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Music The Almighty Buck

RIAA Accounting — How Labels Avoid Paying Musicians 495

Posted by kdawson
from the hypocrisy-part-deux dept.
An anonymous reader writes "Last week, we discussed Techdirt's tale of 'Hollywood Accounting,' which showed how movies like Harry Potter still officially 'lose' money with some simple accounting tricks. This week Techdirt is taking on RIAA accounting and demonstrating why most musicians — even multi-platinum recording stars — may never see a dime from their album sales. 'They make you a "loan" and then take the first 63% of any dollar you make, get to automatically increase the size of the "loan" by simply adding in all sorts of crazy expenses (did the exec bring in pizza at the recording session? that gets added on), and then tries to get the loan repaid out of what meager pittance they've left for you. Oh, and after all of that, the record label still owns the copyrights.' The average musician on a major record deal 'gets' about $23 per $1,000 made... and that $23 still never gets paid because it has to go to 'recouping' the loan... even though the label is taking $630 out of that $1,000, and not counting it towards the advance. Remember all this the next time a record label says they're trying to protect musicians' revenue."
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RIAA Accounting — How Labels Avoid Paying Musicians

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  • Albini's story redux (Score:5, Informative)

    by 192939495969798999 (58312) <> on Tuesday July 13, 2010 @02:00PM (#32890460) Homepage Journal

    Reminds me of this horrific classic of how recording artists get ripped off: []

  • Not exactly news (Score:5, Informative)

    by BBTaeKwonDo (1540945) on Tuesday July 13, 2010 @02:04PM (#32890540)
    TFA is heavily based on a Courtney Love speech from 10 years ago at [] . Prettier charts in TFA, though.
  • by JavaBear (9872) * on Tuesday July 13, 2010 @02:07PM (#32890606)

    Actually the artists are locked into the main labels, because indies apparently don't get the same air time as RIAA members do, definitely not in the prime time, on the main broad cast stations.

    I don't know about iTunes.

  • Re:So question (Score:5, Informative)

    by binkzz (779594) on Tuesday July 13, 2010 @02:08PM (#32890626) Journal
    Concerts and merchandise. Not CD sales. That's why Radiohead had no problems giving away their songs for free online.
  • by MightyMartian (840721) on Tuesday July 13, 2010 @02:19PM (#32890778) Journal

    That may apply in some cases, but one case I have been following (mainly because I'm a huge fan) is Robert Fripp's multiyear odyssey to get UMG to give him a proper accounting of King Crimson's royalties. He has fairly good evidence that the band has not been properly paid out, but because of the complexity involved due to the mergers and buy-outs and such of publishing companies and the like, whether through maliciousness or incompetence, he and his band have been screwed. What's more, there is some pretty good evidence as far as online sales go that King Crimson has not seen royalties at all, and worse, in many cases, the artists were never even asked, despite a good deal of control over the release of recordings that the Crimson still holds. Fripp tried for some time to get to talk to someone, anyone, in a position of authority who could produce an accounting of earnings and royalties, and finally had to sue UMG, and only now is he finally getting some movement.

    The general methodology of UMG, at least, is to delay, obfuscate and obstruct, claiming at times that it can't answer questions from subordinate companies, or forcing artists to deal with individuals who ultimately have no authority to answer or compel someone else to answer the artist's requests. While I suppose it could be colossal incompetence, I posit that the system is purposefully set up to steal money owed to artists.

    The same thing has happened over at EMI, where the Beatles have been forced to sue over withheld royalties. I'm assuming every record company and major label probably uses the same tactics to screw over artists.

  • Nothing new here (Score:5, Informative)

    by mbone (558574) on Tuesday July 13, 2010 @02:27PM (#32890928)

    Absolutely nothing new here.

    Steve Albini [].
    Courtney Love [].

    Both, I believe, 10+ years old.

  • by walterbyrd (182728) on Tuesday July 13, 2010 @02:29PM (#32890968)

    I am not sure what you are posting about. The article is not trying to justify piracy, neither are most posters.

