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Mullinator
07-10-2001, 10:27 AM
Hypothetically say I am the singer in a band made up of 5 people. We're a good band playing locally. All of a sudden, we break the big time and Sony decides to sign us. They give us a contract for $1,000,000.

However, when it comes to the music industry I am clueless. How much of that money will I see? I know there must be a few of you on this board that would have some idea of financing in the music industry. I assume that from that $1,000,000 certain fees go out for lawyers, agents, etc.

I am hoping someone could give me a general idea of where that million would flow and how much would find it's way to the 5 people in the band. I understand the tax side of things so I know that the million is already significantly less because of the feds.

Any help would be greatly appreciated.

bdgr
07-10-2001, 11:08 AM
This (http://www.arancidamoeba.com/mrr/problemwithmusic.html) pretty well sums it up.

pezpunk
07-10-2001, 11:24 AM
I love Steve Albini (author of the article). How could you not love the man who released "songs about f**king". That is a great article. Very informative.

Opengrave
07-10-2001, 01:07 PM
There is a book about this exact topic that I have heard recommended by several musicians. They all said it was a fairly accurate book, problem is I can't remember the name or author. A quick search on Amazon netted this (http://www.amazon.com/exec/obidos/ASIN/0684870649/o/qid=994784491/sr=2-1/104-9840978-6758367).

mongrel_8
07-10-2001, 01:11 PM
Interesting article, I just have one question: What are the points that were mentioned several times in the article?

yabob
07-10-2001, 01:58 PM
They would be percentage points, like when you pay points up front on a home mortgage. If you look through the sheets at the end, you will see "record sales" of 3 million, then "Producer's points:" of $90K (40K + 50K advance) = 3%, the producers "three points" they talked about. And if the producer's points over advance are paid out of the artist's royalties, as those figures imply, that strikes me as absurd. The producer's advance came out of the recording budget. If that's the way it works, you would want the studio to give the producer as big an advance as you get them to give, so that his points would take less of a slice out of your royalties. Why aren't the producer's points paid off the top?

bdgr
07-10-2001, 03:00 PM
Originally posted by yabob
They would be percentage points, like when you pay points up front on a home mortgage. If you look through the sheets at the end, you will see "record sales" of 3 million, then "Producer's points:" of $90K (40K + 50K advance) = 3%, the producers "three points" they talked about. And if the producer's points over advance are paid out of the artist's royalties, as those figures imply, that strikes me as absurd. The producer's advance came out of the recording budget. If that's the way it works, you would want the studio to give the producer as big an advance as you get them to give, so that his points would take less of a slice out of your royalties. Why aren't the producer's points paid off the top?

Doesn't matter, the producer is going to get paid the same amount either way, and its still going to come out of your pocket in the end. He will keep getting a percentage of everything you make off that recording.

Bill H.
07-10-2001, 08:23 PM
I'm afraid I have no experience in the business side of music, but I have lots of experience in business in general. And that article looks like a lot of businesses. Cash flowing every which way like it's a party, then everyone wonders where it all went.

As I say, I don't have much domain expertise, but what that band needed was someone to manage the process, and get paid as a percentage of what the band got paid. If they had someone holding the purse strings whose financial interests were aligned with their own, they would've done ok.

Ringo
07-10-2001, 08:45 PM
I believe the book Opengrave is thinking of is This Business of Music (http://www.musiciansnews.com/books/46/this_business_of_music.shtml) by Sidney Shemel and M. William Krasilovsky. I've got the 1985 revision and it really will explain the whole thing quite well and in detail.

Bill H.
07-10-2001, 09:13 PM
Here's a high level of what the Albini article says:

Of the Gross Revenue of record sales,
* The Record Company gets 87%
* The Artist gets 13%

The Record company covers all operational and sales costs, such as manufacturing and marketing.

The Artist covers all development costs, such as recording, video shooting and album artwork.

Is this an accurate depiction of how a typical deal works? 13% seems low and covering 100% of development costs from that leaves for very tight margins. In a slim margin business, watching every penny is key, and artists don't strike me as the best penny pinchers.

Tough business.

astro
07-10-2001, 09:37 PM
Here's Courtney Love's take in Salon on where the money goes in band economics, in the context of the controversy regarding MP3's at the time using a theoretical million dollar contract. Actually a pretty good article and speaks to the OP's point.

