How Music Works (41 page)

and big studios for recording them. When you do a record like that with a

corporate-owned label, you have to pay at least union rates for musicians.

Though high, those rates are generally fair. In this case, recording costs (all the musicians, studio time, technicians, and arrangements) were $218,000,

which seems like a sizable sum. I was glad Nonesuch was covering those

expenses with their advance, but still, what was I to live on? Was I being

foolish and naïve?

Presumably they didn’t give me that advance knowing or even caring

what the record would cost. Rather, for them the amount was based on pro-

jected sales. Needless to say, this “loan” would need to be paid off—it wasn’t a gift for signing with them! I would begin to see income from my record

only after that sizable sum was repaid.

There are two ways of handling a royalty deal, but they both come out

more or less the same for the artist. In one form of accounting, the artist

gets their percentage only after a lot of others get to the feed trough first.

The other standard model involves the retailer and record company taking a

lump sum off the top, with the artist receiving a fixed royalty on what’s left.

I’m going to focus on the first form of accounting, since it’s more transparent.

A big chunk of the price a consumer pays goes to the retailer—either the

physical store (those that are left) or to iTunes or Amazon. Then the record’s producer gets some percentage (3 percent is common). Any tour support the

record company advanced to the artist gets paid back, as do video costs, which can be as high as the cost of making a record and are often higher, like a million dollars for a really big-budget video. Then promotional costs are shared, including payola—which is essentially bribes of one form or another to radio stations. So half of what the record company pays to get your record played

and marketed is your own money—you just don’t have to front it. (To be

fair, they usually ask at each step along the way.) It goes on and on. Returns (meaning the records that are pressed and shipped out but remain unsold and

DAV I D BY R N E | 225

need to be returned), limos, those dinners they bought you that you thought

were such a nice gesture—this all gets deducted before the artist’s percentage kicks in. A lot of accounting work is required if an artist decides he or she wants to actually investigate where all that money went.

PHYSICAL ROYALTY BREAKDOWN

5% Packaging and

Manufacturing

1% Musician’s

Unions

5% Publishing

Royalties

5% Retail

Profit

24% Retail Overhead

6% Distribution

10% Artist

Royalties

18% Label Overhead

11% Label Profit

15% Marketing/

Promotion

226 | HOW MUSIC WORKS

Here are the figures that show the cost of making my
Grown Backwards

record versus the advance I got from Nonesuch.

EXPENSE BREAKDOWN FOR
GROWN BACKWARDS

($225,000 ADVANCE)

1% Rehearsal Space

1% Cartage/Freight

1% Equipment Supplies/Rentals/Repairs

1% Meals & Entertainment

3% Artist net income from advance, after

recording costs

3% Travel

4% AFM duties

7% Arranger/

Copyist Fees

38% Musician Fees

17% Engineer Mixing Fees

24% Studio Expenses

DAV I D BY R N E | 227

This was an expensive, and therefore risky record to make in the current

economic climate. The record business was heading down a slippery slope,

so betting that I’d make that hefty advance back was in no way a sure thing.

I felt lucky just to be able to make a record with strings, winds, and the host of great musicians I loved, and I was prepared not to reap much in the way

of profits as a result. We all knew that records were costing more, but relative to what my record sales were at that time, this was really pushing it a bit. I’ve talked recently to some emerging musicians who are still watching

the industry tank, and when I asked them why they even wanted to make a

record, their feeling was, “I want to do it while they still exist.” I may have been operating under a similar impulse:
Let me sneak under the wire before
the whole game is over
.

How many copies of that record would I have to sell to actually make money?

The record retailed for $18 (before inevitable discounts, but for the sake of this exercise let’s use the full price). Eight dollars of that goes straight to the retail store selling physical CDs, which leaves $10. If my royalty percentage were a not-uncommon 14 percent, I’d get $1.40 from that wholesale price. If my royalty rate were a fairly high 19 percent I’d get $1.90 per CD sold. If I had a big-name producer on the record then I’d typically be obliged to give 3 percent to him or her, because producers get paid off the top—not after I go into profit.

Really big producers get advances, too. T Bone Burnett often gets an advance in the six figures, which comes off the artist’s royalty share, though many artists would say that he is worth the price.

Some producers also demand a share of the publishing, essentially claiming

they co-wrote the songs. This might in fact be the case at times: the beats and sounds they contribute are often so integral to the success of the song that they could legitimately be classified as composition. There’s no law that says beats are composition, though, so this demand is completely negotiable.* In a typical situation, I might be paying off my recording debt (and tour support money, if I took any) with that $1.40 per record, minus the 30 cents the producer would be getting from the very first record sold. So I’m left with $1.10 per record sold.

* This isn’t a new situation. One could argue that a song produced by Phil Spector back in his sixties heyday is almost a different song from a version he had no hand in. More recently a song with beats—not words or melody—by Timbaland is identifiable and sometimes catchier because of his unique way with samples. Are these guys then automatically co-writers of the songs? Technically and legally, no. But either the producer demands credit or the artist, recognizing the value of the producer’s contribution, gives it.

