Who's Killing the Mega-Labels?

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The normally staid Wall St. Journal reports the record industry is in "freefall." The first week of January's sales are down 18 percent over the same week in 2006. That's a lot.

Why? Well, you can either blame the producer or the consumer. Most of the time, business blames the producer. When Ford stops selling trucks, the Journal blames Ford for making shitty gas guzzlers, not the consumer for buying something else. Contrarily, the recording (and newspaper) industry loves to blame the consumer.

Well, we don't. We think the consumer's right. Music appreciation is at an all-time high in our books. But how do you go about appreciating? That's the market to tap. Here are two legendary articles that blame the producers: one by In Utero producer Steve Albini called "The Problem with Music" ,the other by "At Seventeen" singer Janis Ian called "The Internet Debacle - An Alternate View". -- David Downs

THE INTERNET DEBACLE - AN ALTERNATIVE VIEW

by Janis Ian

* Shortly after this article was turned in, Michael Greene resigned as president of NARAS.

When I research an article, I normally send 30 or so emails to friends and acquaintances asking for opinions and anecdotes. I usually receive 10-20 in reply. But not so on this subject!

I sent 36 emails requesting opinions and facts on free music downloading from the Net. I stated that I planned to adopt the viewpoint of devil's advocate: free Internet downloads are good for the music industry and its artists.

I've received, to date, over 300 replies, every single one from someone legitimately "in the music business."

What's more interesting than the emails are the phone calls. I don't know anyone at NARAS (home of the Grammy Awards), and I know Hilary Rosen (head of rhe Recording Industry Association of America, or RIAA) only vaguely. Yet within 24 hours of sending my original email, I'd received two messages from Rosen and four from NARAS requesting that I call to "discuss the article."

Huh. Didn't know I was that widely read.

Ms. Rosen, to be fair, stressed that she was only interested in presenting RIAA's side of the issue, and was kind enough to send me a fair amount of statistics and documentation, including a number of focus group studies RIAA had run on the matter.

However, the problem with focus groups is the same problem anthropologists have when studying peoples in the field - the moment the anthropologist's presence is known, everything changes. Hundreds of scientific studies have shown that any experimental group wants to please the examiner. For focus groups, this is particularly true. Coffee and donuts are the least of the pay-offs.

The NARAS people were a bit more pushy. They told me downloads were "destroying sales", "ruining the music industry", and "costing you money".

Costing me money? I don't pretend to be an expert on intellectual property law, but I do know one thing. If a music industry executive claims I should agree with their agenda because it will make me more money, I put my hand on my wallet...and check it after they leave, just to make sure nothing's missing.

Am I suspicious of all this hysteria? You bet. Do I think the issue has been badly handled? Absolutely. Am I concerned about losing friends, opportunities, my 10th Grammy nomination by publishing this article? Yeah. I am. But sometimes things are just wrong, and when they're that wrong, they have to be addressed.

The premise of all this ballyhoo is that the industry (and its artists) are being harmed by free downloading.

Nonsense. Let's take it from my personal experience. My site (www.janisian.com ) gets an average of 75,000 hits a year. Not bad for someone whose last hit record was in 1975. When Napster was running full-tilt, we received about 100 hits a month from people who'd downloaded Society's Child or At Seventeen for free, then decided they wanted more information. Of those 100 people (and these are only the ones who let us know how they'd found the site), 15 bought CDs. Not huge sales, right? No record company is interested in 180 extra sales a year. But... that translates into $2700, which is a lot of money in my book. And that doesn't include the ones who bought the CDs in stores, or who came to my shows.

Or take author Mercedes Lackey, who occupies entire shelves in stores and libraries. 15 years ago she published a series of books with "Arrows" in the title; she's been getting royalties ever since. However, one royalty period after putting the first "Arrow" book on Eric Flint's "Baen Free Library" site, she received over triple the normal royalty.* In fact, payment on all her old titles increased, suddenly and significantly, with the only change being the availability of that one free book. I don't know about you, but as an artist with an in-print record catalogue that dates back to 1965, I'd be thrilled to see sales on my old catalogue rise.

