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Don’t Spend It All In One Place

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How big a cut are the Recording Artists getting out of those 99 cent downloads? Are the Record Companies licensing the downloads legally entitled to do so?

Looking at the second question first, the answer is probably Yes in many cases, No in others. Artists successful enough to afford lawyers capable of taking on EMI, Sony or Time Warner AOL have a chance of opening discussions on the subject, anyway. Others may wonder at the interpretation of key phrases in their contracts. One of Robert Fripp’s business partners writes:

My own feeble allotment of energy has been focussed on supporting the Tall Pointy One fighting the good fight with EMI, who have put paid Crimson downloads on various sites without the approval of the band. The EMI contract does specify that they have the right to all new “record formats”. But is a download a new format? … After all, the King Crimson contract specifies that the DGM logo must appear on all records. If a download is a “record” (as it must be if EMI have the rights), then perhaps they will explain how they are going to put the DGM logo on it. Likewise, they do not have the right to alter artwork, and I would argue they have done so in the case of a download, which has no artwork.

I would be interested if someone can tell me if King Crimson form part of the iTunes service, allowing you to download individual tracks, as opposed to whole albums.

It is not that I am against downloads. They are certainly part of the future. But I hate hate hate labels who feel that they can twist a contract designed for a physical world to sell product in the e world, at hideously low royalty rates. Boo hiss spit spit.

But what hope is there for fair treatment when the EMI legal department cannot even remember the name of the guitarist in the band that has sold them over 3 million records in the last ten years. Oh yes. “Richard”, that’s the one.

Returning to the first question, and assuming the Record Company will see no need to renegotiate any contracts in favor of the artist until required to do so, a royalty rate of 10 percent on seventy per cent of 90% of 10/14ths of that 99 cents comes out to about four and a half cents. Oh wait, iTunes keeps one-third of the gross. Make that 3 cents.

But why would royalty rates applying to CD’s suffice for downloads? Robert Fripp’s instructive answers to a hypothetical interviewer might suggest that if standards developed for 78’s can be applied to CD’s, there’s no real downside (for the Record Company) to applying the same guidelines to Downloads. Think of all the overhead involved in implementing New Technology!

Q. Is Discipline a vanity label, or is it a real record company?

A. Are those our only two options?

What is a “real” record company? A “real” company seeks to take as much from the artist as it can. It does this firstly by paying as little in royalties as it can. It has become harder, following the abolition of legal slavery, to pay scandalously low rates, like single figures. So today a new artist might get 12-14%. This is paid on 70% of CD sales, because the technology of CDs is “new technology”.

Q. But CDs aren’t “new technology” any more.

A. You’re quick. But this is company “standard practice”. Then this figure is itself paid on 90% of sales, because of damage to the shellac or vinyl.

Q. But CDs aren’t made of shellac or vinyl.

A. You’re very quick. But that is also a “standard practice” from the time of 78s breaking in shipment to the stores. Then, that figure in turn is paid on 10/14ths of the money the record sells for.

Q. Why?

A. Because company policy (in this case Virgin) determines that record shops in the UK sell the record for £10.

Q. But your CDs sell for around £13.99.

A. Now you’re really getting up to speed. Virgin company policy determines shop price as £10. It’s the company standard policy, you see. And Virgin is a real record company. Then, once the artist agrees the company’s standard policy on royalties, an advance is paid which enables the record to be made. This advance is recouped from royalties. That is, the artist pays for the record to be made. The phonographic copyright, that is the record, is then owned by the record company.

Q. How can the record company own the record which the artist paid to make?

A. Standard company policy.

And so on. Assuming the Artist isn’t still repaying an Advance for making any recordings or videos, he might expect a $3000 payment (presumably to be shared with bandmates and management) for 100,000 unique downloads. Not bad free money for you or me, but fair compensation for a moderately popular recording artist? (Please spare me the “they signed those contracts of their own free will” comments.) Even Courtney Love can do that kind of math. So, why she’d sign with Virgin at this point while Pearl Jam is heading the opposite direction may say something about whose career is in most dire need of a media greased hype campaign.

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About Hazy Dave

  • http://www.waking-vision.com Michelle

    Interesting. Now not only the consumer is the loser but also the artist. I know why I’m boykotting the music industry.

  • Eric Olsen

    Very interesting and informative Dave, thanks

  • http://w6daily.winn.com/ Phillip Winn

    I can understand Apple’s decision to deal only with labels. Bravo to them for at least including a lot of indies in this. And of course whatever deal the labels have with the artists is none of Apple’s concern the way they’ve structured it.

    But the labels are by and large thieves, no question. It would be nice indeed if any label could gain marketing clout while offering their artists a much better deal.

    I’ve seen seen labels that can sell records, and I’ve seen labels that treat their artists well, but I’ve never seen one that does both.

    THanks for the post.