228 | HOW MUSIC WORKS

Foreign sales work a little differently. My royalty in this deal was 75 percent of the U.S. dealer price in Europe and 50 percent in the rest of the world. So even if I were hugely popular in Japan, it would take me twice as long to recoup my recording costs using those record sales as it would in the United States. This seems completely arbitrary and unfair to me, especially when downloads are increasingly the way folks buy music. But this is the standard offer on such deals.

If I wrote every song on a CD (which I didn’t on
Grown Backwards
), I would get, from the mechanical income mentioned above, 91 cents (9.1 cents per song multiplied by the ten songs the labels usually limit these mechanicals to), in addition to the sales royalty percentage and my publishing income. If my sales royalty was 14 percent of the $10 dealer price and I wrote all the songs, then I would get $1.40 + 91¢ = $2.31 per record sold. Things are looking a little better.

I believe it was the Beatles and other singer-songwriters of the sixties who realized that recording your own songs was far more lucrative than doing record after record covering other people’s songs, as had often been the norm in pop music. This incentivized songwriting, and it was partly due to this insight that there was suddenly an explosion of creativity and innovation in pop music

in the sixties. But it also made a few too many musicians feel more or less

obliged to consider themselves songwriters. I’m as guilty as many others in

feeling that I, or my bandmates, “had” to write every last song on a record, even though covering an underappreciated gem might have been a better choice

than recording one of our not-so-stellar writing efforts. However, even not-

so-good songs generate income from album sales, as long as there are a couple of hits on there that motivate folks to buy the whole album. The “filler” goes along for the ride and still generates money for the artists and publishers.

In the case of my Nonesuch record, the math is pretty simple: if I had

written all the songs on that record, then I would have had to sell almost

100,000 records to break even on that $225,000 advance. (But remember, if I

had recorded that album for a fraction of the actual cost, I would essentially have had that advance as income.) That might not have seemed a huge number

of records to sell back in the day for a popular act, but it’s far more than most records sell now. Few acts sell millions of copies anymore, and the artists who do tend to have more debts to pay off than just the recording costs—massive

promotional budgets, percentages to managers and video producers. Say a top

pop-act does a video that costs half a million dollars (which is not unusual).

They’ve then got to sell way more than my 100,000 records to break even;

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they’ve got to sell more like 750,000. Not all do, of course, and their debts begin to mount up quickly.

Here are some sobering facts from SoundScan via Billboard: only thirty-

five albums released in 2006 sold more than one million copies within the

calendar year; twenty-seven in 2007; twenty-two in 2008; twelve in 2009;

and ten in 2010. Only 2,050 of the 97,751 albums released in 2009, or 2.1 percent, sold over 5,000 copies. That sort of puts a different spin on the dream of living large off of record sales. If that hypothetical record with its expensive video isn’t successful, the artist is suddenly about a million dollars in the hole. The pressure to have a hit with the next record is then immense.

What about downloads? Aren’t they picking up some of the slack as CD

sales dwindle? Nope. Typically an album downloads for $10, and Apple’s iTunes Store, for example, takes 30 percent of every sale. The record label applies the artist’s royalty percentage to that $10 retail price, so if the artist is getting the traditional 14 percent, he or she is left with $1.40 per album download. So

an artist isn’t better off, especially when you think about the way people buy music online—they tend to buy songs, not entire albums. Artists are understandably trying to negotiate better royalty percentages for downloads, arguing that the record companies don’t have the same overhead and expenses and nor

do the “stores”—therefore the royalty given to artists should be higher. But there is, of course, a lot of resistance from the record companies.

In the end, how did I end up doing on that record? I asked my business

manager, who had this to say:

With
Grown Backwards
, you have, as of 2010, sold approx. 127,000 physical albums, 53,000 digital singles, and 8,000 digital albums, for total revenues to you of approximately $276,000 (which does include some licensing money). This was a straight-up master deal. Total revenues of $276,000, less the cost of making the record, which was $218,000, means you have made $58,000 on the record deal.

However, this amount doesn’t include your publishing income (mechanicals and performance royalties).

Now, $58,000 doesn’t sound too bad. That’s what an elementary school

teacher makes in New Jersey. But you also have to factor in the time it takes to write the songs, the time it takes to record them, and the lag before any of that money comes in. What’s more, those figures my business folks provided

230 | HOW MUSIC WORKS

are for six years worth of sales—six years! It would be pretty tough to live on $58,000 for six years; I would be out of house and home and looking for other employment if I was hoping to rely on record sales to live. And that record

sold okay. Luckily I work on more than one project or record sequentially, so while I’m waiting for possible income from one project, I’m already working

on the next one. I might spend, on a record I have high hopes for, a couple of years on writing, recording, and performing. That’s not six years, but it’s a long time to hang on before the check comes in.

Of course, if I’d sold millions of records, I would have made more money—my

income per record sold would have increased. My debt to the record company

would have been easily paid back early on, and then I could have pocketed nearly
all
the royalty income rather than having to pay back the advance and other costs.

Note that Nonesuch didn’t make a whole pile on this record either—though

they did go into profit. (I don’t know their overhead costs, so I can’t factor those in.) I am happy to be able to make the records I want to make, and I realize that those records don’t always sell in the millions. Though sometimes we are pleasantly surprised: that “Lazy” single I co-wrote and sang sold a
lot
!