Lackey says "It's what I'd expect to happen if a steady line of people who'd never read my stuff encountered it for free...they started to work through my backlist." I've found that to be true over and over again. Every time we make a few songs available on my website, sales of all the CDs go up. A lot.

Now, RIAA and NARAS, as well as most of the entrenched music industry, are arguing that free downloads hurt sales. (More than hurt - they're saying it's destroying the industry.) Alas, the music industry needs no outside help to destroy itself. We're doing a very adequate job of that on our own, thank you.

Here are a few statements from the RIAA's website:

"Analysts report that just one of the many peer-to-peer systems in operation is responsible for over 1.8 billion unauthorized downloads per month". "Sales of blank CD-R discs have...grown nearly 2 ½ times in the last two years...if just half the blank discs sold in 2001 were used to copy music, the number of burned CDs worldwide is about the same as the number of CDs sold at retail." "Music sales are already suffering from the impact...in the United States, sales decreased by more than 10% in 2001." "In a recent survey of music consumers, 23%...said they are not buying more music because they are downloading or copying their music for free." Let's take these points one by one, but before that, let me remind you of something: the music industry had exactly the same response to the advent of reel-to-reel home tape recorders, cassettes, DATs, minidiscs, VHS, BETA, music videos ("Why buy the record when you can tape it?"), MTV, and a host of other technological advances designed to make the consumer's life easier and better. I know because I was there.

The only reason they didn't react that way publicly to the advent of CDs was because they believed CD's were uncopyable. I was told this personally by a former head of Sony marketing, when they asked me to license Between the Lines in CD format at a reduced royalty rate. ("Because it's a brand new technology.")

Who's to say that any of those people would have bought the CD's if the songs weren't available for free? I can't find a single study on this, one where a reputable surveyor such as Gallup actually asks people that question. I think no one's run one because everyone is afraid of the truth - most of the downloads are people who want to try an artist out. And if a percentage of that 1.8 billion is because people are downloading a current hit by Britney or In Sync, who's to say it really hurt their sales? Soft statistics are easily manipulated. How many of those people went out and bought an album that had been over-played at radio for months, just because they downloaded a portion of it? Sales of blank CDs have grown? You bet. I bought a new Vaio in December, and now back up all my files onto CD. I go through 7-15 CD's a week that way, or about 500 a year. Most new PC's come with XP, which makes backing up to CD painless; how many people are doing what I'm doing? Additionally, when I buy a new CD, I make a copy for my car, a copy for upstairs, and a copy for my partner. That's three blank discs per CD. So I alone account for around 750 blank CDs yearly. I'm sure the sales decrease had nothing to do with the economy's decrease, or a steady downward spiral in the music industry, or the garbage being pushed by record companies. Aren't you? There were 32,000 new titles released in this country in 2001, and that's not including re-issues, DIY's , or smaller labels that don't report to SoundScan. A conservative estimate would place the number of "newly available" CD's per year at 100,000. That's an awful lot of releases for an industry that's being destroyed. To make matters worse, we hear music everywhere, whether we want to or not; stores, amusement parks, highway rest stops. The original concept of Muzak (to be played in elevators so quietly that its soothing effect would be subliminal) has run amok. Why buy records when you can learn the entire Top 40 just by going shopping for groceries? Which music consumers? College kids who can't afford to buy 10 new CDs a month, but want to hear their favorite groups? When I bought my nephews a new Backstreet Boys CD, I asked why they hadn't downloaded it instead. They patiently explained to their senile aunt that the download wouldn't give them the cool artwork, and more important, the video they could see only on the CD. Realistically, why do most people download music? To hear new music. Not to avoid paying $5 at the local used CD store, or taping it off the radio, but to hear music they can't find anywhere else. Face it - most people can't afford to spend $15.99 to experiment. That's why listening booths (which labels fought against, too) are such a success.

