My Hilarious Warner Bros. Royalty Statement

http://www.toomuchjoy.com/?p=1397

by soundsop • 17 years ago

201 69 17 years ago

Tangurena• 17 years ago

Courtney Love gave an interesting speech several years ago on this very subject: http://archive.salon.com/tech/feature/2000/06/14/love

redcap• 17 years ago

Interesting article, but if you were after just the details on how fucked over artists are, check out the Steve Albini article listed below.

Quarrelsome4• 17 years ago

Albini doesn't reference the Satellite Home Viewing Act 1999 though. That bit of Courtney's rant is interesting. Also the reason why this article doesn't appear on her own site anymore is interesting.

It's all interesting stuff and this is an area where there is limited information. Read both!

BRadmin• 17 years ago

Thank you for that. She made far more coherent and intelligent points than what I would have previously given her credit for. Written in 2000, I wonder if we've made any progress for her:

"If you're going to start a company that deals with musicians, please do it because you like music. Offer some control and equity to the artists and try to give us some creative guidance. If music and art and passion are important to you, there are hundreds of artists who are ready to rewrite the rules."

JacobAldridge• 17 years ago

Funny, if it weren't so tragic.

aresant2• 17 years ago

I think the record companies are spot on - spend your time with the 20% of artists that are making money, ignore the 80% that are not.

The crooked side in this is that the labels outright own rights to the small 80%'s catalogs.

It would be better for everybody if Warner let them out of the pen so that artists could deal with rhapsody, etc themselves.

I doubt that the book-keeping and time spent on uploading, cashing tiny checks, etc would work out to being a positive net gain for the artists.

waterlesscloud• 17 years ago

The exact same software that would allow for accurate tracking of the 20% that make money would work for the 80% that don't.

The fact that they can't properly account for the 80% strongly implies that they can't properly account for the 20%.

pyre4• 17 years ago

It's entirely possible that all of the numbers are being moved around by hand through various large Excel spreadsheets rather than in an actual accounting system. You might think this unlikely for a large corporation, but it happens. In this case, shuffling around the numbers for the 80% would be extra time and money.

edit: Maybe I should mention that I'm not defending them, just pointing out that there could be a plausible explanation. In this case, the plausible explanation is that their accounting people are idiots (they probably think that their system is more reliable because an accountant is looking at all of the numbers instead of some automated process, not taking into account that MS Excel isn't exactly bullet-proof software).

aresant2• 17 years ago

I bet the hidden math is in the accounting fees, administrative fees of dealing with the few dollars here and there.

akronim• 17 years ago

There must be bands near recouped, that would be but for some dodgy accounting. So while for the author it doesn't really make any difference, there must be artists missing out on actual cash.

dasil003• 17 years ago

Read further:

That’s how much they spent on us, and we don’t see any royalty checks until it’s paid back, but it doesn’t get paid back out of the full price of every album sold. It gets paid back out of the band’s share of every album sold, which is roughly 10% of the retail price. So, using round numbers to make the math as easy as possible to understand, let’s say Warner Bros. spent something like $450,000 total on TMJ. If Warner sold 15,000 copies of each of the three TMJ records they released at a wholesale price of $10 each, they would have earned back the $450,000. But if those records were retailing for $15, TMJ would have only paid back $67,500, and our statement would show an unrecouped balance of $382,500.

Just because the artist is unrecouped doesn't mean the record company isn't making money.

IsaacSchlueter• 17 years ago

Yep. It's pretty incredible.

Good thing startup founders are usually a little bit better at math. Seems like it'd be about like this:

    "Advance" your startup $1M (really, advanced to yourself,
    since you're hanging onto the money)

    Sell the startup dubious services at outrageous prices,
    force them to make your dumb cousin an SVP

    "Pay back" the loan with %10 of the *profits*

    When the profits top $10M, the founders *start* seeing 
    10% of what comes in (after expenses, of course)

I'm in the wrong line of work.

edit: As I read this, I'm realizing that there probably are termsheets out there that aren't far off from this.

ars2• 17 years ago

So, the labels charge the bands for everything they do for them? So why do they then also take 90% of the income?

You get a profit if you make an investment, but if you charge for all your services, you didn't make an investment, so why do you deserve a profit?