  • by PopeRatzo (965947) * on Tuesday July 13, 2010 @02:33PM (#32891024) Homepage Journal

    Can you press a nice looking album in good numbers? Can you distribute? Can you promote them?

    Of course you can do all of those things without the RIAA or even a record label. And you can do it a lot cheaper. If you've ever seen an expense sheet from a label trying to justify not paying musicians (I have) you wouldn't believe how much labels claim stuff costs. When you do a tour of 5 college campuses and the label says they paid $20,000 to promote the shows when the only promotion that was done was using free spots on college radio stations and printing a single black and white flyer, you realize you're being screwed.

    Further, it is quite possible to work with a record label but not with the RIAA. There is no such thing as a "standard contract" and if a label exec tells you that something in a contract is "standard language" run for the door. There are labels out there that will make all sorts of agreements, including I have learned from direct experience, letting the composer license the music via Creative Commons (which, by the way, is not a free license unless you make it so).

    And creating your own label has never been easier or more economical. There has been absolutely no need for big record labels since at least 2003, but they keep going because of inertia and uninformed artists. More and more, the big labels are nothing but factories for wholly-fabricated "artists" like Lady Gaga or the finalists of American Idol. They simply skip over dealing with "artists" by fabricating their own. And this does not only apply to pop trash like Gaga. A lot of what's passing for rock and heavy metal is just Archies-style fabricated groups made up of out-of-work actors who basically lipsync and pretend to play their instruments while backing tracks play in concert.

    The big music industry has been in its death throes for some years now. The corporations have already socked away the profits and are only padding their quarterly reports now until the end, when they'll just transition into some other scam. Maybe "internet television".

  • by geminidomino (614729) on Tuesday July 13, 2010 @02:43PM (#32891202) Journal

    Ask and you may become enlightened [].

  • by MightyMartian (840721) on Tuesday July 13, 2010 @02:48PM (#32891286) Journal

    Fripp has been writing a blog for several years now, and it goes back quite some way. It's at []

    What's more you can download a lot of music. He sells entire concerts, $9.99 for MP3s, and I've got about a half a dozen now, including a really kick-ass concert for 2008 and another of 1984. What's more, buy it from DGM Live and, while I'm sure lots of money comes off the top to pay for the website, at the end of the day Fripp and King Crimson get a lot bigger a cut than they would if you went down to HMV and bought an album (and they normally only have In The Court of the Crimson King anyways, and not the really awesome stuff like Red, Discipline or Thrakk).

  • by Critical Facilities (850111) on Tuesday July 13, 2010 @03:17PM (#32891718) Homepage

    Last I checked only labels can sell music through iTunes.

    I'm glad to say that this is not at all true. Here's my stuff* [] in iTunes, and I assure you, I don't work with a label (I learned that lesson the hard, so-called 'indie' labels suck too). If you don't like iTunes, there are other great sites like Soundclick [], and many others.

    *go ahead, buy it, you know you want to.

  • by thedbp (443047) on Tuesday July 13, 2010 @03:20PM (#32891770)

    The Problem with Music [] by Steve Albini []

    Looks like Courtney Love pilfered a lot of her article from Mr. Albini (that doesn't surprise me one bit), which really adds a nice rich chocolatey irony sauce to the whole thing.

  • by DynaSoar (714234) on Tuesday July 13, 2010 @04:08PM (#32892418) Journal

    Educate yourself with something like []

    Then get a lawyer to go over the contract. They only "still own the royalties" if you assigned them all rights. Keep your rights but assign them one time plus compilation rights but keep others and specify your desired pay-off rate. If they don't go for it, take the contact as you want it worded to other producers until you find one that will take it.

    Or do it yourself. There are not only self-producing musicians online, there are self-producing bands that are also online collaborations. They can live on different continents and never meet. Music production has left the building and gone to everyone's homes. The MafIAA was the first against the wall when the revolution came, but they were too brain dead to realize it.