You can't hear new music on radio these days; I live in Nashville, "Music City USA", and we have exactly one station willing to play a non-top-40 format. On a clear day, I can even tune it in. The situation's not much better in Los Angeles or New York. College stations are sometimes bolder, but their wattage is so low that most of us can't get them.

One other major point: in the hysteria of the moment, everyone is forgetting the main way an artist becomes successful - exposure. Without exposure, no one comes to shows, no one buys CDs, no one enables you to earn a living doing what you love. Again, from personal experience: in 37 years as a recording artist, I've created 25+ albums for major labels, and I've never once received a royalty check that didn't show I owed them money. So I make the bulk of my living from live touring, playing for 80-1500 people a night, doing my own show. I spend hours each week doing press, writing articles, making sure my website tour information is up to date. Why? Because all of that gives me exposure to an audience that might not come otherwise. So when someone writes and tells me they came to my show because they'd downloaded a song and gotten curious, I am thrilled!

Who gets hurt by free downloads? Save a handful of super-successes like Celine Dion, none of us. We only get helped.

But not to hear Congress tell it. Senator Fritz Hollings, chairman of the Senate Commerce Committee studying this, said "When Congress sits idly by in the face of these [file-sharing] activities, we essentially sanction the Internet as a haven for thievery", then went on to charge "over 10 million people" with stealing. [Steven Levy, Newsweek 3/11/02]. That's what we think of consumers - they're thieves, out to get something for nothing.

Baloney. Most consumers have no problem paying for entertainment. One has only to look at the success of Fictionwise.com and the few other websites offering books and music at reasonable prices to understand that. If the music industry had a shred of sense, they'd have addressed this problem 15 years ago, when people with websites were trying to obtain legitimate licenses for music online. Instead, the industry-wide attitude was It'll go away. That's the same attitude CBS Records had about rock 'n' roll when Mitch Miller was head of A&R. (And you wondered why they passed on The Beatles and The Rolling Stones.)

I don't blame the RIAA for Holling's attitude. They are, after all, the Recording Industry Association of America, formed so the labels would have a lobbying group in Washington. (In other words, they're permitted to make contributions to politicians and their parties.) But given that our industry's success is based on communication, the industry response to the Internet has been abysmal. Statements like the one above do nothing to help the cause.

Of course, communication has always been the artist's job, not the executives. That's why it's so scary when people like current NARAS president Michael Greene begin using shows like the Grammy Awards to drive their point home.

Grammy viewership hit a six-year low in 2002. Personally, I found the program so scintillating that it made me long for Rob Lowe dancing with Snow White, which at least was so bad that it was entertaining. Moves like the ridiculous Elton John-Eminem duet did little to make people want to watch again the next year. And we're not going to go into the Los Angeles Times' Pulitzer Prize-winning series on Greene and NARAS, where they pointed out that MusiCares has spent less than 10% of its revenue on disbursing emergency funds for people in the music industry (its primary purpose), or that Greene recorded his own album, pitched it to record executives while discussing Grammy business, then negotiated a $250,000 contract with Mercury Records for it (later withdrawn after the public flap). Or that NARAS quietly paid out at least $650,000 to settle a sexual harassment suit against him, a portion of which the non-profit Academy paid. Or that he's paid two million dollars a year, along with "perks" like his million-dollar country club membership and Mercedes. (Though it does make one wonder when he last entered a record store and bought something with his own hard-earned money.)

Let's just note that in his speech he told the viewing audience that NARAS and RIAA were, in large part, taking their stance to protect artists. He hired three teenagers to spend a couple of days doing nothing but downloading, and they managed to download "6,000 songs". Come on. For free "front-row seats" at the Grammys and an appearance on national TV, I'd download twice that amount! But...who's got time to download that many songs? Does Greene really think people out there are spending twelve hours a day downloading our music? If they are, they must be starving to death, because they're not making a living or going to school.

This sort of thing is indicative of the way statistics and information are being tossed around. It's dreadful to think that consumers are being asked to take responsibility for the industry's problems, which have been around far longer than the Internet. It's even worse to think that the consumer is being told they are charged with protecting us, the artists, when our own industry squanders the dollars we earn on waste and personal vendettas.

