Over three years, the Recording Industry Association of America (RIAA) has spent $64 million in legal fees to recover approximately $1.4 million in damages from people they’ve sued for allegedly pirating music. Though the RIAA claims that they’re protecting artist’s rights, what they’re really protecting is this business model:
So, back to our original example of the average musician only earning $23.40 for every $1,000 sold. That money has to go back towards “recouping” the advance, even though the label is still straight up cashing 63% of every sale, which does not go towards making up the advance. The math here gets ridiculous pretty quickly when you start to think about it. These record label deals are basically out and out scams. In a traditional loan, you invest the money and pay back out of your proceeds. But a record label deal is nothing like that at all. They make you a “loan” and then take the first 63% of any dollar you make, get to automatically increase the size of the “loan” by simply adding in all sorts of crazy expenses (did the exec bring in pizza at the recording session? that gets added on), and then tries to get the loan repaid out of what meager pittance they’ve left for you.
Oh, and after all of that, the record label still owns the copyrights. That’s one of the most lopsided business deals ever.
Also, too: the president of the RIAA was paid $2 million in 2008.
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MikeJ
Back when radio still mattered the artists were getting screwed the same as they are now, but at least the labels could point to the slimy guys they had spread around the country who took PDs to strip clubs and gave them coke. Now they don’t even do that. Or if they are they’re *really* wasting money.
I wish the labels would just die already. Go turn into coal.
cleek
i see Albini himself left the link in the other thread, but in case you don’t see it there, here’s Steve Albini’s classic take on music industry contracts.
r€nato
“The music business is a cruel and shallow money trench, a long plastic hallway where thieves and pimps run free, and good men die like dogs. There’s also a negative side.” – Hunter S. Thompson
lonesomerobot
I happen to run an independent record label, one I hope doesn’t turn into coal.
Now, I’m not going to take this opportunity to defend the RIAA or record labels in general, because I don’t have any urge to be anything like them. In fact I’m not – I take no publishing (copyrights) and my artists get 50% of profits from net sales after I recoup my expenses.
The RIAA are just greedy lobbyists. Take Hillary Rosen, for instance. She used to head the RIAA. Now she’s helping BP manage their PR. So money is more important to her than any real principle.
The point is that CD sales are down and the RIAA & record labels have no clue how to get them back up. I’ve found that if I offer artists (that I deem as mature – meaning no rockstars or hotel trashers) a better deal and make them feel like they’re working toward something with me, they’re more likely to be interested in putting forth a little extra effort for their promotion. Rather than seeing these artists as little revenue engines, we have to see them for what they are: individuals who have hopes for the future and want to be able to make a living in their field. Music shouldn’t be like the lottery.
celiadexter
On top of that, the recording contract usually lasted 5 years, didn’t obligate the label to make any more than one record or do any promotion for the record, and didn’t permit the artist to record for anyone else, so most of the time a new artist wouldn’t make a dime and couldn’t make another record until he/she was past his/her sell-by date. But people signed contracts like this all the time back in the ’70s because they were kids, were excited to be signed to a record deal, didn’t understand the ramifications of the contract, and had no bargaining power anyway. I know too many musicians whose careers went into the sewer because of those deals. For what it’s worth, I don’t see a lot of that these days — musicians often can raise/borrow the up-front costs (which are relatively less since so much of the studio is computerized) and do their own recording. They also own their songs, do their own sales and promotion and although it’s small-scale compared to the old model, can be turning a nice little profit within months. So the RIAA is just getting what’s been coming to it for quite a while.
lonesomerobot
Yes if anyone wants a bit of the sordid tale of the music industry, Hit Men is a pretty astonishing read. Cool stuff like label execs giving songwriter’s credits to their elementary school-aged children (and thus taking percentages away from the real songwriters). Really classy.
Guster
Damn, that’s worse than publishing. At least with books, writers get that same $23 for every $300-$400 sold (if my math is right).
grumpy realist
With books, you can also have differing royalty rates based on the number of books sold. As publishers, we put one in. A nice little bonus for the author if his work does turn into a runaway seller and it’s not a downside for us.
(The older I get, the more I appreciate E.E.”Doc” Smith. In one of his books he talks about a “doctrine of Enlightened Self-Interest” and explains it as “don’t be greedy. Leave something for the other side as well.”)
Guster
Yeah, that’s true. I’m getting twelve percent on hardcovers to I think 100,000 and then fifteen percent. I dunno what I get on trade paper. Something like six or seven percent on mass market, though–if it ever hits mass market, which is unlikely.
