The ultimate prize, a recording contract II

The last section covered how a recording deal is structured.  Please read it before reading this blog. If you don’t I guarantee that you’ll be confused.

As I mentioned in the last blog the deal is structured as a series of options. These lock the band into a consecutive series of time periods when they are bound to the label and are working on creating a set of recordings that meet their obligations laid out in their contract. I realize that sentence is pretty complex and may not make much sense without a great deal of head scratching. Let me put it another way.

A recording contract says that the band can only record for the label and no one else. This is absolute and final. There is no scenario where the label will allow the band to record tracks without the label being in absolute control of those masters. I have run into these kind of conflicts while managing bands. For example the band Miracle Legion was on tour with the Icelandic band The Sugarcubes. As is natural on a tour the bands became good friends. Soon they started to join each other on stage. The logical next step? I get a call saying that they would like to record together.

I immediately knew the problems that would come once the labels got wind of this plan. Miracle Legion was signed to Rough Trade at this time and that label, perhaps the only one in existence at the time that would allow it, I knew would work out a compromise. The Sugarcubes on the other hand, were signed to Electra. Electra, like all majors, had no capacity to compromise.

As soon as the bands brought it up I booked the time and rearranged the tour to free up a recording block. I then set about doing my best to cover up what we were doing. I started some false rumors. “Miracle Legion was leaving the tour” “There was tension based upon who was sleeping with whom” etc. All the rumors were untrue of course, but I tried to make them as plausible as possible knowing that any potentially harmful rumor would grab the label’s attention. If they were concerned about who Bjork was sleeping with they might not spend the time to notice exactly why a hole had appeared in the band’s schedule and it conveniently left both bands in New York for three days. I knew that the key was to get the bands into the studio and get the tracks cut before the label could stop them. That’s exactly what we did.

The end result was 4 wonderful songs and years of war with electra. We put the tracks out under Rough Trade and said “Sue us”. So they did. At least the fans got to hear it. The point to this little tale is that once you sign with a label they own you. What I did with the Sugarcubes was basically unheard of… no one signs with a major and then records without their approval.( well Hendrix did and Miles Davis, and a few others…) They never, ever, ever give their approval unless it is their idea.

So if you sign with a label you are their possession, their slave. If this doesn’t sit well with you then DON’T SIGN WITH A MAJOR LABEL! I am sure some of you are imagining that your stubborn son of a bitch personality will allow you to manipulate them into allowing whatever you want. This is extremely naive. They have enslaved bigger egos than yours, bet on it.

So now lets look at the second half of a recording contract the section that covers royalties and payments. This is the heart of the agreement and this is the section where the band gets screwed. Yes the first section that controls everything you do is bad but the second section where the deal outlines how the band is paid is the part that really guts the band and controls them.

The way that royalties are paid and accounted for is based upon the way records were sold long, long ago. As a result the language used and the system used can be confusing. The first thing to understand is that everything is based upon MSRP. Manufacture’s Suggested Retail Price. This is a price, agreed by the major labels and representatives of retail music chains. It is a fictional price that is somewhere near the real average price that CDs sell for on a daily basis. I have been in the business for twenty-five years and I am unsure exactly how they decide this number. I expect that I could find out more about the process but I just don’t care to. The only thing that matters is knowing what the number is. For the balance of this blog let’s just assume that the MSRP is currently $14.98. I have no idea if this is current but it doesn’t matter. The number is a basis for calculating what a band is paid.

A typical contract my say that the band will be paid 12% of MSRP. This works out to $1.80. So it appears that for each CD sold the band, the artist, you will be paid $1.80. Sounds great doesn’t it. So you sell a 100,000 CDs and get paid $180,000. Fantastic. Well it would be. It’s just that the balance of the of the language in the contract takes this simple formula and starts to alter it. So what is the real formula? Well it goes something like this……. The first thing they take off is called a “packaging deduction”. This is a fictional discount that the artist pays for to “package the CD”. ???? What the hell does that mean? Well, quite simply they are charging you for putting the CD in a jewel case and putting a booklet in the case. The standard seems to be 25% currently. So now we add this to the formula and it looks like this $14.98 x 75% =$11.24 $11.24 x 12% royalty = $1.35. So that little trick cost you $.50 of your royalty.

So now you sell those 100,000 CDs and you get paid $135,000 right? No, not so fast. It seems that the sales figures and not just a simple count of CDs sold. The first 50,000 CDs get half the normal royalty rate….What???!!! what the fuck???!! Oh yeah, don’t worry about that you’re gonna sell millions right?