Greene went on to say that "Many of the nominees here tonight, especially the new, less-established artists, are in immediate danger of being marginalized out of our business." Right. Any "new" artist who manages to make the Grammys has millions of dollars in record company money behind them. The "real" new artists aren't people you're going to see on national TV, or hear on most radio. They're people you'll hear because someone gave you a disc, or they opened at a show you attended, or were lucky enough to be featured on NPR or another program still open to playing records that aren't already hits.

As to artists being "marginalized out of our business", the only people being marginalized out are the employees of our Enron-minded record companies, who are being fired in droves because the higher-ups are incompetent.

And it's difficult to convince an educated audience that artists and record labels are about to go down the drain because they, the consumer, are downloading music. Particularly when they're paying $50-$125 apiece for concert tickets, and $15.99 for a new CD they know costs less than a dollar to manufacture and distribute.

I suspect Greene thinks of downloaders as the equivalent of an old-style television drug dealer, lurking next to playgrounds, wearing big coats and whipping them open for wide-eyed children who then purchase black market CD's at generous prices.

What's the new industry byword? Encryption. They're going to make sure no one can copy CDs or download them for free. Brilliant, except that it flaunts the Bill of rights. And it pisses people off.

How many of you know that car makers are now manufacturing all their CD players to also play DVD's? or that part of the encryption record companies are using doesn't allow your store-bought CD to be played on a DVD player, because that's the same technology as your computer? And if you've had trouble playing your own self-recorded copy of O Brother Where Art Thou in the car, it's because of this lunacy.

The industry's answer is to put on the label: "This audio CD is protected against unauthorized copying. It is designed to play in standard audio CD players and computers running Windows O/S; however, playback problems may be experienced. If you experience such problems, return this disc for a refund."

Now I ask you. After three or four experiences like that, shlepping to the store to buy it, then shlepping back to return it (and you still don't have your music), who's going to bother buying CD's?

The industry has been complaining for years about the stranglehold the middle-man has on their dollars, yet they wish to do nothing to offend those middle-men. (BMG has a strict policy for artists buying their own CDs to sell at concerts - $11 per CD. They know very well that most of us lose money if we have to pay that much; the point is to keep the big record stores happy by ensuring sales go to them. What actually happens is no sales to us or the stores.) NARAS and RIAA are moaning about the little mom & pop stores being shoved out of business; no one worked harder to shove them out than our own industry, which greeted every new Tower or mega-music store with glee, and offered steep discounts to Target and WalMart et al for stocking CDs. The Internet has zero to do with stores closing and lowered sales.

And for those of us with major label contracts who want some of our music available for free downloading... well, the record companies own our masters, our outtakes, even our demos, and they won't allow it. Furthermore, they own our voices for the duration of the contract, so we can't even post a live track for downloading!

If you think about it, the music industry should be rejoicing at this new technological advance! Here's a fool-proof way to deliver music to millions who might otherwise would never purchase a CD in a store. The cross-marketing opportunities are unbelievable. It's instantaneous, costs are minimal, shipping non-existant...a staggering vehicle for higher earnings and lower costs. Instead, they're running around like chickens with their heads cut off, bleeding on everyone and making no sense. As an alternative to encrypting everything, and tying up money for years (potentially decades) fighting consumer suits demanding their first amendment rights be protected (which have always gone to the consumer, as witness the availability of blank and unencrypted VHS tapes and casettes), why not take a tip from book publishers and writers?

Baen Free Library is one success story. SFWA is another. The SFWA site is one of the best out there for hands-on advice to writers, but more importantly, over a decade ago they negotiated Internet payment deals for the use of writer's works. As the Net grew and the music industry continued sticking its collective head in the sand, SFWA made sure its members were protected financially, without losing the opportunities Internet downloading provided.

