16
Hot Traxxx / Dead Prez
« on: April 20, 2007, 04:12:58 PM »
uh-ohh
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17
Hot Traxxx / Timbaland
« on: April 17, 2007, 04:30:36 PM »
neva witnessed a commercial takeover of such magnitude since the Neptunes started workin wid EVERYBODY! luv em or hate em timberland's the man ryt now, dude upped his level ridiculous and i gatta say ive neva listened to as much POP as i have ova this past month! I think i'm becoming a fan..bump bump bump!
18
From the "breadbasket of Africa",the "fastest growing economy in Africa" to the worlds highest inflation rate and one of its fastest shrinking economies... was watching special a**.(missed the 1st 15 mins tho so i hope theyl broadcast a re-run) and with the dodgy nature of politricks there it's startin to sound more like 1930s Russia than the 21st century "post-independant" zimbabwe most of us woulda envisioned during its heydays.. now i havent bn in zim since 2005 but it seems like its becoming almos impossible 2 make ends meet on a daily... i was surprised tho 2 hear one s.a. nwspper editor (i think) say the only reason the international com especialy sa does not intervene is cuz" his Excellency Comrade (Doctor) Robert Gabrial Mugabe" was a respected (fellow)freedom fighter! WHAT? So this means he's above the law...ryt? Just a thought at 2 am ... oh and can anybody tell me kuthi whts the story behind mai Mjuru messin wid the internet connections... i dnt knw if the zimbos could confirm the validity of that cuz i only heard... ma eyes r real tired yo,and danm cellphone's annoyin 2 type wid so... Can i get yalls views ill be back
19
Hip Hop Events / HH is Dead?
« on: January 03, 2007, 04:13:38 PM »
maaaan, "neo-hip hop" is still a sensitive issue.. hear what Young Jeezy has to say about Nas claiming Hip Hop is "DEAD" ... (clearly hip hop means a lota different things 2 differen people)
AND THE DEBATE GOES ON
Still havent listened to the new album but i havent felt Nas for a while but im anxious enough to have a listen tho :lol:
AND THE DEBATE GOES ON
Still havent listened to the new album but i havent felt Nas for a while but im anxious enough to have a listen tho :lol:
20
Producers - Discussion / INDUSTRY 101
« on: October 14, 2006, 06:24:47 PM »
All (well just about) ya need 2 know about record deals n what not.. its one hell of a read (myt wana have sum coffee or sumin on side :lol: ) but its quite interesting. Bigupz 2 Begotten Sun 4 tha hookup
LOVE
****************************>>>
Label Executive Money Breakdown
Quote:
I used to run big record companies and now I run a small company, Artemis Records, which I also partially own. Universal and Warner Music Group, two of the big four international music companies, have fired me. Artemis is distributed internationally by Sony and in the U.S. by RED, which is predominantly owned by Edel, a European indie. I have a tangled web of friendships and feuds with executives and artists at every company. My wife, Rosemary Carroll, is an attorney who represents many artists. I am not objective, but I have opinions.
In the frenzy to identify exactly how the Internet will improve the music business, some Web executives and tech savants have claimed that digital distribution will lead to fairer and more generous contracts for artists. These claims are based on the oft-repeated a**umption that major-label recording contracts are unfair to artists, allowing the labels to grab a disproportionate share of profits. Cathartic as it is to vent at record companies and carry the banner for artist empowerment, it seems to me that many of the attacks on the inequitable sharing of the pie have been overstated. The problems most artists have with record companies (and there are many legitimate problems, don't get me wrong) have nothing to do with how the money is divided up, so long as we are talking about acts that actually sell enough records.
It goes without saying that the blockbuster artists who sell millions of albums make lots of money. Not only do such sales levels generate millions of dollars in royalties (and goose important income streams such as publishing and performance fees), but they also provide these artists enormous leverage to renegotiate. Why, you ask, would a record company owed several albums by an artist improve her deal? Because record company executives are judged on their annual, sometimes even quarterly, performances.
