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It's been three years since you
formed Cobain Headstain-and things couldn't be
better for the band. Your self-released single, "Neatly Trimmed
Triangle," has been getting heavy spins on WEQX. Cobain Headstain are regularly headlining shows at QE2, pulling sellout
crowds each and every time. You also just played a slamming opening set for
the Black Flag reunion show at Valentine's, catching the attention of the
Mammon Records' A&R rep who happened to be
Rollins-watching at the bar.
Your bandmates put you in charge of negotiations
when Mammon comes a-courtin' in earnest a few weeks
later, since you've always been the one who handled Cobain Headstain's affairs-booking shows, renting the truck for
that gig in Poughkeepsie, buying pizzas for rehearsal, all that business
stuff. And their trust was well placed, as after a few weeks of amiable
back-and-forth with Mammon, you and the guys are sitting at the signing
table, contract and pens in hand. Yeh, there's a
bunch of gobbledygook in the contract, but you know it's just the usual
meaningless verbiage that shows up on apartment leases or on those purchase
slips they make you sign at Radio Shack. The important points are that
Mammon will be releasing the Cobain Headstain debut
album-while the band will be walking out of the label's offices with a
$100,000 check in hand and a promise of 15% royalties on the forthcoming
album's sales.
After the signing, you immediately head for the studio to lay down tracks for
your debut disc, Die Through This. Mammon Records are generous to a
fault throughout the recording sessions and, amazingly, even accommodate your request to have Brian Eno
flown in from England to produce. Wow! Ten weeks later, you and the guys head home, cash
that big fat Mammon paycheck and decide to live it up for a while because,
well, you've earned it. And what's a little drug-addled excess between
friends?
When you all regain consciousness three months later, some $100,000 poorer
for your hearty partying efforts, you discover that Die Through This
has shipped 200,000 copies and the re-released "Neatly Trimmed
Triangle" is in heavy rotation on over 100 radio stations nationwide.
You run down to Music Shack and see that they're selling Die Through This
on CD for 15 bucks a pop--so you do some quick math (15% of 200,000 albums at
$15 each) and figure that your band is entitled to about $450,000 in
royalties already. Ch'ching! Filled with cash lust,
you return home, call up the other guys and give 'em
the good news. Boy, are they stoked!
Next you ring Mammon to ask when the money trucks will be making a drop at
your house. When the label's accountant finishes laughing, he answers,
"Sorry man, but that $100,000 advance you got wasn't a gift: you have to
pay that back before you see another penny. How? Through your royalties, of
course, which we'll be keeping until we've recouped the full advance, plus
any other recoupable costs that you incur."
Being a smart boy, you point out that there should still another $350,000
coming your way on sales to date after the advance is recouped. "Nope,
sorry, it doesn't work that way," the chuckling Mammon bean counter
replies. "First off, your royalties are calculated on a suggested
retail list price (SRLP) that we assign each record we release; if the
stores want to sell records for more, that's their business. And I'm sure you
recall that we're calculating your royalty payments on a cassette SRLP
of $10, although since you only get paid royalties for the portion of the
product that you actually created, we also discount that SLRP by 20%
for cardboard, plastic and packaging costs. So the base on which your
royalties are calculated is actually $8 per unit, not the $15 you may see on
a CD in a record store.
"You may also recall that your 15% royalty rate was anall-in
royalty rate, which means that the producer gets a cut," Mr. Mammon
continues. "And since Eno commanded a 5%
royalty, your net per unit actually ends up being 10% of the $8 I just
explained. So in order to figure your royalties, you need to multiply the
number of royalty bearing units by an 80 cent unit rate."
Okay, 200,000 records at 80 cents a pop, that's still $160,000-which means
you've paid off the advance and have $60,000 coming your way, right?
"Wrong again," your phone chum answers. "Since 20% of the units
we ship are freebies to radio stations, you can't collect royalties on those.
And don't forget that we also deduct a 15% breakage factor on sellable units
to account for things getting destroyed in the mail. So removing 20% worth of
free goods from the original 200,000 units shipped leaves 160,000 sellable
units, 85% of which generate royalties for you. So that's 136,000 royalty
bearing units at 80 cents a pop, or about $108,800 in gross royalties."
Ummm . . . so that means you get only $8,800 after
selling 200,000 records!? "No, 'fraid not,
because you also incurred some additional recoupable costs over the last few
months," explains Mammon's cash demon. "There's $150,000 for studio
costs plus $50,000 for independent radio promotion of 'Neatly Trimmed Triangle,'
meaning that in total you're actually now about $191,200 in the hole. So in
order for us to recoup that amount, we'll need to ship . . . oh, say another
350,000 copies or so of Die Through This. And honestly, that's not
likely to happen.
