Wednesday, December 02, 2009

Royalty Statement Fiction

Tim Quirk, a member of Too Much Joy is also a music industry executive with Rhapsody. He had been trying for years to get an accurate royalty statement from Warner Brothers Records for the records the band released on that label. Although he knew the band was not recouped (paid back all the advances given by the label), he did not see one digital royalty listed. Being that he worked at Rhapsody, he had access to the Too Much Joy account there and was able to see what they were making and what was paid to the label.

In his blog, Tim details his experience dealing with Warner Bros accounting. This is a pretty common scenario and I've spoken many time about artists I've worked with who have sold over 1 million units a title and never saw a dime in royalties from the label. Tim points out that the label makes money on many bands that never recoup. Bands usually receive between 10-18% of the retail selling price. That money goes to recouping the advance. The bulk of the money goes to the labels. What Tim doesn't mention is that the labels often bill unapproved expenses to the artist. In most cases the musician's contract does not specify that they need to get approval for spending. Labels can spend tens of thousands of dollars on radio promotion (yes that includes gifts for programmers, giveaways and promotional items), crazy marketing ideas (let's put the band's name on a hot air balloon for $6,000) and dinners with the band. It's not limited to these things, but the spending builds. I've yet to see a truly transparent royalty statement. Tim astutely notes that if they accurately report to the bands that don't recoup, they have to do the same to those that do recoup and that means shelling out more money than they want to. If they can afford it (it's very costly), an artist can audit the label. From what I've heard from managers, there is always money to be found.

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