Courtney Love does the math
The controversial singer takes on record label profits, Napster and "sucka VCs."

Editor's note: This is an unedited transcript of Courtney Love's speech to the Digital Hollywood online entertainment conference, given in New York on May 16.

http://www.salon.com/tech/feature/2000/06/14/love/

"Courtney Love does the math
The controversial singer takes on record label profits, Napster and "sucka VCs."

Editor's note: This is an unedited transcript of Courtney Love's speech to the Digital Hollywood online entertainment conference, given in New York on May 16.

- - - - - - - - - - - -
By Courtney Love

June 14, 2000 | 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-type software.

I'm talking about major label recording contracts.


I want to start with a story about rock bands and record companies, and do some recording-contract math:

This story is about a bidding-war band that gets a huge deal with a 20 percent royalty rate and a million-dollar advance. (No bidding-war band ever got a 20 percent royalty, but whatever.) This is my "funny" math based on some reality and I just want to qualify it by saying I'm positive it's better math than what Edgar Bronfman Jr. [the president and CEO of Seagram, which owns Polygram] would provide.

What happens to that million dollars?"

etc etc etc (long article)

Mullinator
07-11-2001, 12:35 PM
Thanks for the info guys. It all basically falls in line with my assumptions (Band signing contract doesn't equal band making it big.) Apparently band signing contract also does not equal band buying groceries for the week.

Wumpus
07-11-2001, 05:51 PM
Mind you, the Albini and Love articles quote recording budgets of $150,000-500,000. They needn't be that high. Many great jazz, blues, and punk albums have been made live in the studio for a tiny fraction of the cost.

RealityChuck
07-11-2001, 07:28 PM
I'd say that half a million for a first album is a particularly high number chosen to make the point. Still, it is despicable that the record companies pay so little money to the people who are writing and performing the song. They are to be roundly censured for making a profit without giving the creators their artistic due.

Oh, and remind me. How much money did Napster pay artists?

bdgr
07-12-2001, 09:37 AM
Originally posted by Bill H.


As I say, I don't have much domain expertise, but what that band needed was someone to manage the process, and get paid as a percentage of what the band got paid. If they had someone holding the purse strings whose financial interests were aligned with their own, they would've done ok.

Well, they had a manager, he made over 50 grand.

The problem is that the Managers, producers, and record companys hold all the cards. There are a million bands out there, and only so much room in the spotlight. Unless the band is really hot and there are more than one company fighting to sign them, then they have to take what they can get. I know a couple of people I used to play in bands with who were offered deals, and turned it down because the deal wasnt good enough. They never got a second chance. It's a rough business. Thats why a lot of artists were pro napster. Because it hurt the record company more than it hurt them, and gave new artists an alternate way to get thier music heard.

Bill H.
07-12-2001, 09:43 PM
bdgr wrote
Well, they had a manager, he made over 50 grand.

As I said, the solution is to pay someone as a percentage of what the band got paid. The manager wasn't paid that way.

In any business, you need someone watching the whole thing, making sure to maximize revenue and minimize costs, i.e. to make sure the joint makes money. The best way to ensure good profits is to pay that person a percentage of the profit. In the examples given here, the band had that ultimate responsibility, and I'm sure they weren't the right ones to have that responsibility.

Having such a manager would solve the band's money problems. But guess what? What I'm describing can also be called "giving up creative control".

You can't have everything. In this case, have a party or make money. These two examples describe a monster party.

bdgr
07-12-2001, 10:22 PM
Originally posted by Bill H.
bdgr wrote
[quote]Well, they had a manager, he made over 50 grand.

As I said, the solution is to pay someone as a percentage of what the band got paid. The manager wasn't paid that way.
[/quote ]
acutally, he was

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. Anyway, it doesn't cost them any thing if it doesn't work. 15% of nothing isn't much!



In any business, you need someone watching the whole thing, making sure to maximize revenue and minimize costs, i.e. to make sure the joint makes money. The best way to ensure good profits is to pay that person a percentage of the profit. In the examples given here, the band had that ultimate responsibility, and I'm sure they weren't the right ones to have that responsibility.

Having such a manager would solve the band's money problems. But guess what? What I'm describing can also be called "giving up creative control".

You can't have everything. In this case, have a party or make money. These two examples describe a monster party.