I have no objection to Greene et al trying to protect the record labels, who are the ones fomenting this hysteria. RIAA is funded by them. NARAS is supported by them. However, I object violently to the pretense that they are in any way doing this for our benefit. If they really wanted to do something for the great majority of artists, who eke out a living against all odds, they could tackle some of the real issues facing us:

The normal industry contract is for seven albums, with no end date, which would be considered at best indentured servitude (and at worst slavery) in any other business. In fact, it would be illegal. A label can shelve your project, then extend your contract by one more album because what you turned in was "commercially or artistically unacceptable". They alone determine that criteria. Songwriters have to accept that they'll be paid only 75% of the rates set by Congress for their work on their own albums, or lose the contract. Congressionally set writer/publisher royalties have risen from their 1960's high (2 cents per side) to a munificent 8 cents. Many of us began in the 50's and 60's; our records are still in release, and we're still being paid royalty rates of 2% (if anything) on them. If we're not songwriters, and not hugely successful commercially (as in platinum-plus), we don't make a dime off our recordings. Recording industry accounting procedures are right up there with films. Worse yet, when records go out-of-print, we don't get them back! We can't even take them to another company. Careers have been deliberately killed in this manner, with the record company refusing to release product or allow the artist to take it somewhere else. And because a record label "owns" your voice for the duration of the contract, you can't go somewhere else and re-record those same songs they turned down. And because of the re-record provision, even after your contract is over, you can't record those songs for someone else for years, and sometimes decades. Additionally, we should be speaking up, and Congress should be listening. At this point they're only hearing from multi-platinum acts. What about someone like Ani Difranco, one of the most trusted voices in college entertainment today? What about those of us who live most of our lives outside the big corporate system, and who might have very different views on the subject?

There is zero evidence that material available for free online downloading is financially harming anyone. In fact, most of the hard evidence is to the contrary.

Greene and the RIAA are correct in one thing - these are times of great change in our industry. But at a time when there are arguably only four record labels left in America (Sony, AOL/Time/Warner, Universal, BMG - and where is the RICO act when we need it?)... when entire genres are glorifying the gangster mentality and losing their biggest voices to violence...when executives change positions as often as Zsa Zsa Gabor changed clothes, and "A&R" has become a euphemism for "Absent & Redundant"... well, we have other things to worry about.

It's absurd for us, as artists, to sanction - or countenance - the shutting down of something like this. It's sheer stupidity to rejoice at the Napster decision. Short-sighted, and ignorant.

Free exposure is practically a thing of the past for entertainers. Getting your record played at radio costs more money than most of us dream of ever earning. Free downloading gives a chance to every do-it-yourselfer out there. Every act that can't get signed to a major, for whatever reason, can reach literally millions of new listeners, enticing them to buy the CD and come to the concerts. Where else can a new act, or one that doesn't have a label deal, get that kind of exposure?

We'll turn into Microsoft if we're not careful, insisting that any household wanting a copy for the car, or the kids, or the portable CD player, has to go out and "license" multiple copies.

As artists, we have the ear of the masses. We have the trust of the masses. By speaking out in our concerts and in the press, we can do a great deal to damp this hysteria, and put the blame for the sad state of our industry right back where it belongs - in the laps of record companies, radio programmers, and our own apparent inability to organize ourselves in order to better our own lives - and those of our fans. If we don't take the reins, no one will.

Sources: Baenbooks.com, BMG Records, Chicago Tribune, CNN.com, Congressional Record, Eonline.com, Grammy.com, LATimes.com, Newsweek, Radiocrow.com, RIAA.org, personal communications * for more information on the Free Library, go to www.baenbooks.com. * to read Eric Flint's entire article, go to www.janisian.com.

