The bottom dollar of the music biz
David Migicovsky
CDs but don't earn a cent
By JIM SLOTEK
Toronto Sun
There was a recent Budweiser commercial about the record industry, part of
a series of ads that seemed inspired by Mastercard's "Numbers" spots.
In the Bud ad, a garage band is seen performing in front of two
individuals -- one apparently an A&R scout, the other his bald, middle-aged
boss.
"Ten years together, 20 grand in the hole," goes the narration. The song
is over and the A&R guy asks, "Would you be willing to make your sound more
commercial?" to which the narrator adds, "One question of integrity."
The band huddles. Lead singer comes back and says, "No sir." Boss walks
out, saying to his underling, "Sign 'em."
The narrator concludes: "One five-year deal, zero compromise ... equals
... one chord struck."
The implied message -- that maintaining your integrity can take you far in
the music business -- would be received sarcastically by people even mildly
familiar with corporate culture.
To some with an intimate knowledge of how bands get signed, the commercial
would have verged on horrifying.
With a lot of historical black marks on its record -- from the Payola
scandal in the '50s to the disco era's record jobbing and returns scandals
-- it's possible that the music industry cleaned up long ago and is just
really misunderstood today.
On the other hand, as you'll read below, even record execs admit there are
music acts in Canada that sell more than 100,000 CDs (they "go platinum")
but don't earn one penny in royalties.
Artists are starting to criticize the industry out loud. And with Napster
and an entire generation of digital-literate kids changing the rules, how
the industry faces its past and present will have a large bearing on how it
fares in the future.
In May, Courtney Love spoke to the Digital Hollywood Online Entertainment
Conference in L.A. This is how she began: "Today I want to talk about
piracy and music. What is piracy? Piracy is the act of stealing an artist's
work without any intention of paying for it. I'm not talking about Napster.
I'm talking about major-label recording contracts."
She offered up some math -- in which a bidding-war band is fronted a
million dollars to record an album.
"What happens to that million dollars? They spend half a million to record
their album. That leaves the band with $500,000. They pay $100,000 to their
manager for 20% commission. They pay $25,000 each to their lawyer and
business manager. That leaves $350,000 for the four band members to split.
After $170,000 in taxes, there's $180,000 left. That comes out to $45,000
per person. That's $45,000 to live on for a year until the record gets
released."
Then comes the release, and videos and publicity, and Love's hypothetical
band was able to account for a $2-million artists' cut from sales being
"recouped" to zero by the label. In the end, she says "the band may as well
have been working at 7-11."
The "working at 7-11" analogy was used several years earlier by producer
Steve Albini, who recorded In Utero for Love's late husband Kurt Cobain and
Nirvana. In a piece in the Chicago-based Web site 'zine The Baffler, he too
drew up a fictitious contract for a moderately successful band (250,000
sales of its first album). The story was headlined Major Labels: Some Of
Your Friends May Already Be This F---ed.
Industry types quibble with Love's numbers. And even some who agree with
her about record labels tend to see her as a hypocrite for speaking out.
After all, they say, her ulterior motive is that she has been at war with
the label that handles her band, Hole.
"She got money. She goes to do an album, she charges a large fee from the
record label," says Terry McBride, founder of Vancouver-based Nettwerk
Records (of Sarah McLachlan fame). "She's a hypocrite. Y'know what? No one
pays attention to what that girl has to say."
On the other hand, big may not mean invulnerable. In the past few years,
TLC and Toni Braxton -- acts with almost $200 million in album sales each -
- filed for bankruptcy on contracts they say paid them roughly 2% on sales
($400,000). For its part, TLC's and Braxton's label, BMG-owned LaFace
Records (to whom both are still signed), accused the artists of using
federal bankruptcy law to pressure it into renegotiating their contracts.
As a celebrity who is both a recording artist and movie star, Love has a
unique perspective on how one branch of showbiz pays a lot better than
another. So does actor Dermot Mulroney (My Best Friend's Wedding), who
plays cello and mandolin in the "punk-folk" Low And Sweet Orchestra, which
was signed to eclectic-minded Interscope Records (owned by Universal). "In
movies they pay you up front, and you work and it's over," he says. "What a
record company does instead of paying you is lend you money. We owe
Interscope several hundred thousand as it stands right now. The idea is if
you never make it back, they write it off and that's that. But if you're at
all successful, it's like loan-sharking."