  • by sjbe (173966) on Tuesday July 13, 2010 @05:13PM (#32893140)

    That's the real trick, getting your music distributed in stores.

    Actually that's half the trick and arguably the easier half. I have first hand experience in media distribution as both an industrial engineer and an accountant. First you need the capital to produce the physical media you intend to sell. Not many musicians have this kind of capital and you can't get it from a bank. Unit costs might not be bad but when you plan on selling CDs in the hundred thousands or millions the costs and logistics challenges increase in a non-linear fashion. Even ten thousand units is a pretty big logistical challenge. Second you need to actually sell the music to the stores and into the distribution networks. Try to do it yourself and you won't have much time for making music even if successful. Or you can hire someone to do it for you but this is expensive too regardless of whether it is an RIAA member or not. If you want big scale for selling a physical product (say CDs in Walmart) you'll almost certainly have to go through one or more middlemen who are much bigger than you are and who don't need your business. Your costs to use them will be MUCH higher than the big boys.

    The hard part though is actually getting people to be interested in your music. Distribution logistics are a science but marketing and promotion is an art and something of a dark art at that. Few understand how to create a hit better than the RIAA members.

    Yes, and even if I can't a publicity firm is a lot cheaper than the RIAA.

    Maybe but maybe not. They aren't cheaper if they aren't effective and most publicity firms I've worked with have a pretty low return on investment. If you seek to reach the widest possible audience, it would be hard to compete with the RIAA members. Scummy as they are, they are actually better at promoting musicians than pretty much anyone else. (I'm not talking about how they treat the musicians, just their technical capabilities) You certainly can find cheaper publicity but sadly its pretty difficult to find publicists who specialize in promoting music AND who have the ability to reach as wide an audience. The RIAA members have economies of scale, pre-existing promotional relationships, knows the industry and who is important within it, etc. These are not easy abilities to replicate (a HUGE understatement by the way). Many are trying and the landscape IS shifting thanks to digital distribution but the big labels still matter and aren't going to be easy to push out of the way.

    There are a lot of better ways for real musicians to make money than try to get a deal with an RIAA label.

    Arguably true if the musician is realistic about the likelihood of success. Very few musicians make a lot of money and the RIAA members feed on the dreams and naivety of the rest. It's definitely possible to make money in music but odds are it will be a pretty modest living.

  • by rlh100 (695725) on Tuesday July 13, 2010 @05:15PM (#32893160) Homepage

    Moses Avalon is a record company insider who has written some very funny books about the industry:
                    Million Dollar Mistakes
                    Confessions of a Record Producer
                    Secrets of Negotiating a Record Contract (maybe not funny, have not read it)

    On his web site he as a royalty calculator that allows you to plug in numbers for a recording contact and see how much the band will make:
    It includes standard things in record contracts such as 10% record (CD) breakage and 23% production costs. He gives hints how to maximize the return to the band. At standard record industry contract terms with no advance to the band you have to sell over 3/4 of a million records in order to break even. This assumes the band has already recorded the album. Need an advance to do that, then you have to sell more albums in order to break even. It is fun to play with and the hints are funny and eye-opening. His basic point is that the only money the band is likely to see is the advance. So get as large an advance as possible and spend as little of it as you can.

    At one time he had an article about the economics of a record contract and touring to support it and the end result is that for the hours the band worked, they would make the same money flipping burgers at MacDonald's. And this is for a band with a million selling record.

    Now I do not know how this translates to itunes sales but I would not be surprised if itunes sales still have a 10% breakage allowance.

    Moses is a very funny author to read.


  • by geminidomino (614729) on Tuesday July 13, 2010 @05:26PM (#32893252) Journal

    Maybe the grandchild who said my link was overkill was right. I was not trying to be a dick.