http://negativland.com/albini.html The Problem With Music by Steve Albini Whenever I talk to a band who are about to sign with a major label, I always end up thinking of them in a particular context. I imagine a trench, about four feet wide and five feet deep, maybe sixty yards long, filled with runny, decaying shit. I imagine these people, some of them good friends, some of them barely acquaintances, at one end of this trench. I also imagine a faceless industry lackey at the other end holding a fountain pen and a contract waiting to be signed. Nobody can see what's printed on the contract. It's too far away, and besides, the shit stench is making everybody's eyes water. The lackey shouts to everybody that the first one to swim the trench gets to sign the contract. Everybody dives in the trench and they struggle furiously to get to the other end. Two people arrive simultaneously and begin wrestling furiously, clawing each other and dunking each other under the shit. Eventually, one of them capitulates, and there's only one contestant left. He reaches for the pen, but the Lackey says "Actually, I think you need a little more development. Swim again, please. Backstroke". And he does of course. Every major label involved in the hunt for new bands now has on staff a high-profile point man, an "A & R" rep who can present a comfortable face to any prospective band. The initials stand for "Artist and Repertoire." because historically, the A & R staff would select artists to record music that they had also selected, out of an available pool of each. This is still the case, though not openly. These guys are universally young [about the same age as the bands being wooed], and nowadays they always have some obvious underground rock credibility flag they can wave. Lyle Preslar, former guitarist for Minor Threat, is one of them. Terry Tolkin, former NY independent booking agent and assistant manager at Touch and Go is one of them. Al Smith, former soundman at CBGB is one of them. Mike Gitter, former editor of XXX fanzine and contributor to Rip, Kerrang and other lowbrow rags is one of them. Many of the annoying turds who used to staff college radio stations are in their ranks as well. There are several reasons A & R scouts are always young. The explanation usually copped-to is that the scout will be "hip to the current musical "scene." A more important reason is that the bands will intuitively trust someone they think is a peer, and who speaks fondly of the same formative rock and roll experiences. The A & R person is the first person to make contact with the band, and as such is the first person to promise them the moon. Who better to promise them the moon than an idealistic young turk who expects to be calling the shots in a few years, and who has had no previous experience with a big record company. Hell, he's as naive as the band he's duping. When he tells them no one will interfere in their creative process, he probably even believes it. When he sits down with the band for the first time, over a plate of angel hair pasta, he can tell them with all sincerity that when they sign with company X, they're really signing with him and he's on their side. Remember that great gig I saw you at in '85? Didn't we have a blast. By now all rock bands are wise enough to be suspicious of music industry scum. There is a pervasive caricature in popular culture of a portly, middle aged ex-hipster talking a mile-a-minute, using outdated jargon and calling everybody "baby." After meeting "their" A & R guy, the band will say to themselves and everyone else, "He's not like a record company guy at all! He's like one of us." And they will be right. That's one of the reasons he was hired. These A & R guys are not allowed to write contracts. What they do is present the band with a letter of intent, or "deal memo," which loosely states some terms, and affirms that the band will sign with the label once a contract has been agreed on. The spookiest thing about this harmless sounding little memo, is that it is, for all legal purposes, a binding document. That is, once the band signs it, they are under obligation to conclude a deal with the label. If the label presents them with a contract that the band don't want to sign, all the label has to do is wait. There are a hundred other bands willing to sign the exact same contract, so the label is in a position of strength. These letters never have any terms of expiration, so the band remain bound by the deal memo until a contract is signed, no matter how long that takes. The band cannot sign to another laborer or even put out its own material unless they are released from their agreement, which never happens. Make no mistake about it: once a band has signed a letter of intent, they will either eventually sign a contract that suits the label or they will be destroyed. One of my favorite bands was held hostage for the better part of two years by a slick young "He's not like a label guy at all," A & R rep, on the basis of such a deal memo. He had failed to come through on any of his promises [something he did with similar effect to another well-known band], and so the band wanted out. Another label expressed interest, but when the A & R man was asked to release the band, he said he would need money or points, or possibly both, before he would consider it. The new label was afraid the price would be too dear, and they said no thanks. On the cusp of making their signature album, an excellent band, humiliated, broke up from the stress and the many months of inactivity. There's this band. They're pretty ordinary, but they're also pretty good, so they've attracted some attention. They're signed to a moderate-sized "independent" label owned by a distribution company, and they have another two albums owed to the label. They're a little ambitious. They'd like to get signed by a major label so they can have some security you know, get some good equipment, tour in a proper tour bus -- nothing fancy, just a little reward for all the hard work. To that end, they got a manager. He knows some of the label guys, and he can shop their next project to all the right people. He takes his cut, sure, but it's only 15%, and if he can get them signed then it's money well spent. Anyways, it doesn't cost them anything if it doesn't work. 15% of nothing isn't much! One day an A & R scout calls them, says he's 'been following them for a while now, and when their manager mentioned them to him, it just "clicked." Would they like to meet with him about the possibility of working out a deal with his label? Wow. Big Break time. They meet the guy, and y'know what -- he's not what they expected from a label guy. He's young and dresses pretty much like the band does. He knows all their favorite bands. He's like one of them. He tells them he wants to go to bat for them, to try to get them everything they want. He says anything is possible with the right attitude. They conclude the evening by taking home a copy of a deal memo they wrote out and signed on the spot. The A & R guy was full of great ideas, even talked about using a name producer. Butch Vig is out of the question-he wants 100 g's and three points, but they can get Don Fleming for $30,000 plus three points. Even that's a little steep, so maybe they'll go with that guy who used to be in David Letterman's band. He only wants three points. Or they can have just anybody record it (like Warton Tiers, maybe-- cost you 5 or 7 grand] and have Andy Wallace remix it for 4 grand a track plus 2 points. It was a lot to think about. Well, they like this guy and they trust him. Besides, they already signed the deal memo. He must have been serious about wanting them to sign. They break the news to their current label, and the label manager says he wants them to succeed, so they have his blessing. He will need to be compensated, of course, for the remaining albums left on their contract, but he'll work it out with the label himself. Sub Pop made millions from selling off Nirvana, and Twin Tone hasn't done bad either: 50 grand for the Babes and 60 grand for the Poster Children-- without having to sell a single additional record. It'll be something modest. The new label doesn't mind, so long as it's recoupable out of royalties. Well, they get the final contract, and it's not quite what they expected. They figure it's better to be safe than sorry and they turn it over to a lawyer--one who says he's experienced in entertainment law and he hammers out a few bugs. They're still not sure about it, but the lawyer says he's seen a lot of contracts, and theirs is pretty good. They'll be great royalty: 13% [less a 1O% packaging deduction]. Wasn't it Buffalo Tom that were only getting 12% less 10? Whatever. The old label only wants 50 grand, an no points. Hell, Sub Pop got 3 points when they let Nirvana go. They're signed for four years, with options on each year, for a total of over a million dollars! That's a lot of money in any man's English. The first year's advance alone is $250,000. Just think about it, a quarter million, just for being in a rock band! Their manager thinks it's a great deal, especially the large advance. Besides, he knows a publishing company that will take the band on if they get signed, and even give them an advance of 20 grand, so they'll be making that money too. The manager says publishing is pretty mysterious, and nobody really knows where all the money comes from, but the lawyer can look that contract over too. Hell, it's free money. Their booking agent is excited about the band signing to a major. He says they can maybe average $1,000 or $2,000 a night from now on. That's enough to justify a five week tour, and with tour support, they can use a proper crew, buy some good equipment and even get a tour bus! Buses are pretty expensive, but if you figure in the price of a hotel room for everybody In the band and crew, they're actually about the same cost. Some bands like Therapy? and Sloan and Stereolab use buses on their tours even when they're getting paid only a couple hundred bucks a night, and this tour should earn at least a grand or two every night. It'll be worth it. The band will be more comfortable and will play better. The agent says a band on a major label can get a merchandising company to pay them an advance on T-shirt sales! ridiculous! There's a gold mine here! The lawyer Should look over the merchandising contract, just to be safe. They get drunk at the signing party. Polaroids are taken and everybody looks thrilled. The label picked them up in a limo. They decided to go with the producer who used to be in Letterman's band. He had these technicians come in and tune the drums for them and tweak their amps and guitars. He had a guy bring in a slew of expensive old "vintage" microphones. Boy, were they "warm." He even had a guy come in and check the phase of all the equipment in the control room! Boy, was he professional. He used a bunch of equipment on them and by the end of it, they all agreed that it sounded very "punchy," yet "warm." All that hard work paid off. With the help of a video, the album went like hotcakes! They sold a quarter million copies! Here is the math that will explain just how fucked they are: These figures are representative of amounts that appear in record contracts daily. There's no need to skew the figures to make the scenario look bad, since real-life examples more than abound. income is bold and underlined, expenses are not.

