royalty of 73 cents, comes to 200,682 units. So with this new album the company has to
sell over 530,000 units before it is contractually fully recouped, and before the artist starts
receiving the royalties. Which is again highly unlikely, and the only funds the artist we
see is probably an additional 20,000 dollars advance, if he receives such an advance for
this album, like he did for the last one. So all in all, the artist has 40,000 dollars
total to show for, from both albums. 20,000 dollars advances times 2, right?.
And how about the label? What’s the score there in this scenario of the second album
and the cross-collateral recoupment? If the second album sold also just 100,000 units
like the first one, and all the expenses stayed the same, we can just double what the company’s
real profits are at this point. Which is about 600,000 dollars. Of course, officially, the
company is unrecouped and in the red, remember? It needs to sell over 530,000 units of the
second album to be officially recouped. So, although in our scenario the first album sold
100,000 units, and the second album sold 100,000 units, and the company made over 600,000 dollars
in profits, the artists has only received 40,000 dollars in advances and has not seen
a single cent, of the artist’s royalties, from the sales yet.
If you pushed that math all the way to the edge, where the artist is about to receive
the royalties, but has not receive them yet – to 330,000 units sold of each album, remember?
– the numbers become tragi-comical. Just about triple everything, and there you have
it. If each of the two albums really sold 330,000 units, a bit more than three times
of our original 100,000 units scenario, the company would have about 2 million dollars
in profits, while the artist still didn’t receive a cent from the artist’s royalties.
Courtesy of the sheer magic of the standard, major-label-recording contract. So if you
are ever offered a recording contract by a major record label, or have to consider one
on behalf of your artists, keep all of this in mind before you sign on the dotted line,
and make sure you know exactly what you are signing and what all the implications are.
Is there any wonder the artists are unsatisfied and seek better contracts? Is there any wonder
the majors are going though hard times, since this is how they have been treating their
artists contractually for a long, long time now? Don’t you think it’s time to start
changing these arcane and often unreasonable contractual standards, and stop selling the
bridges in the Arizona desert as great bargains? And we are. The recording contracts are changing
and becoming more realistic and reasonable. Throughout the industry. Especially in the
indies world. We’ll look at that issue a little closer, later on in the course.