When I was at Mercury Records, we agreed to give Shania Twain an increase in her royalty rate in the range of 40 percent if she would deliver Come On Over in time for a fourth-quarter release in 1997. Shania had a weak deal despite having sold 10 million copies of her previous album, The Woman in Me. The boost in royalty rate was conditional upon Shania finishing her work quickly; she did, and the Q4 (ed note: fourth quarter) release of Come On Over significantly propped up the PolyGram numbers for 1997. And in the process, the renegotiated rate has earned Twain at least an extra $10 million. Every artist coming off a multimillion seller has similar leverage with the bosses of the big companies.
Conversely, artists who have a relatively small audience, say under 50,000 albums, clearly make no money for themselves or their record companies in the major-label game, so it really doesn't matter how their royalties are calculated or what their rate is.
But let's look at mid-level artists, many of whom: Aimee Mann, Chuck D and Michelle Shocked, to name a few have been outspoken critics of the major-label system. These are the artists who are most often plagued by the legitimate problems I alluded to above: insensitive executives who pressure them to copy current hit sounds; rapidly changing corporate cultures in which an artist can be romanced into signing in one season and virtually ignored by the time he delivers his album (often for reasons having nothing to do with the quality or even the commercial viability of the record), and the increasing demand on the soon-to-be-four remaining major record groups to act as efficiently managed profit centers for their multinational parent companies. This type of pressurized quarter-to-quarter accountability strikes many as antithetical to the spirit of the days when many labels stood loyally by their artists for year after year, building careers lovingly and patiently until sometimes, the big payoff arrived, or if not, so what? Why can't all labels, goes the daydream, be like Warners in the 1970s?
That this image of art making nice with commerce is as much nostalgia-tinged fantasy as reality does little to diminish the hold it has on the collective unconscious, especially that of singer-songwriters. It should be noted, though, that this golden era of artist development was facilitated by a one-time-only, post war, baby boom that dramatically spiked the number of album-friendly record buyers. And any artist around then will tell you that the royalty rates back then were anything but golden. The profits generated by these factors provided the labels the ability to stick with artists for longer periods of time, also known as “artist development." The collapse of artist-development budgets was forestalled in the '80s when $9.98 ca**ettes were replaced by $16.98 CDs, a “conversion" which permitted continued double-digit annual growth despite the smaller Gen X pool of buyers. When sales of catalog CDs reached a saturation point in the early '90s and companies were still required to show the same growth, cutbacks in staff and a reduced commitment to artist development began in earnest.
Up until the 1970s, record companies unquestionably hoarded a disproportionate share of the profits, and many artists, especially black artists, didn't get paid at all. Over the last several decades, however, as the business grew, a cla** of lawyers emerged to take advantage of the record companies' needs for marketable product, and the deals themselves have vastly improved for the artists.
Some of the criticisms leveled at the labels hark back to earlier eras. For example, some PR-hungry artists and managers have claimed that there are still “breakage" clauses in contracts, remnants from the days of vinyl. In reality most companies, including the one I ran, have long since eliminated them.
There are, however, still boilerplate formulas called “packaging deductions" (a 25 percent reduction from the CD list price) and “free goods" (15 percent). Putting aside the murky origins of such clauses, the practical effect is straightforward: they reduce the value of a point on a $16.98 CD to between 10 and 11 cents (a point is shorthand for a royalty percentage). For the purposes of this article, I am a**uming a point equals 10 cents, and that the royalty rate for our hypothetical mid-sized artist is l4 points, or $1.40 per album.
So let's take our mid-level artist, and say that she managed to sell 200,000 copies of her latest CD. How does the artist make out? Based on a royalty rate of $1.40 per album, 200,000 CDs sold results in earned income of $280,000. However, before the artist buys her mom a car (or pays off her college loans), she first needs to deal with the dreaded recoupment. If our artist received a $25,000 advance and spent another $115,000 making the record, this $140,000 is deemed recoupable, which means that the label can collect that amount against royalties.
Also, let's a**ume the artist received $70,000 in tour support (recoupable) and another $70,000 in recoupable video and promotional support (this is usually split between the label and artist). That adds up to $280,000 in recoupable advances, thereby canceling out the $280,000 earned by the artist on points from her CD sales. Royalty-wise, it's a wash. (There's a holdback for returns of 15-20 percent, but royalties for these “reserves" are usually paid out in 18 months minus any actual returns.)
