There's This Band

There's this band. They're pretty ordinary, but they're also pretty good, so they've attracted some attention. They're signed to a moderate-sized "independent" label owned by a distribution company, and they have another two albums owed to the label.

They're a little ambitious. They'd like to get signed by a major label so they can have some security, you know, get some good equipment, tour in a proper tour bus: nothing fancy, just a little reward for all the hard work. 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 anything if it doesn't work. Fifteen percent of nothing isn't much! One day an A&R scout calls them, says he's "been following them for a while now," and when their manager mentioned them to him, it just"clicked." Would they like to meet with him about the possibility of working out a deal with his label? Wow. Big Break time. They meet the guy, and y'know what! He's not what they expected from a label guy. He's young and dresses pretty much like the band does. He knows all their favorite bands. He's like one of them. He tells them he wants to go to bat for them, to try to get them everything they want. He says anything is possible with the right attitude. They conclude the evening by taking home a copy of a deal memo they wrote out and signed on the spot.

The A&R guy was full of great ideas, even talked about using a name producer. Butch Vig is out of the question: he wants 100 g's and three points, but they can get Don Fleming for $30,000 plus three points. Even that's a little steep, so maybe they'll go with that guy who used to be in David Letterman's band. He only wants three points. Or they can have just anybody record it (like Warton Tiers, maybe: cost you 5 or 10 grand) and have Andy Wallace remix it for 4 grand a track plus 2 points. It was a lot to think about.

Well, they like this guy and they trust him. Besides, they already signed the deal memo. He must have been serious about wanting them to sign. They break the news to their current label, and the label manager says he wants them to succeed, so they have his blessing. He will need to be compensated, of course, for the remaining albums left on their contract, but he'll work it out with the label himself. Sub Pop made millions from selling off Nirvana, and Twin Tone hasn't done bad either: 50 grand for the Babes and 60 grand for the Poster Children, without having to sell a single additional record. It'll be something modest. The new label doesn't mind, so long as it's recoupable out of royalties.

Well, they get the final contract

It's not quite what they expected. They figure it's better to be safe than sorry and they turn it over to a lawyer, one who says he's experienced in entertainment law, and he hammers out a few bugs. They're still not sure about it, but the lawyer says he's seen a lot of contracts, and theirs is pretty good.

They'll be getting a great royalty: 13% (less a 10% packaging deduction). Wasn't it Buffalo Tom that were only getting 12% less 10? Whatever. The old label only wants 50 grand, and no points. Hell, Sub Pop got 3 points when they let Nirvana go. They're signed for four years, with options on each year, for a total of over a million dollars! That's a lot of money in any man's English. The first year's advance
alone is $250,000. Just think about it, a quarter-million, just for being in a rock band!

Their manager thinks it's a great deal, especially the large advance. Besides, he knows a publishing company that will take the band on if they get signed, and even give them an advance of 20 grand, so they'll be making that money too. The manager says publishing is pretty mysterious, and nobody really knows where all the money comes from, but the lawyer can look that contact over too. Hell, it's free money.

Their booking agent is excited about the band signing to a major. He says they can maybe average $1,000 or $2,000 a night from now on. That's enough to justify a five week tour, and with tour support, they can use a proper crew, buy some good equipment and even get a tour bus! Buses are pretty expensive, but if you figure in the price of a hotel room for everybody in the band and crew, they're actually about the same cost. Some bands (like Therapy? and Sloan and Stereolab) use buses on their tours even when they're getting paid only a couple hundred bucks a night, and this tour should earn at least a grand or two every night. It'll be worth it. The band will be more comfortable and will play better.

The agent says a band on a major label can get a merchandising company to pay them an advance on T-shirt sales! Ridiculous! There's a gold mine
here! The lawyer should look over the merchandising contract, just to be safe. They get drunk at the signing party. Polaroids are taken and everybody looks thrilled. The label picks them up in a limo.

They decided to go with the producer who used to be in Letterman's band. He had these technicians come in and tune the drums for them and tweak
their amps and guitars. He had a guy bring in a slew of expensive old"vintage" microphones. Boy, were they "warm." He even had a guy come in and check the phase of all the equipment in the control room! Boy, was he professional. He used a bunch of equipment on them and by the end of it, they all agreed that it sounded very "punchy," yet "warm."

All that hard work paid off. With the help of a video, the album went like hotcakes! They sold a quarter million copies!

Here is the math that will explain just how fucked they are:

These figures are representative of amounts that appear in record contracts daily.
There's no need to skew the figures to make the scenario look bad, since real-life examples more than abound.

• Record sales: 250,000 @ $12 = $3,000,000 gross retail revenue
• Royalty (13% of 90% of retail): $351,000 less advance: $250,000
• Producer's points: (3% less $50,000 advance) $40,000
• Promotional budget: $25,000 Recoupable buyout from previouslabel: $50,00
• Net royalty: (-$14,000)

Record company income:
Record wholesale price $6.50 x 250,000 = $l,625,000 gross income

Artist Royalties: $351,000 Deficit from royalties: $14,000 Manufacturing, packaging and distribution @ $2.20 per record: $550,000

Gross profit: $710,000

THE BALANCE SHEET:

This is how much each player got paid at the end of the game.

• Record company: $710,000
• Producer: $90,000
• Manager: $51,000
• Studio: $52,500
• Previous label: $50,000
• Agent: $7,500
• Lawyer: $12,000

Band member net income each: $4,531.25

The band is now 1/4 of the way through its contract, has made the music industry more than 3 million dollars richer, but is in the hole $14,000 on royalties. The band members have each earned about 1/3 as much as they would working at a 7-11, but they got to ride in a tour bus for a month.

The next album will be about the same, except that the record company will insist they spend more time and money on it. Since the previous one
never "recouped," the band will have no leverage, and will oblige.

The next tour will be about the same, except the merchandising advance will have already been paid, and the band, strangely enough, won't have
earned any royalties from their T-shirts yet.

Maybe the T-shirt guys have figured out how to count money like record company guys.