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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

by aresant 17y 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.

dasil003 17y 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 17y 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.
  - rbanffy 17y ago
    I wonder if there is a band leader that writes a decent business plan, puts on a suit and goes to an investment bank seeking funds. With a decent enough BP, I doubt a suit is needed.
    - vidarh 17y ago
      Re: music industry, banks and suits, there's the old story about Branson and Virgin back when they were just a label. No idea if it's just an urban legend or if it really happened. The story says that Virgin was practically bankrupt, and that Branson went to their bank - a very stodgy, conservative British bank - and on purpose avoided wearing a suit contrary to all advice. He apparently got there dressed in his normal casual clothes, sat down and asked for huge increase in their credit facility without any plans or anything to back it up other than some vague claims about needing money to expand. The thought was supposedly that if someone in his business showed up to the bank in a suit with a detailed plan for "how to save the business" they'd smell the desperation and get rid of him as quick as they could, so instead he went looking like it was any other day and it really didn't matter to him if they said yes and no, but hey, it wouldn't hurt with another half a mill to grow a bit faster, hoping that they'd figure that business had to be great if he was that casual about those kind of amounts. Not that I'm advocating that approach in general..
    - xsmasher 17y ago
      Possible, but the bank would probably prefer to invest in the record label, and get a piece of their lower-risk action, than invest in a single band.
waterlesscloud 17y 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%.
- pyre 17y 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).
  - tezza 17y ago
    I'm not defending them either, just using my knowledge of the music rights industry (involved in legal side of Music Startup FYI) The rights of each track are tortuous and split. There are many different responsible bodies that need to be consulted as to who owes how much to whom. * Mechanical Rights * Production Rights (maybe split say 30% 30% 35% somehow) * Recording Rights These are all spread around different collecting bodies. There may be different societies for different artists, countries. It is a difficult, time-consuming and manual problem to allocate the monies.
  - cabalamat 17y ago
    Assuming royalties are often incorrectly calculated, what's the likelihood that the innaccuracies are almost always in the favour of the record company? I suspect very likely indeed, and IMO it constitutes fraud. When record companies deprive artists of income through misaccounting, they should be charged with copyright infringement, and fined at the same high rate per copy that they have bribed legisltors to apply when others infringe copyright. And if that means they go bankrupt, it's no more than they deserve.
akronim 17y 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.

by aresant 17y ago

dasil003 17y 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 17y 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.
- rbanffy 17y ago
  I wonder if there is a band leader that writes a decent business plan, puts on a suit and goes to an investment bank seeking funds. With a decent enough BP, I doubt a suit is needed.
  - vidarh 17y ago
    Re: music industry, banks and suits, there's the old story about Branson and Virgin back when they were just a label. No idea if it's just an urban legend or if it really happened. The story says that Virgin was practically bankrupt, and that Branson went to their bank - a very stodgy, conservative British bank - and on purpose avoided wearing a suit contrary to all advice. He apparently got there dressed in his normal casual clothes, sat down and asked for huge increase in their credit facility without any plans or anything to back it up other than some vague claims about needing money to expand. The thought was supposedly that if someone in his business showed up to the bank in a suit with a detailed plan for "how to save the business" they'd smell the desperation and get rid of him as quick as they could, so instead he went looking like it was any other day and it really didn't matter to him if they said yes and no, but hey, it wouldn't hurt with another half a mill to grow a bit faster, hoping that they'd figure that business had to be great if he was that casual about those kind of amounts. Not that I'm advocating that approach in general..
  - xsmasher 17y ago
    Possible, but the bank would probably prefer to invest in the record label, and get a piece of their lower-risk action, than invest in a single band.

waterlesscloud 17y 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%.

pyre 17y 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).
- tezza 17y ago
  I'm not defending them either, just using my knowledge of the music rights industry (involved in legal side of Music Startup FYI) The rights of each track are tortuous and split. There are many different responsible bodies that need to be consulted as to who owes how much to whom. * Mechanical Rights * Production Rights (maybe split say 30% 30% 35% somehow) * Recording Rights These are all spread around different collecting bodies. There may be different societies for different artists, countries. It is a difficult, time-consuming and manual problem to allocate the monies.
- cabalamat 17y ago
  Assuming royalties are often incorrectly calculated, what's the likelihood that the innaccuracies are almost always in the favour of the record company? I suspect very likely indeed, and IMO it constitutes fraud. When record companies deprive artists of income through misaccounting, they should be charged with copyright infringement, and fined at the same high rate per copy that they have bribed legisltors to apply when others infringe copyright. And if that means they go bankrupt, it's no more than they deserve.

akronim 17y 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.