Album royalties, luckily, are not the only stream of income for an artist. Artists who write their own material enjoy a tremendous economic advantage over those who do not. If an artist writes her own songs, she earns additional monies known as mechanical royalties. a**uming a mediocre .75 percent mechanical rate per song times 11 (a roundabout number of songs on an album), the hypothetical writer-artist would earn around 60 cents an album, or $120,000 on sales of 200,000 units. (Artists with a strong contract can get up to 85 cents in mechanicals per album-and these payments are all “from record one,'' and not subject to any kind of recoupment.) Solo artists like Mann or Shocked also don't have to divide royalties with other musicians, although they will have to pay managers, lawyers, and accountants (standard is approximately 25 percent of net income). They also can make extra money -facilitated, in our hypothetical, by the sale of 200,000 albums - from concert appearances, merchandise like T-shirts, and performance royalties, from radio airplay for example, which are collected and distributed by ASCAP and BMI. None of this is to suggest that an artist selling 200,000 albums is living large; she is, however, considerably ahead of 90 percent of Americans.
What would the label make on the sale of these 200,000 albums? Are labels making their parent companies' shareholders rich at the expense of these middle-cla** artists? Retailers pay around $10 an album, which amounts to a gross revenue for the label on those 200,000 CDs of $2 million.
No one knows exactly how much distribution and manufacturing costs. The big companies all have large overheads to provide these functions, often creating separate divisions to handle them. The record company presidents run their divisions with internal charges for manufacturing and distribution that add up to around $2.65 a unit. There's obviously profit built into that but the per-unit amount varies, depending on the amount of overall record-group volume as well as unpredictable outside events such as retail bankruptcies. As a rule of thumb, I was always told to a**ume about $1.00 a unit profit on these combined functions. For the purpose of this exercise I'm a**uming a “real" cost of $1.65 per unit for combined manufacturing and distribution.
Here are the record company's expenses:
· Recording and recoupable marketing costs: $300,000
· Mechanicals: $120,000
· Non-recoupable marketing: $600,000
· Manufacturing and Distribution: $330,000
· Total label expenses: $1,350,000
This leaves $650,000 in profit, right? Not necessarily. Out of that comes all of the salaries of the people who work at the record company. These include the people who do the color separations for CD covers, who create Web sites for artists, and who make hundreds of calls to radio stations, journalists, and retailers. Struggling divisions spend more, but a healthy U.S. record company with a decent catalog allots around 20 percent of their gross revenues to overhead, or, in this instance, $400,000.
That still leaves the label with a profit of $250,000, right? Yes, and the middle-level artist has reason to gripe, but not without coming to terms with a fundamental fact: big record companies weren't established to enable artists to sell 200,000 copies. Big record companies need big sales. Even the most astute A&R people are wrong two-thirds of the time. On average, even at a successful company the cost of promoting and marketing a label’s "misses" eats up most of the profits, from not only the mid-level successes but even the gold-plus hits. Executives at major labels, then, are usually disappointed by sales of 200,000.
A major record company's profits come from the Shania Twains of the world, the very artists who have the least to complain about. Remember the $600,000 allocated to marketing on 200,000 albums, this represents 30 percent of the total revenue. On an album that goes on to sell millions, the share of income spent on advertising and promotion drops to 10 percent, leaving an extra $2 an album profit for the label. After a certain point, albums sell themselves through word of mouth.
Based solely on these numbers, you might wonder why Seagram spent all those billions to buy PolyGram. Those sky-high valuations take into account two other crucial factors: international profits and catalog value.
Album prices are higher in Europe and Japan, and artist royalties are usually reduced to three-quarters of the U.S. rate. Hence, labels clear more profit per unit sold. And once again, with rare exception, the artists who generate strong international numbers are those with big pop hits.
Secondly there is the a**et value of owning a catalog, which is why master ownership is so jealously guarded. The Beatles' albums still sell millions each year. Bob Marley's Legend anthology sold five million copies in the '90s. Catalogs of hits make very high margins and generate money for decades through re-issues, compilations, licensing for soundtracks, etc. It is widely a**umed that the widespread use of MP3 music files on the Internet, like the introduction of any new format for music, will drive up the value of hit catalogs, but the key word here is "hit." No one ascribes much catalog value to an album that sold 200,000 in its first release.