Advance: $ 250,000 Manager's cut: $ 37,500 Legal fees: $ 10,000 Recording Budget: $ 150,000 Producer's advance: $ 50,000 Studio fee: $ 52,500 Drum Amp, Mic and Phase "Doctors": $ 3,000 Recording tape: $ 8,000 Equipment rental: $ 5,000 Cartage and Transportation: $ 5,000 Lodgings while in studio: $ 10,000 Catering: $ 3,000 Mastering: $ 10,000 Tape copies, reference CDs, shipping tapes, misc. expenses: $ 2,000 Video budget: $ 30,000 Cameras: $ 8,000 Crew: $ 5,000 Processing and transfers: $ 3,000 Off-line: $ 2,000 On-line editing: $ 3,000 Catering: $ 1,000 Stage and construction: $ 3,000 Copies, couriers, transportation: $ 2,000 Director's fee: $ 3,000 Album Artwork: $ 5,000 Promotional photo shoot and duplication: $ 2,000 Band fund: $ 15,000 New fancy professional drum kit: $ 5,000 New fancy professional guitars [2]: $ 3,000 New fancy professional guitar amp rigs [2]: $ 4,000 New fancy potato-shaped bass guitar: $ 1,000 New fancy rack of lights bass amp: $ 1,000 Rehearsal space rental: $ 500 Big blowout party for their friends: $ 500 Tour expense [5 weeks]: $ 50,875 Bus: $ 25,000 Crew [3]: $ 7,500 Food and per diems: $ 7,875 Fuel: $ 3,000 Consumable supplies: $ 3,500 Wardrobe: $ 1,000 Promotion: $ 3,000 Tour gross income: $ 50,000 Agent's cut: $ 7,500 Manager's cut: $ 7,500 Merchandising advance: $ 20,000 Manager's cut: $ 3,000 Lawyer's fee: $ 1,000 Publishing advance: $ 20,000 Manager's cut: $ 3,000 Lawyer's fee: $ 1,000 Record sales: 250,000 @ $12 = $3,000,000 Gross retail revenue Royalty: [13% of 90% of retail]: $ 351,000 Less advance: $ 250,000 Producer's points: [3% less $50,000 advance]: $ 40,000 Promotional budget: $ 25,000 Recoupable buyout from previous label: $ 50,000 Net royalty: $ -14,000