But, I guess it works, since people are doing it.

pyre4• 17 years ago

Loan sharks exist and make money too. "It works."

jrockway• 17 years ago

This is why artists don't care if you pirate their music. Their music was already stolen by the record company.

Albums basically amount to free advertising for the band.

InclinedPlane3• 17 years ago

So, the labels charge the bands for everything they do for them? So why do they then also take 90% of the income?

Because it means more money in their pockets, duh. Accounting in the entertainment industry is as crooked as it gets.

tezza7• 17 years ago

Plenty of businesses have multiple ways of billing.

If you order repeat bank statements from your mortgage bank, are they not allowed to charge you for postage??

As far as the article can show, Warner Bros is out $300K on the deal with little prospect of getting it back. That's presuming the digital download sum was actually $92,000 instead of $65.

Quarrelsome4• 17 years ago

You missed the bit where he points out that 90% that Warner take off the CD sales are not deducted from the advance. In his figures Warner only had to sell 15,000 of each CD to break even (which the author seems to suggest they did). At this point the band will still be in the red with the label but the label wont be in the red with the band.

InclinedPlane3• 17 years ago

You seem to miss the difference between "legal" and "morally defensible". Sure, bands with no knowledge of business or law (most of them) can sign horrific contracts tremendously skewed toward the advantage of the record labels, all perfectly legal. But that doesn't make it right.

rbanffy3• 17 years ago

"So, the labels charge the bands for everything they do for them? So why do they then also take 90% of the income?"

Because, as the article explains, many bands (presumably most of them) never pay back what the label invested. If TMJ never earns them a penny, they have to cover their losses with those who do.

dagw2• 17 years ago

According to the article TMJ probably earned the label back all the money they lent them, but from a different revenue stream. The loan doesn't get paid back from all the money the band generates, but from a small percentage of it.

Let us say that an album sale makes $6 for the label and $3 for the band, then the label first takes the $6 and then also takes the $3 to pay down the advance. So even though that album sale in effect gave the label $9 in revenue, they only decreased the loan by $3. So in this example the losses from a 90k$ advance will be completely recovered after 10k sales, but the band will still 'owe' the label until they've made 30k sales. So just because a band still 'owes' a label hundreds of thousands of dollars, that does not mean that the label lost that money.

philwelch• 17 years ago

Your startup hires a hacker. The hacker earns a salary. So why does he get to have equity, too?

It's not a matter of principle here, it's a matter of how bad the bargain is in reality. In my example, the employee receives a decent guaranteed pay but low percentage of the upside. The founder receives low guaranteed pay but more upside. The label though receives most of the upside and most of the guaranteed pay too.

codexon• 17 years ago

Seems to be down sporadically. Here's a mirror.

http://www.toomuchjoy.com.nyud.net/?p=1397

wgj• 17 years ago

Here is Steve Albini's famous article on the generalized situation between labels and bands:

http://www.negativland.com/albini.html

aerique• 17 years ago

What are these "points" Albini is talking about in his article?

Like here: "Wasn't it Buffalo Tom that were only getting 12% less 10? Whatever. The old label only wants 50 grand, an no points. Hell, Sub Pop got 3 points when they let Nirvana go."

Luc• 17 years ago

Percentage points on the gross retail revenue. Look at the spreadsheet under the article - the producer gets $90,000 (-$50,000 advance), being 3% of $3,000,000 record sales.

chrischen5• 17 years ago

That's what's great about the internet. Fuck the distributors.

Want to be a journalist? Start a blog or a site.

Sell shit nationwide? Make a website, ebay, Amazon, etc.

Be famous across the world? Youtube.

Distribute an indie movie? Video sites and online stores.

The important feature of the internet here is that it allows anyone to be a distributor. Survival of the fittest can work more ideally. No more people/companies being there simply because they were there first.

pyre4• 17 years ago

> That's what's great about the internet. Fuck the distributors.

> ebay, Amazon, etc.

> Youtube.

> Video sites and online stores.

Unless you are selling directly from your site there is still a middle-man/distributor. As a content-creator, 'distributors' are a middle-man between you and the retailers, but the retailers are middle-men between the distributors and the end-user/customer.