Mid-level artists are, in essence, valuable to labels only in terms of their future potential, or if they garner such great press that they help a particular executive burnish his or her reputation as a sensitive soul. Such repute, alas, is far less valuable in the marketplace than an expertise in marketing megabits or implementing cost cutting.
One major label doing very well in the last year showed an aggregate profit margin (including a calculation for distribution and international) of a little over 10 percent. Nonetheless, there was increasing pressure from the parent corporation and from Wall Street to raise the margin to over 15 percent. Nine times out of 10, this is done by signing fewer new artists and by taking fewer marketing risks on the new artists under contract (staff cutbacks usually follow suit, as well).
If an album fails to create immediate excitement, word comes from on high to shift manpower and marketing dollars to a different project. This syndrome, far more than substandard royalty rates, is what devastates artists. After touring tirelessly and building a devoted fan base, after a year or two of pouring their hearts into writing and recording a record, after hearing cries of genius from friends and fans alike, artists naturally believe that with a little more advertising, one more video and a real shot at radio play, they too, could move millions. But the attention span of majors nowadays, with a few exceptions, resembles that of the 13-year-olds at the core of their audience.
Reduction of risk-taking by the major record groups means that cutting-edge musicians are driven to independent labels like mine, which have scarcer resources and lack the added profits from distribution or international sales. Indies have traditionally presented an alternative, both aesthetically and economically to the blockbuster-driven mindset of the majors. In the 1980s, several indie-rock labels such as Dischord and Touch and Go erected a payment system that gave artists 50 percent of the net profits.
This "partnership" may seem more artist-friendly but the net amount of money made by artists on those labels is not demonstrably greater than it would have been with the same level of marketing in a royalty-based system. It's just that the major labels rarely find themselves spending so little in support of one of their albums. More recently the redoubtable Ani DiFranco has chosen to control her own infrastructure and forgo bids from majors and indies alike. I'd posit that in exchange for maintaining total business control, DiFranco has probably sacrificed income. (And in return for the greater per-unit margin, she's had to pay a year-round staff and be her own bank.)
This decade's version of the indie-label-as-salvation mantra is, of course, the Internet-based music company. There has been much talk about the bloat of the majors, and of how much more efficient the Internet will be. This is true up to a point, although bear in mind that the big companies (when they make the move to digital) will benefit from the same efficiencies that Internet companies are relying on, and they'll have the added clout of their catalogs. Undoubtedly the math will change with the advent of Net distribution. But Internet startups claiming the change will be seen in the next year or two are selling snake oil. Companies that have reaped positive PR by offering "artist-friendly" contracts and "new business models" have yet to mint a single real-life success story. One hundred percent of nothing is still nothing. If these companies start adding value to an artist via marketing and promotion, those costs will add up and inevitably be pa**ed along.
Looking beyond the royalty mcguffin, there are some legitimate changes brought about by technology that could be especially advantageous to our mid-level artist. These include:
Lowered recording costs. Remember the $115,000 recording budget? Home-studio systems like ProTools have dramatically reduced recording costs. This means that artists under contract can keep more of the money from an advance, and that unsigned artists can make a decent album much more cheaply which increases their likelihood of getting a deal (funding and marketing) and making money sooner. If an artist makes an album for $45,000 instead of $115,000, with all other a**umptions in the earlier model staying the same, they would begin earning their $1.40 per unit royalty after 150,000 albums sold instead of 200,000.
Cutting out the middleman. The biggest piece of the $16.98 pie still goes to retailers. For many years to come, retail is going to be very important to most artists. Some cult artists may make their music available exclusively on the Internet, thus permitting a much higher margin for them and/or lower prices for the consumer.
Retiring the CD. Manufacturing and distribution costs are obviously going to decline as more and more music is delivered through the Internet. The savings from digital delivery can be divided among the artist, the label and possibly the consumer. (Online and offline concert ticket pricing has taught us that the price for music is determined not by the physical costs of delivery but by what consumers are willing to pay). In theory, in a pure digital marketplace, if an album costs $14, with half going to the artist, a royalty flow on the more cheaply produced album described above could commence at only 10,000 units sold, depending on the artist advance.