"So you guys better hurry up and invest your advance in merchandise to
sell on that tour you're supposed to be setting up," the Mammonite concludes. "Because that's where
you're gonna make your money. Oh, and I also want
to thank you, while I've got you, for giving us your publishing
rights--because we're just making a killing on all the airplay that
'Triangle' has been getting. You guys have been real good for the
company!"
You hang up. You call a band meeting. You announce that you're quitting to pursue other opportunities. You take out an ad in the
Metroland classifieds reading: "Established bassist seeking to form
new band. Need drummer, guitarist and lawyer. Serious inquiries only."
The End.
Epilog: A little extreme for illustrative purposes? Only in Cobain Headstain's naivete since the
business details described are within record industry standards, although
they would not necessarily all appear in the same contract. For more
information on what else you can expect when dealing with record labels, try Donald
S. Passman's All You Need to Know About the
Music Business (Simon & Schuster), which offers crucial industry
insight in language so simple that even your drummer will be able to follow
along. Passman's first tip? Hire a manager or a
lawyer before tangling with the industry big boys. Hopefully you now
understand why.
The Local Perspective
Okay, so why sign a contract with a record label at all, if it's that
much of a hassle?
"Well, as a general rule, musicians don't have any money," answers
Clay People vocalist Dan Neet. "And the only
way they're going to get any is by signing a contract with somebody who has
some."
Neet and his bandmates
signed such a contract with Slipdisc Records (a
Mercury affiliate) late last year, but the deal was a long time in the
making. "We spent about eight years building the Clay People name before
we signed with Slipdisc," Neet
explains. "We had already issued several independent records, which
helped us build credibility in the music business. And I really think it's a
good idea to incubate a band like that it if you want to last, because a lot
of the bands who come straight out on a major label are just not ready for
what gets thrown at them."
"I used to really look up to those bands that were signed to major labels,"
adds Neet's guitar-playing bandmate
Mike Guzzardi. "I was so hungry for that and I
just focused everything I had on getting to where they were . . . but once I got
there, there were just all of these new monsters to deal with. One of the Figgs had told me that was the case a few years ago and I
laughed at him then, but now I know exactly what he was talking about, 'cause
when the shit hits the fan, everything comes to down to business once
you've signed on that line. And ultimately a label is only interested in you
as long as you're able to make money for them, since that's what their
business is all about."
Neet and Guzzardi are
both quick to stress the important roles that their business advisors played
in the negotiations leading up to their contract and in their approach to
managing their affairs since the signing. "Every band needs a team: a
lawyer, manager, publicist, tour manager, sound person, whatever,"
summarizes Neet. "And we've developed a great
team over the years who can do all the business things that I don't feel are
part of my job description as a member of the band. But it's also important
that you work with the people on your team for a while to learn their
capabilities before signing on the line--because once you sign, everybody gets
a cut."
So with all of those cuts heading into other people's pockets, how can a band
make any money on a record deal? "There's a perception that a lot of
bands have about how they're gonna make money
selling lots of records once they sign a contract, but that's really a
myth," explains Clay People drummer Dan Dinsmore.
"Most bands are gonna make their money on
advances, on touring, on merchandise and on their publishing rights,
particularly if you can get a song on a soundtrack or whatever, 'cause you're
getting a cut every time that song is played. So when you sign a contract,
you want to make sure you get your publishing rights and tour support into
the deal, then you also want to get as big an advance as possible to invest
in the band and in merchandise to sell while you're on the road."
Super 400 took a different approach when they signed a deal with Island Records to release the group's
eponymous debut album after it had already been recorded for the local Cacophone label. "We really didn't try to get a lot
of money from Island up front," notes
singer-guitarist Kenny Hohman. "Although, at
out manager's suggestion, we did get a truck out of the deal so we'd have
something to tour in. We figured it was better to be an inexpensive purchase
for Island, since then we might get to
hang around longer-which is important to me, 'cause I really don't want this
to be our only album. And Island's looking at it that way, too, which is
nice: they're kinda treating us like a young
fighter, bringing us along slowly instead of burning us out with a media
blitz."
Hohman also emphatically echoes the Clay People's
sentiments when it comes to having a sound business team. "I just really
hate the business side of it because it's so far removed from the music
part," he notes. "So I just play the best I can, write the best
songs possible, look presentable on stage--and have a great lawyer and a
great manager to handle the rest of the stuff, because it's just too
terrifying for me to deal with."
Copyright 1997: J. Eric Smith.
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