The internet is really for reducing costs, but doing something like selling streaming HD video (or just HD video downloads) is not something you can economically accomplish on your own with just a hosting service. You need a framework (iTunes, YouTube, etc) and they become the new distributor. They may be a better distributor (or just more 'barebones'), but they are still a distributor.

chrischen5• 17 years ago

>Unless you are selling directly from your site there is still a middle-man/distributor Right. And I said:

>The important feature of the internet here is that it allows anyone to be a distributor.

Anyone can be the distributor, so competition is fiercer. Monopolies/oligopolies are harder to maintain. Competition can be more ideal.

> doing something like selling streaming HD video (or just HD video downloads) is not something you can economically accomplish on your own with just a hosting service.

But more companies can jump into the space, even if one cannot do it individually. The barrier to entry to a lot of industries is reduced because of the internet.

My point was not that it makes everything accomplishable by one person, my point was that the internet lowers the barriers to entry and encourages more ideal capitalism.

> ...they are still a distributor.

Yes, and if you self-distribute, you become the distributor. There will be a distributor. My "fuck the distributors" statement was directed at the current distributors. It was a statement directed at all the inefficiencies of their current systems.

Distributors will always be there. Of course. But the internet will allow more distributors, because the internet gives all access to the world.

ericd• 17 years ago

"No more people/companies being there simply because they were there first."

Except for those there first with huge network effects...

chrischen5• 17 years ago

My point was that companies will have to be more legitimate. It will be harder to maintain their dominance by using their stature. Companies will need to stand more on their merit. I did not mean to imply that companies won't be able to use their stature to gain influence though.

pierrefar• 17 years ago

The numbers are scary: WB claims to be $300k out but they're not accounting for a sizable revenue stream. The post mentions the band earned $12k in 5 years from albums they control, and they expected the albums WB control to earn 2-5X more. Assume 5x$12, and you'll get closer to $200k.

Do that over quite a few years, and they'll end up owing the band money while the band members are alive. Keep telling them $62 over five years and they'll never ever need to write them a cheque.

How is this not pure and simple theft?

dazzawazza• 17 years ago

Because they singed a contract stating that advances are to come out of their share of the profits.

It sucks but that's how it has worked and sometimes still works for artists although a lot of them are wise to this game.

jcl• 17 years ago

His point is that the company is misrepresenting money promised by the contract; if the contract were actually enforced, the band might completely repay their advance in another five years and be owed money.

It's like in The Producers... Whether intentionally or not, the record labels are banking on the fact that people do not look too closely at the accounting of a losing enterprise.

billswift• 17 years ago

As the copyright extensions and DMCA demonstrate, the big media companies own the gov't. It's not theft if it's legal, and it's not illegal if the gov't won't prosecute.

Luyt• 17 years ago

The financial statement seems to be printed... on a matrix printer! It looks very 80's to me.

sethg2• 17 years ago

I am conflicted about whether I am actually being a petty jerk by pursuing this, or whether labels just thrive on making fools like me feel like petty jerks.

I vote for the second option.

zackattack• 17 years ago

what's your surname?

pbhjpbhj• 17 years ago

Can they somehow count unrecouped monies against profits on their accounting sheets and so reduce apparent profit and pay less tax? Sounds like some sort of accounting scam (as well) whether this is possible or not.

invisible• 17 years ago

What I find reprehensible about this is that while he believes he'll never repay WB, it looks to me as though he could be at least a hell of a lot closer to $0. So why should it be OK for WB to say keeping him further from $0 is OK?

You are not being a jerk by trying to zero out your balance. If what you said about your other albums is correct, you could be at $250K currently rather than the $400K. That means reaching "recouped" (whatever that means in this insane contract you're bound to) could be possible in 10-15 years.

zacharye• 17 years ago

Terrific read, as unfortunate and common as the content may be.

As an aside that some may find of interest, and since the article mentions the Red Hot Chili Peppers, I forwarded it to a friend who works with the firm that does royalty audits for the Chili Peppers. His response (the auditor's name has been removed):

"The Chili Peppers use ____ to audit their royalty statements, which they pay ____ a lot of money for, and they always get checks for hundreds of thousands of dollars when ____ settles the audits with Warner Bros. Obviously, Too Much Joy can’t afford ____’s level of expertise. So the little guy gets screwed... No surprise there!"

My Hilarious Warner Bros. Royalty Statement

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