Before we celebrate the coming renaissance, recognize that it will take years before many of these costs are reduced, and that until labels figure out replacement revenue streams, they'll be loath to adapt to the new models.
Furthermore, there is no evidence that marketing costs, a major expense for labels, will decline. In a complex Internet environment, it will still take serious dollars to expose new music to potential fans, and top marketing and promotion staffs will never come cheap. Artists should be able to make a living at a lower sales level, but the vast majority of aspiring musicians, critical favorites, and local bar bands will still have a hard time supporting themselves and their families. The biggest obstacle to commercial fulfillment for all but the few genuine stars will not be the music business, but the wants pf the people: the cruelest, most fickle and most generous boss of all.
Danny Goldberg, president of Artemis Records and Sheridan Square Entertainment, has worked hands on with more popular musical talent than literally any other recorded music executive in the 1990s. He is also one of the very few who has worked with every major genre of popular music: rap, country, folk, cla**ical, jazz, pop, rock, R&B and jazz.
Rappers Don't Make Loot
Quote:
ARTISTS DON'T MAKE MONEY FROM RECORD DEALS
By, Wendy Day from Rap Coalition
Who is the incredible bonehead who said rappers make mad loot? Wrong, wrong, wrong, wrong, wrong!! Because the fans expect their favorite artists to be crazy paid and livin' large, this puts an incredible amount of pressure on the artists to appear wealthy. And it's not just the fans; I can't tell you how many times I've been out with rappers along with people in the industry, and the industry slobs have expected the artists to pick up the dinner check. I've even seen people cop an attitude if the artist doesn't pay for everything. This is small minded and ignorant because the artist is ALWAYS the last to get paid. Everyone gets their cut first: the label, the manager (15%- 20% of all of the artist's entertainment income), the lawyer (by the hour or 5%-10% of the deal), the accountant (by the hour or 5% of all income), and, of course, the IRS (28% to 50% depending on the tax bracket).
Once an artist releases a record, the pressure is on to portray a successful image to fans, friends, families, and people around the way. People expect the artists to be well dressed, drive an expensive car, etc. Think about it. Don't you expect artists "to look like artists?" Would you admire Jay-Z as much if he drove a busted old 1990 Grand Am instead of that beautiful, brand new, top of the line Bentley?
Sadly, when an artist gets signed to a label deal, especially a rap artist, he or she receives somewhere between 8 and 13 points. What that means is 8% to 13% of the retail sales price, after the record label recoups the money it puts out (the advance, the sample clearances, the producer advances, usually half the cost of any videos, any cash outlays for the artists, etc.). The artist has to sell hella units to make any money back. Here's an example of a relatively fair record deal for a new rap artist with some clout in the industry and a terrific negotiating attorney:
ROYALTY RATE: 12%
We're going to a**ume that there are 3 artists in the group, and that they split everything equally. We're also going to a**ume that they produce their own tracks themselves.
Suggested retail list price (ca**ettes) $10.98
less 15% packaging deduction (usually 20%) =$ 9.33
gets paid on 85% of records sold ("free goods") =$7.93
So the artists' 12% is equal to about 96 cents per record sold. In most deals, the producer's 3% comes out of that 12%, but for the sake of brevity, in this example the group produced the whole album, buying no tracks from outside producers, which is rare.
Let's a**ume that they are a hit and their record goes Gold (although it is rare that a first record blows up like this). Let's also a**ume they were a priority at their record label and that their label understood exactly how to market them. So they went Gold, selling 500,000 units according to SoundScan (and due to the inaccuracies in SoundScan tracking at the rap retail level, 500,000 scanned probably means more like 600,000 actually sold).
GOLD RECORD = 500,000 units sold x $ .96 = $480,000. Looks like a nice chunk of loot, huh? Watch this. Now the label recoups what they've spent: independent promotion, 1/2 the video cost, some tour support, all those limo rides, all those out of town trips for the artist and their friends, etc.
$480,000
-$100,000 recoupable stuff (NOT advance)
--------
$380,000
-$ 70,000 advance (recording costs)
--------
$310,000
Still sounds OK? Watch... Now, half of the $380,000 stays "in reserve" (accounting for returned items from retail stores) for 2 to 4 years depending on the length specified in the recording contract. So the $70,000 advance is actually subtracted from $190,000 (the other $190,000 is in reserves for 2 years). Now, there's also the artist's manager, who is entitled to 20% of all of the entertainment income which would be 20% of $310,000, or $62,000. Remember, the artist is the last to get paid, so even the manager gets paid before the artist.