So let’s look at the formula again….100,000 sales now pays $106,000. Ok still seems like you can get by on this kind of money. BUt that, of course, is not what the band is paid. The band paid the producer, 40,000 and the studio 90,000 so that money is still owed. Yes, that’s right, the fees for production and recording come out of the band’s share. Doesn’t sound fair does it? (Let’s not get all trapped in the whole “fair” thing…it’s just too complex) This little fact looks even more outrageous when you consider that the band pays for the recording sessions and producer, engineers etc but the label owns the recording. In fact even though the band is paying the producer the producer answers directly to the label. Any band that thinks otherwise will learn a quick lesson.  It might be workable if this is where the band’s debts ended but, of course, it doesn’t.  The band also pays for promotions costs. Yup, that’s the costs that the label incurs to promote the record. The band pays for radio bribes. The band pays for print advertising. The band pays for the generation of artwork. Let’s just cut to the chase—- the band pays FOR EVERYTHING THAT HAS TO DO WITH THE ALBUM!!!. Yes that’s correct. I didn’t just make it up. 

So the A & R guy flies out from LA to visit the studio while the band is cutting tracks. He stays a few days a goes back to tell the label how brilliant the band’s new tracks are….. and sure enough 18 months later the costs of the flight, the hotel he stayed out, the car he rented (and boy was it a nice one), the meals he ate and yes, that nice meal he treated the band to… they are all deducted from the band’s cut.

Here’s another possibility. The record starts to get some college airplay in the Northwest on a half-dozen college stations. The head of College promotions jumps right on this trend. He jets out to Seattle, rents a car, gets a pocketful of cash and starts to make the rounds of the radio stations. he hires as many of the music directors and program directors for these radio stations.  He pays them to put up flyers for the band on campus and more importantly on other campuses and to talk to other DJs and staff at other college stations about how they too could have this cool, lucrative job putting up flyers. As a result the band’s record climbs from 36 on the Northwest college charts to #11.  This whole little exercise costs $43,000 over the course of two months. two years later the band discovers they must pay back $43,000 before they earn any money.

Here’s another angle.  The band hears about the scheme to promote the record in the Northwest and says “hey we got a better idea. Why don’t we play in Seattle and Tacoma and Portland and Vancouver!!”  So you rent a bus and gear and travel around and play all these towns and your record goes from #36 on the college charts to #1 on the college charts. The label, orgasmic over this cosmic stroke of luck decides to celebrate. They fly a third of the staff out to Seattle for a rocking celebratory show. Here it comes… you guessed it kiddies…two years later the band discovers that their tour support, the chartered plane, the hotels, the bribes they still insisted on handing out to DJs etc. are all being paid back out of the bands cut of the royalties. It all comes to a whopping $211,000. Are you starting to see the picture here?

Let me be extremely clear about this blog and this particular topic. IF A BAND SIGNS A MAJOR LABEL CONTRACT EVERY SINGLE DIME SPENT TOWARDS MAKING THE RECORD OR PROMOTING THE RECORD OR PAYING ANYONE COMES OUT OF THE BAND’S CUT!!! As a result, unless you become Bruce Springsteen you will make nothing from recording for a major label. There is only one exception to this rule. Whoever writes the songs and controls the publishing of the songs on the record may very well make some money. Since the law demands that labels pay for the use of the songs the songwriter is the only one that gets paid consistently when a record sells.

Well that’s enough for the moment. I realize that I haven’t been posting lately so I am now back in the swing of it……….

©Brad Morrison/ Billiken Media 2010

2 thoughts on “The ultimate prize, a recording contract II

  1. Brad, this makes me so furious! We’re all just struggling to make it in the business, and they gotta screw us over like that?? Damn. So how would you advice a band starting out to get big and famous, without the label screwing you?? Look up the band MGMT. Their a part of Capital records and are quite big, do you think they are getting screwed too? Thanks for all this advice man, as a band trying to make it out there, its so tough. Especially when people try to screw you left and right. NOT literally haha. Also, in my band, the way it works, is I write the lyrics to songs, and my friend records the music. We both sing. If we got signed how would we split the profits? Thank you for your time!

    • Hi Ryan,
      It doesn’t pay to get angry at the labels. They are in business for themselves, not the bands. The good news is that you can make it to the big time without a label. The web has the ability to open all the doors for a young band. The time when major labels ruled the world is over.
      As for splitting the money with your cowriter – that one is easy. The law says that publishing royalties are evenly split between the person that writes the lyrics and the person that writes the music. Your arrangement fits perfectly with that arrangement…….Good luck…………

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