Loud Music is a $40 Fine

Just my personal blog.

July 11, 2007

Record Label Shenanigans

I just finished reading this post about a band called The Ohio Express. In my book, record labels are one step above loan sharks, but this story takes the cake.

In a nutshell, the one big hit the band had, “Yummy Yummy Yummy” wasn’t even recorded by them. It was done by session musicians, but the band was expected to go out and act as if it were their song, ie. perform it live, and lip sync it on TV.

The record label took advantage of a bunch of naive kids. They basically said “here’s the deal, take it or leave it.” The group took it.

They’re still reportedly owed a bunch of money for the live shows they did. They were being paid a weekly amount, with the rest being put in escrow. The band never saw the money that was supposedly put in escrow.

I’ve had my own experience with a record company here in Nashville. I was contracted to write a royalty program for one of the independent labels. As I got further along into the project, I realized that what they were doing wasn’t ethical. It might have been legal, but I wasn’t comfortable with it.

When a band signs with a record label, they’re given an advance. That money is used to record the album. The label recoups that money from the sales of the album. The artist is also charged for marketing, packaging, and other items that come out of the royalties they’re entitled to. You could say that the record company is a loan shark. Although they’re not charging interest to the band, they make sure they get their money back, and in some cases, they make sure they make a profit before the band does.

As albums are sold, the record company collects the money and distributes it to all the folks who have a piece of the pie. In order to protect themselves, they withhold a percentage of the sales “in reserve.” That is, if a band has a contract with 10% reserves, the record company will only pay them 90% of the royalties due in the quarter. The next quarter, that 10% is supposed to be paid to the artist. What I found unethical with the company I was dealing with was that they added that 10% back into the gross sales. In effect, they were going to withhold money from sales they’d already withheld reserves on. That could theoretically go on forever, with the band not getting credit or royalties for all they’re due.

I ended up buying my way out of that contract. If I’d known what slime balls they were going into it, I’d have never agreed to do the program.

One other thing record companies do is to retain ownership of the music. That is, even though the company recoups the cost of recording, the record company claims ownership of the masters. So what happens if the record company goes out of business? The masters end up being part of their assets, and in the best case scenario, those masters end up with another company who’ll reissue them. In the worst case, the masters just disappear.

Congress should enact a law that would require any “abandoned” recordings be given back to the artist who made them. If the company goes out of business and the new owners don’t have any interest in the masters, the artist should get them back along with full rights. Or if the assets are acquired by another company and that company doesn’t have any interest in putting out or reissuing the album, then the artist should get the masters.

I keep reading about the plight of the record industry. They’re claiming that online piracy is keeping CD sales down. As usual, the record labels must think the public is stupid. They’ve conspired to keep CD prices high while at the same time they put out garbage. It’s no wonder demand is low. The record companies need to wake up and realize they’re in the 21st century. Instead of suing 6th graders, they need to revamp their business model.

So, as you can see, I don’t hold record companies in very high regard. I think if they were marketing any other product, they’ve have been under investigation for RICO violations a long time ago.

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