What's
fair in a record deal?
By Chris Standring
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 perspective.
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 situation.
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 they record!
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 royalties.
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 contracts:
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.
Chris
Standring is the CEO and founder of A&R Online (www.aandronline.com).
He is also a contemporary jazz guitarist presently signed
to Mesa/Bluemoon Records. The music is marketed at NAC and
Urban AC radio. For more info on Chris' recording career
go to his personal website at www.chrisstandring.com