    Specifically, the regex construct s/X/Y in that context means "replace the first instance of string X with string Y"

  • by mhajicek (1582795) on Tuesday July 13, 2010 @05:35PM (#32893338)
    Why do people act like iTunes is the only alternative to brick-and-mortar? Try or any of a dozen other sites. Better pricing, plenty of selection, and no DRM.
  • by black3d (1648913) on Tuesday July 13, 2010 @06:29PM (#32893766)

    He simply dislikes Lady Gaga and doesn't actually know anything about her DJing or writing past. She's one of the very few "pop" artists who ISN'T fabricated. A bad example for sure.

  • Re:Well for all that (Score:3, Informative)

    by Sycraft-fu (314770) on Tuesday July 13, 2010 @07:43PM (#32894382)

    Might work for console games as well. All you need to be allowed to sell a console game is the signoff of the company that owns it. I suppose they could, in theory, restrict it to only established companies but that does not jive with what I've seen.

    As a practical matter as a small developer, you can just use XBL marketplace to sell your game, and XNA to make it. MS at least (and I'm given understand Nintendo is the same" has a framework and dev tools for you to distribute and sell your work. Again the terms are fair, and upfront.

    My point to the original poster was simply one that this idea that you have to play in a given, established system just to get in stores, is bunk. I won't claim it is easy, I claim it is doable. Also, I claim that now with the Internet you don't have to. You don't have to be in major stores to sell your wares. The best examples are in the gaming world since, being technology focused, they are more on the cutting edge but it applies anywhere.

    I just don't want to hear whining from musicians that say "Oh you HAVE to sign RIAA to make any money." No, you don't.

  • Re:Well for all that (Score:3, Informative)

    by tepples (727027) <tepples@g[ ] ['mai' in gap]> on Tuesday July 13, 2010 @08:14PM (#32894554) Homepage Journal

    I suppose they could, in theory, restrict it to only established companies but that does not jive with what I've seen.

    What I've seen of qualifications []: "We typically look for companies that are established game developers [...] Home offices are not considered secure locations."

    As a practical matter as a small developer, you can just use XBL marketplace to sell your game, and XNA to make it.

    I've considered XNA and found a few drawbacks []: XNA lacks a practical way to play procedural audio, you can't easily port a game from another platform because Standard C++ does not meet the requirement of being verifiably memory-safe, games are exclusive to hardware that has a reputation for unreliability, and Microsoft won't give you any help in promoting your game; your customers will have to find the needle in the haystack.

    Also, I claim that now with the Internet you don't have to. You don't have to be in major stores to sell your wares.

    Some genres of music are more popular among people who don't have a PC and broadband.

  • by Anonymous Coward on Tuesday July 13, 2010 @10:40PM (#32895350)

    I hate to say it this way, but this is exactly what people mean when they say someone was "Jewed out of what they are owed/deserved." That expression did not come out of thin air.

    To provide a bit of context...

    Jews are associated with cheating people out of money because, for most of Christian history, the lending of money by Christians was prohibited. Jesus himself condemned it. But, it's always been a necessary social service (and our current economy is almost entirely dependant on it), so Jews, during the dark/middle ages, were the sole source of credit. And naturally, some people were either cheated or confronted with the inevitable "can't pay it back, so blame the lender" problem. Also, money lending, it turns out, it fucking profitable, so naturally the ethnic group most associated with it is also associated with having a lot of money and controlling businesses. And hence this form of antisemitism.

    Wikipedia has something to this effect here [] and here [].

    Posting anonymously because, frankly, this stereotyping is offensive. Also, because the Israeli lobby dominates American politics and I can't afford to be associated with anything to do with the expression "Jewed."

  • by shitdrummer (523404) on Tuesday July 13, 2010 @11:40PM (#32895722)
    Bullshit. I and many friends of mine have songs and albums on iTunes. None of us are signed. We also have our music for sale/streaming on about 10 other site. We all set this up ourselves, no middle-man required. Although there are services that will distribute you music to any of the online sale sites for a fee or cut of your profits.

When the weight of the paperwork equals the weight of the plane, the plane will fly. -- Donald Douglas