"There isn't an artist alive who hasn't sat down and done the math and
said, 'Where did all the money go?' " says Alan Frew, the erstwhile lead
singer of Glass Tiger, the Canadian rockers who grossed some $15 million in
record sales in the mid-1980s (a time when, Frew insinuates, payola --
paying money for radio airplay -- was still alive and well in the U.S.).
For all that, Frew is still represented by the same label, Capitol-EMI,
and the same publisher, EMI Publishing ("These are people I have a
longstanding relationship with. Not everything can be blamed on the big,
bad record company," he says).
The labels have their own way of rationalizing the relationship with their
acts.
"You live in a house, the bank owns that house, even though you have a
mortgage and you have equity in that home," says Universal Canada president
Randy Lennox. "That home costs a fortune. You have an equity position.
Eventually you will pay off that mortgage, and eventually the artist will
pay off his unrecouped balance and be the full beneficiary of 100% of the
royalties."
That's the theory. But of course, a home owner's mortgage doesn't keep
getting bigger.
Consider the situation of popular Toronto band Wild Strawberries, a.k.a.
Ken and Roberta Harrison, a husband-and-wife tandem known for intelligent
pop rock and a spot on the Lilith Fair a few years back. While signed to
the aforementioned Nettwerk, their album Heroine sold 50,000 copies, which
put the band $100,000 in the red. So they exited Nettwerk and themselves
produced their next album, the just-released Twist. They hired independent
publicists and, like the Cowboy Junkies, signed a distribution-only deal
with Universal. "We've sold 5,000 out of the gate, and we're already in the
clear on it," Ken Harrison says.
Bands that want to avoid being crushed by marketers and accountants might
sign with a smaller label such as Nettwerk, expecting better treatment,
Harrison says.
"I'm just glad we woke up to it and asked to leave our contract," Harrison
says. "Nettwerk was pulling the big-record-company antics with the making
of the record without being able to deliver any big record-company splash.
We did better with the (indie single) Lifesize Marilyn Monroe on radio,
because Roberta and her sister were calling stations across Canada. We
tracked top-40. Nettwerk had one guy working out of Vancouver waking up at
who-knows-what time in the morning -- certainly past 12 here.
"The real problem is that small labels and big labels both think that the
way to make something better is spending money. We mixed Heroine at Sarah
(McLachlan)'s keyboard player's studio, and she played on it. And we handed
it in all done. The only thing the label supplied was the gratuitous
expensive remix they always want that ends up costing you more than you
spent recording it in the first place.
"I mean, if you spend a thousand times more on something, is it going to
be a thousand times better? A good idea is a good idea, and a good song is
a good song."
In his defence, Nettwerk's McBride says, "It's very true that an artist
can sell platinum in this country and not see a royalty cheque. But a lot
of that's got to do with the money the artist takes to make the album. In
the case of the Wild Strawberries, we already gave them more than the
contract said.
"Another problem was that a good chunk of Wild Strawberries was sold
through record clubs, which we as a label and the artist get a reduced rate
on. It hits both parties."
So what about Wild Strawberries making more money selling 5,000 albums on
their own than Nettwerk made for them selling 50,000?
"That's very, very possible," McBride says, "because chances are they
didn't go into a full-blown recording studio, chances are they got people
to play on the album for, like, nothing. But as a record label, people
won't do that for us."
As for the "guy in Vancouver" comment, an irked McBride says, "Gary, who's
the radio guy, gets here at 7 a.m., which I'm pretty sure is before noon in
Toronto. And the singles Wild Strawberries had at this label have been much
larger than the singles they had before or after."
And the "gratuitous remix?" Says McBride: "Whether an artist brings an
album to the table which they basically create, it's our job as the record
label to market and promote that album. If we feel that the sort of single
we pick doesn't have the mix that we need to get the attention of radio
programmers, then we will spend more of our own money to try to make that
happen."
Then McBride tosses in a closing comment.
"Y'know, it always seems to be the ones that don't have success that
criticize. I wish Ken and Roberta the best of luck. We could have held them
to their contract, we could have had them making demos, we could have had
them demo-ing forever. But in the end they felt they had the songs, we felt
they didn't, so we said, 'Go, make the album you want to make. We'll cut
you loose.' "
The idea of making them "demo forever" is sadly reflective of what happens
to some bands, who are forced to record until, and if, the label likes the
result and decides to promote it. Or the label could sit on the album until
the "timing is right." In the meantime, the execs who championed them in
the first place might leave, and the bands break up. That's one possible
end for the Budweiser band's five-year deal.
Many of these qualitative assessments are made by Artist & Repertoire
(A&R) execs, who are "almost universally young (about the same age as the
bands being wooed)," Albini wrote, continuing, "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."