And I can’t really complain. I’ve never earned out an advance, so the publishers aren’t exactly making a killing off my work. Sadly, neither am I …
slippy
@lonesomerobot:
Maybe they should stop churning out focus-grouped pablum designed to get people to press a button based on whether or not they like a seven-second sample.
Somewhere down in here I read this story that that is how popular music is put on the radio these days. Which explains why I don’t listen to the radio EVER anymore. Aside from classic rock, there doesn’t seem to be any new music anymore that isn’t just a gag-fest of overproduced garbage with very little imagination to it.
lonesomerobot
@slippy:
It’s what you get when Clear Channel owns the majority of commercial music stations.
BenA
Seriously though… the music industry is more stagnant now than anytime I can remember. Since like 1998 we’ve basically had the same artists at the top.. with random one-hit wonder/ Disney produced artists sprinkled in.
dj spellchecka
that ain’t all….the big labels now get artists to sign “360 deals”‘ which gives them a chunk of all ticket sales, t-shirt money, even partial payment if the musician gets a part in a movie….and here’s the best bit…that in-stream doesn’t go against paying off any advance money….they’re taking a cut of your merchandising while keeping you in debt…nice work if you can get it…
Mr Furious
@slippy: Agreed. One of the perks of my new job is regular access to satellite radio—something I looked forward too after tiring of traditional radio YEARS ago. I was hoping to bring myself up to date with current artists…
Instead, I end flipping between Lithium (early 90s), First Wave (80s-90s new wave) and Classic Vinyl (70s) and Rewind (80s).
The formatting is just as bad in terms of repetitive playlists, and lack of depth, and the percentage of good current music is pretty much Kings of Leon and 99.9% shit.
It’s been a total disappointment.
My commute is an hour, and I nearly always end up reverting to the iPod.
jake the snake
This has been the story for many, many years.
I first learned about it reading about the ’70s band: Commander Cody and the Lost Planet Airmen.
All their Albums (pre CD) made money for the the record company, but they always owed more than their advances.
Like most groups of the day, they had to tour themselves into the ground to pay off their debt to the company.
Ambrose Bierce, almost as reliable as Mark Twain,
“Debt : An ingenious substitute for the chain and whip of the slavedriver.”
Johnny Gentle (famous crooner)
Not to defend the industry, but I think the numbers are a bit misleading. Maybe $64m in legal fees has only netted $1.4m in damages, but you’d have to calculate how many more millions of dollars these legal actions generated via dissuading people from piracy.
It’s possible that many thousands of people have read or heard about these lawsuits, decided file-sharing was too risky, and instead bought music legitimately from iTunes, Amazon, retailers, etc.
I’m not saying that increased legit sales (if any) make the $64m in legal fees a good investment, but I think we at least need to factor that in. I wonder if anyone’s actually done any studies on the deterrent effect of these lawsuits.
benintn
And in Nashville, entertainment attorney (read: lawyer for the industry) Cece Heil is taking her fight all the way to Congress. Heil, a Republican, is challenging incumbent Jim Cooper (himself a big supporter of the industry) and trying to use Sarah Palin’s endorsement to her advantage with the Gospel Music Association, Southern Baptists, and other Christian groups.
Pangloss
The list of bankrupt and/or destitute recording artists is amazing. A friend of mine knew Tom Petty, and the experience practically scarred him for life.
-dg
@Johnny Gentle (famous crooner):
It’s also possible that many thousands of people did what I did: resolve to never buy another cd until the RIAA stopped acting like entitled fascists.
irregulationary
When the RIAA started making war on their customers, I quit buying CDs. (Nor do I download.) It’s the RIAA, not the music listeners, who are ripping off the artists. May the RIAA and all their lawyers and flacks go quickly to their just reward.
doctordawg
Maybe if the RIAA would go after the MULES who carry illegal downloads from point a to point b, they’d fix the actual problem. AT&T, Verizon, Comcast et. al. charge to pick up and charge again to deliver so-called “peer-to-peer” downloads. They are actually “peer-to-ISP-to-backbone-to-ISP-to-peer” downloads and three out of five perpetrators charge MONEY for their complicity. Do like ASCAP: charge at the final point of DISTRIBUTION, not consumption, and you have a sustainable, fair business model.
But it’s soooo much easier to harass a college student’s mom than AT&T.