have been different. Of course, that in itself would not have had averted today’s recording
business crisis all together, but the industry would have offered affordable quality product
to the public, in accordance with proper business principles, making for greatly increased number
of satisfied, returning customers, and therefore better bottom line. At the same time, if the
artist royalties were allowed to climb to 30, 40, 50 percent, instead of remaining at
mostly 10 - 15 percent, and if these were, by and large, deduction-free royalties, the
outcome would have also been very different, because the industry would have had satisfied
artists who would be looking for long term relationships with their labels instead of
the exit.
Again, satisfied public and satisfied artists make for good business, greed and voracity
do not. And it all starts with a recording agreement. So let’s look at some of the
important mainstream recording agreement standards and issues that caused such wreckage.
For instance – “breakage” deductions, that originated back at the time of old shellac-made
records. This used to be a standard artist’s royalty base deduction of 10%, well into the
CD age, that made you scratch your head and ask: Breakage deductions? Even for CDs? What
breakage? We stopped making fragile shellac records few generations ago, and CDs don’t
break in transport that easy. Certainly not 10% of them.
And then, “Packaging” deductions? Now you are just pushing it, right? Why should
the artist’s royalty base be reduced for a legitimate business expense on your side,
such as a CD cover and a shrink-wrap?
And how about the “All-In” royalty? Where the producer’s royalty is paid from the
artist’s royalty. Remember, we talked about it? You really think the artist’s royalties
should be deducted for the producer’s cut? Then, maybe we should also deduct the artist’s
royalties for new tiles in the producer’s kitchen, while we are at it.
OK, so what about the “Cross-collateral” recoupments? Tying the recoupables for a particular
album, to all the artist’s products that the company controls, instead of to just the
album for which the expense incurred. So, for instance, the profits from the artist’s
publishing that the company controls, can cover its losses from her CD and MP3 sales?
You really want to deprive the artist of her publishing income, because the company was
not successful in selling her CDs and MP3s? Maybe the fact that her compositions are selling,
while the recording of it that the company produced is not, is telling us something about
the company’s production and retail skills. Just a thought.
And then, no artist’s royalties are paid out until all the recoupable expenses are
covered? Really? And the recoupable expenses are covered from the artist’s royalties
only? (You mean the company applies only the artist’s share of the sales income to the
recoupable expenses account? While keeping the rest, not considering it a “profit”
even when it clearly exceeds the company’s investment? Now, that’s bold and audacious.
So many industries out there would kill for such contractual clauses. If only they didn’t
live on earth.)
And on top of that, the artist’s royalty to which all those deductions and clauses
are applicable should be only 10-15% of the retail? And the term of the contract should
be 5-6 renewable one-year terms, with up to 6 albums delivered? At the company’s, and
not the artist’s discretion? Come on now, Riker’s Island is a better deal than that.
Is it any wonder that many artists are looking for the exit, or avoiding labels from the
get go, trying to do it all by themselves? And can we blame them? Under these contractual
standards, how many can ever make any meaningful income for themselves from their recordings
today, when physical sales are a shadow of its former self, and digital sales are still
too far from making up the difference? And how many today will not curse the day they
signed such a “standard” contract and the company with which they signed it? The
answer is: very few, and very few. Certainly, it is high time to seriously revisit and modify
these standards to fit today’s artists’ and companies’ needs, business circumstances
and market environment, and finally start doing good for our artists and our customers,
while doing well for ourselves and our companies. That is not exactly nuclear physics…that
is just good business.