The battle starts the minute you meet a record executive, according to
Michael Timmins of the Cowboy Junkies.
He says "record company contracts are obscene. Anybody in any other
industry that knows about contracts and sees a record-company contract for
the first time is flabbergasted by them, the fact that they can be legal."
Last year, the Junkies were dropped by Geffen Records in a cost-cutting
move after its owner, Universal, merged with Polygram. Ironically, the band
recently signed a distribution-only deal with Universal Canada.
Says Timmins: "We've been very fortunate with our A&R guys - mainly
because for the most part they've been," he stops and laughs, "outside the
process as far as we're concerned. You build your walls early, make your
stands early, telling them, 'You're not allowed in the recording studio.'
It's like, 'You want us to deliver the best piece of merchandise that we
can, and this is the way we do it.' We talk to them like that. You have to
re-fight them every now and then, but not that often."
The Cowboy Junkies' first fight had to do with the famed Trinity Sessions,
the multiplatinum album the band recorded in a church for $1,200. "Every
single label that wanted to sign us said the same thing. 'I love it! I
can't wait to re-record it.' And we were like, 'Um, no, this is the album.
This is why you're interested in us in the first place.'
"There are certain people," Timmins says. "All they understand is money,
and they'll destroy something in the misguided belief that they'll make it
better. That's where the making of music and the music industry just don't
mix. The industry side and the artistic side have a screwy relationship,
because they don't go together, they rarely feed off each other. Successful
records are rarely great records."
"Our sense," Harrison of the Wild Strawberries says, "is that generally
A&R guys are people who would like to be part of the creative process, but
in a kind of businessy way. You give them a demo and they always say, 'Why
don't you make it sound more like X?' And X is whatever is on top of the
charts. The funniest thing for us at Nettwerk was every time we sent
something to them, the answer would always be the same. Positive or
negative, they'd use the same word - linear. It was either 'too linear' or
'not linear enough.' I spent five years trying to understand what that
meant, and I still don't know."
So what deductions from their advance payment are good deals for
performers?
"Well, there's the manager," Timmins says, "a lot of whom are useless, but
they're hard not to use if you're working a lot.
"Booking agents are usually 10%. That's a decent enough arrangement.
You're still getting the bulk of it.
"Publishers are good deals. They take a fair cut, whatever it is, you get
the bulk of it -- unlike record companies where you get a tiny little
smidgen and they steal the rest.
"Not only do you get a small amount from record labels, but you often
don't even get all of that. If you ever talked to anybody who's ever
audited a record company, they always find money they haven't given you.
Every few years, you have the right to audit a record company's books. It's
expensive because you have to pay for that. You take a look at simple
things like percentages, the way they manipulate it, where money comes
from, foreign territories and that sort of thing. And it's always there.
They may be honest mistakes, but it means something to the band and it
doesn't mean anything to the record company.
"That's why I'd tell any new band starting out: 'Make sure you get a good
lawyer.' It's costly, but it's money well spent."
Brian Robertson, head of the Canadian Recording Industry Association
(CRIA), confirms it is standard practice to allow artists to audit record
companies every two years. But he says he thinks Timmins is exaggerating
"based on his own subjective experience. Clearly this is someone who wasn't
happy with his last audit. To say it happens every time is unfair."
Rapper Chuck D, formerly of Public Enemy, says it's the very youth of
recording artists that led to where we are today - with CPAs and executives
negotiating with 18-year-olds.
"The vast majority of artists are not educated in how the music business
is run from top to bottom, and what their ulterior motives might be," Chuck
D says. "The majority of artists signed to major corporations are between
18 and 27 with the dual responsibility to mature as career artists - which
the labels don't develop - and to mature as human beings.
"Artists don't even understand, if they get an advance from a company,
what that means. They don't understand where that comes from. There's never
been any schools for this.
"I really don't have a lot of success telling this to 18-year-olds. My
conversation to them is very slow and detailed, but y'know that often goes
nowhere."
Chuck D says his "best conversations" are with artists who have already
been through the wringer.
"Y'know -- 27, 28, years old, and they've been told that, artistically,
they can't cut it no more. But having an accountant or a lawyer who's the
head of a company tell you that, how can you take that s--t seriously?"
Almost all the critics of the record industry point to corporatization as
the worst enemy. At present, there are five big labels that dominate - BMG,
Sony, Universal, Warner and Capitol-EMI. There is talk of Sony Music and
BMG merging, and talks recently stalled between Time-Warner and EMI. If
both had come to pass, you'd be looking at three.