Record company income: Record wholesale price: $6.50 x 250,000 = $1,625,000 gross income Artist Royalties: $ 351,000 Deficit from royalties: $ 14,000 Manufacturing, packaging and distribution: @ $2.20 per record: $ 550,000 Gross profit: $ 7l0,000

The Balance Sheet: This is how much each player got paid at the end of the game. Record company: $ 710,000 Producer: $ 90,000 Manager: $ 51,000 Studio: $ 52,500 Previous label: $ 50,000 Agent: $ 7,500 Lawyer: $ 12,000 Band member net income each: $ 4,031.25 The band is now 1/4 of the way through its contract, has made the music industry more than 3 million dollars richer, but is in the hole $14,000 on royalties. The band members have each earned about 1/3 as much as they would working at a 7-11, but they got to ride in a tour bus for a month. The next album will be about the same, except that the record company will insist they spend more time and money on it. Since the previous one never "recouped," the band will have no leverage, and will oblige. The next tour will be about the same, except the merchandising advance will have already been paid, and the band, strangely enough, won't have earned any royalties from their T-shirts yet. Maybe the T-shirt guys have figured out how to count money like record company guys. Some of your friends are probably already this fucked.

Steve Albini is an independent and corporate rock record producer most widely known for having produced Nirvana's In Utero.

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