hear a lot of "fans" that download all of their music and think that they support the artist by going to their show. This is not the case.
The one way to really make money as I understand it - which is noted in the book you mention (though it is kind of dated now) - is royalties. If you are fortunate enough to have your song featured in ads and get into heavy rotation on the radio, you get paid outside of your recoupment costs (which they pull from record sales).
I hear a lot of "fans" that download all of their music and think that they support the artist by going to their show. This is not the case.
Well, it's not like their ticket purchases are for naught - it still offsets the cost of touring for the artist. The artists would be worse off doing the same tour with less fans attending.
What better choice do the fans have anyway? Buying the records supports the record label, not the artist.
Larger exposure for the inevitable tour that, if GP is accurate, doesn't make money.
Why people don't go the route of Jonathan Coulton or Pomplamoose, and just scratch it out on their own talents, is beyond me. Hell, I think even those "hide your kids, hide your wife" news parody musicians apparently make more money than major label star. The math just doesn't seem to be adding up anywhere being on a label, is what I'm trying to say.
I guess you have to be a blindingly white-hot ultra-mega-super-duperstar to make a penny from labels and touring, and everyone else should just pack it in or go indie?
Seems like it sucks worse to be a musician than to be a struggling actor or indie mobile app developer.
That would mean you as the artist either wrote or co-wrote the song. As you would then be getting songwriting royalties from your music publishing company, but not royalties off the sound recording. Those recordings belong to the labels and all artists with little to no bargaining power never get a piece of those royalties.
As a professional musician, I can corroborate this, but I can also say that this is why most musicians have day jobs. We go into the business knowing that it will never pay our bills, and usually involves investments which will never pay themselves back. (Orchestral and studio musicians are the exception, but those jobs are few and far between and reserved for the best of the best.)
Being signed, though, indentures you to a label. If I'm going to be playing music for love, and not for money, than I'm certainly not gonna put on shackles and let somebody else make money off of my music.
"an album costs around $10-12 on iTunes and Apple takes 30% of that"
Are you sure that 30% cut is true for music as well? I know it is for apps and books (the "new" things in iTMS), but I've never really found the take on music and videos. Do you have any source?
Plenty of bands manage to overcome this ridiculousness. One of the most common ways is to go on tour. A much larger portion of the ticket and merch sales gets back to the artist compared to album sales. Even at a tiny venue if you get 200 people to show up and you make $10 a head on average that's $2,000 revenue a show, if you do 4 shows a week that's $32k a month, even minus expenses and split N ways that's a decent haul. And if you make more per head from merch or put on bigger shows, that's even better.
The only way artists make a good living off album sales alone with the traditional system is if they are hugely popular, selling millions of records. But obviously only a few bands are in that boat. Also, such bands would still make yet even more by going on tour.
But this system is already past its prime. If you want to make a living off of being a musical artist your best bet is to self-publish online and go on tour, you'll keep a much, much larger portion of the total revenues to yourself and you'll be able to live off of your music even if you only attain a moderate degree of success.
> Even at a tiny venue if you get 200 people to show up and you make $10 a head on average that's $2,000 revenue a show, if you do 4 shows a week
This is completely unrealistic. 4 shows a week @ 40 weeks a year means you are touring. Touring costs will eat the vast portion of revenue. Also, at a 200 person venue, there is little chance the band will see $10 / head, regardless of the cover charge.
Really good article. Mentions the different fees, how they are calculated, their amounts for a typical successful album. This kind of info you normally don't come across.
Really, it's the same issue with the government. I, for one, do not want to fund operations which kill people in foreign countries. I don't care if it's a 'democracy', I don't care if there's a hierarchy and that I'm supposed to vote to make myself heard. I simply want to cut funds to things I don't agree with but the issue is that doing so results in an entity orders of magnitude bigger than me bullying me into submission.