A big company tends to want big paydays. "They'd prefer to have a baby
band who've sold nothing but conceivably could sell a lot," Timmins says,
"or a big superstar. Everybody else is kind of damaged goods."
Lennox begs to differ.
"When you look at Universal Canada, we release 2,000 albums a year. And
our lifeblood is acts who sell between 30,000 and 50,000 copies. Jann Arden
is not the Backstreet Boys. We're not suffering from any illusion that Jann
is going to pop 700,000 copies next time out. Yet, she is blue chip, a
credible Canadian artist who sells a certain amount each time."
Ironically, Arden was one of a number of people who declined to be
interviewed for this article (she was advised not to speak by her manager).
As well, BMG Canada president Lisa Zbitniew -- who wrote an angry letter
to the editor this past summer over a pro-Napster column printed in The
Toronto Sun -- did not return several calls placed to her office over three
weeks. Of the five labels suing Napster, BMG a few weeks ago became the
first to break ranks and sign a deal.
"Y'know, I've seen the same movies you have, where the record guy is
always the jerk or the villain," Lennox says. "Payola, Hit Men (the
acclaimed book about the record industry's seamy history) -- they are all
what? American. We don't pay radio stations to play music in this country.
We don't have a history of doing the things that are stereotypically known
as record-company activities. If you spoke to artists at Universal --
signed artists -- you'll find the fat guy with the big belly, smokin' the
cigar, doesn't exist behind these desks."
The most optimistic champions of the Internet predict it could even up the
power relationship between label and artist. Chuck D goes as far as to say
that some of the most dramatic changes will be in place by the year 2002.
Most of these changes threaten the power of the big labels.
"Artists pay 95% of whatever we make to gatekeepers because we used to
need gatekeepers to get our music heard," Love says. "(But) the digital
world has no scarcities. There are countless ways to reach an audience.
Radio is no longer the only place to hear a new song. And tiny, mall record
stores aren't the only place to buy a new CD."
Again, Nettwerk's McBride accuses Love of fuzzy math.
"We don't get 95% of what the artists make. We might have a better shot of
getting our 5% growth rate up to 10% if we did."
Nonetheless, here's how one band circumvents labels.
Keram Malicki-Sanchez fronts the veteran Toronto groove-pop band, Blue Dog
Pict. On the side, he's an actor (he recently filmed John Q in Toronto with
Denzel Washington). Blue Dog Pict hasn't released an album as such since
1996. But they record new material on a regular basis that can be
downloaded for free, or bought and shipped as a burned CD, on MP3.com. The
band operates a Web site with a bulletin board, and receives regular
feedback from fans as far away as Denmark and Japan.
Malicki-Sanchez becomes downright metaphysical when he talks about the
possibilities of the Internet.
"The great thing is I don't have to follow the old format," he says. "We
don't put out two or three good singles and a bunch of drivel and call it
an album. I can put out a record with three songs, I can put it out with 26
songs. And I don't have to have 4,000 copies of a CD in the garage. I have
no overhead whatsoever. I can upload it from my hard-drive immediately. I
don't need advance promotion, I don't need anything.
"If we go to a club in Cleveland or New York City, there are going to be
audiences there. I can tell a club owner, 'You can book this place on a
Friday, we will fill it.' I gave my e-mailers two days' notice and they
come. We have our own sound, and we don't exist to fill a hole in some
label's roster ... It's blind to think of the Internet as just a new
business frontier. It's a social paradigm shift, the likes of which we
haven't seen in hundreds of years."
And if the '90s was the era of the Indie (independent) label, Chuck D says
the 2000s will be the era of "the Inties... that's what I call the Internet
labels. The majors will always be there in some form or another, but the
Inties will be the new tier. It'll be like back in the '50s where a person
wanted to start a record company with a 45, they could because the
apparatus was simpler."
So with potentially hundreds of thousands of artists on thousands of
"intie" labels, won't this dilute the industry?
"I hear this all the time," Chuck D says. "It's like saying because
hundreds of thousands of Canadians play hockey, that dilutes the NHL. The
cream always rises to the top."
>>David ========>
--
David Migicovsky
d m i g i c o v at n e w s c e n e dot c o m
Our new ad-free home: A_C_F-s...@topica.com
Vinyltap
>TLC and Toni Braxton -- acts with almost >$200 million in album sales each -
>- filed for bankruptcy on contracts they >say paid them roughly 2% on sales
>($400,000). For its part, TLC's
Um...2% of $200 million is more
like $4,000,000. Not that I'm taking
sides lol...