The party the article describes was $500 out of THREE MILLION! I't just one example not two.

The problem isn't that they didn't have anyone looking out for their interests. The problem is that the odds are stacked against them. The fees that they have to pay, the points everyone takes, and breakdown of who gets paid what are determined by forces outside of the band, and their managers control. They don't have any creative control to give up! the label is going to require a known producer, pro equipment, a union crew to set up and break down(non union means you cant play in a whole lot of places. Once you join the union, you can't employ non union people).

So, once you make a name for your self, sell a lot more records, get some airplay, then, when your contract runs out you have some leverage to re-negotiate. Until then, you are screwed and there is not much you can do about it. There are some exceptions. There are artists that manage to break from the start big enoug to negotiate better terms. But if thier manager starts makeing demands to try ang get a better deal, right off the bat, the record company is going to drop them before quick.

Example: I played with this guitar man a while back from Florida. Best guitar player I ever had the priviledge of jamming with. His band, many years ago was offered the same crappy deal that Lynard Skynard was(his band and Skynard both plaid all the same places and were friends). His band turned down the crappy deal, they didn't, the rest is history. He is working Tech support for Microsoft now.

black rabbit
07-13-2001, 12:15 AM
If I were ever to be insane enough to try to make a living off of rock n' roll, I'd stick with songwriting and let other people do the performing.

I was in a "working band" during my first year of college. We were big fish in a small pond, so we managed to pull in around $1500 a week. Minus expenses and kitty donations, and split seven ways, I managed to get about $100-150 a week out of it. It wasn't exactly the healthiest thing for my college career, but it beat the hell outta getting a real job.

In the nine months I was in that band, I wrote about half of their material. About a year after I quit, they released a self-produced CD that sold around 3,000 copies. Something like 5 out of the 12 songs on the CD were ones that I'd written. If I had bothered to register them, I could've made a pretty penny. I split amicably, and I'm still friends with the guys, so it's not like I'm gonna hound them for the money. But if they had ever inked a deal with a major, you can bet your ass I'd rethink my decision to forgo my slice of the pie.

While performers get all the huge advances, they're still the ones who end up paying for just about everything but promotion and manufacturing. If I weasn't doing this for fun, though, I think I'd just write songs, and quietly collect my ASCAP check.

Bill H.
07-13-2001, 12:23 AM
bdgr wrote
acutally, he was.
No, dude, read it again. The Manager was paid 15% of the Advance (15% of 250k = $37.5k). (plus 15% of tour and merchandising, but that's not what we're talking about.)

What I'm suggesting is that he should be paid on a percentage of the profit, i.e. What the band gets.

The manager is financially incentivised to get a big advance. Well, that's great, but it isn't everything. In the example cited, the manager made money and the band didn't. Had he been incentivised on what the band made, he may have made better choices.

Again, I know nothing of the business of music. It could very well be that there aren't choices in the matter, that bands are forced to spend more money than is reasonable on production costs out of their own pockets. But I suspect a business-savy musician could do pretty good by watching the bottom line in the deal described. Or paying someone (i.e. a manager) to do that for him.

pkbites
07-13-2001, 12:42 AM
Excellent site bdgr! My son is a rock musician and I printed that out for him. He's young and I fear he may get screwed over in his career. Thanks!

bdgr
07-13-2001, 05:18 PM
Originally posted by Bill H.
bdgr wrote
acutally, he was.
No, dude, read it again. The Manager was paid 15% of the Advance (15% of 250k = $37.5k). (plus 15% of tour and merchandising, but that's not what we're talking about.)

What I'm suggesting is that he should be paid on a percentage of the profit, i.e. What the band gets.

The manager is financially incentivised to get a big advance. Well, that's great, but it isn't everything. In the example cited, the manager made money and the band didn't. Had he been incentivised on what the band made, he may have made better choices.

Again, I know nothing of the business of music. It could very well be that there aren't choices in the matter, that bands are forced to spend more money than is reasonable on production costs out of their own pockets. But I suspect a business-savy musician could do pretty good by watching the bottom line in the deal described. Or paying someone (i.e. a manager) to do that for him.

I see what you are saying, he is payed 15% of the gross, not the net that the band sees in the end.

Good point. Unfortuneately most managers won't do work off of the net. At least not the ones with the contacts and experiance that they hired this guy for.