So the artists actually receive $19,333 each for their gold album, and in two years when the reserves are liquidated, IF they've recouped, they will each receive another $63,000. IF they've recouped. Guess who keeps track of all of this accounting? The label. Most contracts are "cross-collateralized," which means if the artist does not recoup on the first album, the money will be paid back out of the second album. Also, if the money is not recouped on the second album, repayment can come out of the "in reserve" funds from the first album, if the funds have not already been liquidated.
Even after the reserves are paid, each artist only actually made 50 cents per unit based on this example. The label made about $2.68 per unit. This example also doesn't include any additional production costs for an outside producer to come in and do a re-mix, and you know how often that happens.
So each artist in this group has received a total of about $82,000. After legal expenses and costs of new clothing to wear on stage while touring, etc, each artist has probably made a total of $75,000 before paying taxes (which the artist is responsible for-- remember Kool Moe Dee?). Let's look at the time line now. Let's a**ume the artists had no jobs when they started this. They spent 4 months putting their demo tape together and getting the tracks just right. They spent another 6 months to a year getting to know who all of the players are in the rap music industry and shopping their demo tape. After signing to a label, it took another 8 months to make an album and to get through all of the label's bureaucracy. When the first single dropped, the group went into promotion mode and traveled all over promoting the single at radio, retail, concerts, and publications. This was another six months. The record label decided to push three singles off the album so it was another year before they got back into the studio to make album number two. This scenario has been a total of 36 months. Each member of the group made $75,000 for a three year investment of time, which averages out to $25,000 per year. In corporate America, that works out to be $12 per hour (before taxes).
OK, so it's not totally hopeless. Since we're using the fantasy of a relatively fair deal, let's look at publishing from a relatively fair perspective. There are mechanical royalties and performance royalties to figure in. Mechanical royalties are the payments that Congress stipulates labels must pay based on copy right ownership and publishing ownership. These payments have nothing to do with recouping, but everything to do with who owns the publishing. Publishing is where the money is in the music business. Suge Knight claims to have started Death Row Records with the money he made from owning Vanilla Ice's publishing for one song: Ice Ice Baby. It may not be true, but it could be. Avatar Records (home of Black Xuede) is financed through the publishing that the CEO has purchased over the years. Although publishing can be quite cumbersome to understand (just when I think I get it, I read something else that makes me realize how little I know about the subject), but the most basic principle is that when an artist puts pen to paper, or makes a beat, the artist owns the publishing. It's that simple. Whoever creates the words or music owns those words or music. Where it gets confusing is all the different ways to get paid on publishing, all the ways to split publishing with other folks, and all the ways artists get screwed out of their publishing. In the 8 years I've been doing this, I have heard so many times, artists say that they don't care about losing a song or two because they can always make a ton more. That's stupidity. It's undervaluing one's ability. That's like saying it's OK to rob me of my cash, I can go to the ATM machine and get more money. Wrong!! It's never right to rob someone. The "I can make more" defense immediately goes out the window when the creator sees someone else make hundreds of thousands of dollars off a song. Every time!! So why not protect yourself in the door?
Bill Brown at ASCAP breaks it down more simply than anyone I've ever heard. He compares publishing with real estate. When you make a song, you are the owner of that property: the landlord. Sometimes you sell off a piece of the land for money (but you NEVER give away your land, right??) and if someone else wants to use your property, or rent it, they have to pay you rent to use it. I love that analogy. It's so crystal clear!
A copyright is proof of ownership of a song, both lyrics and music. If there is a sample in the music, you are automatically giving up part of the song, at the whim of the person who owns the rights to the original song (not necessarily the original artist). In order to "clear the sample," you send your version of the song to the owner of the original composition or whomever owns the publishing (and to the owner of the master, meaning original record label or whomever now owns the master). Then you negotiate the price with those two owners. Some are set in stone and you get to either agree to their price or to remove the sample. On DJ DMD's last album (22: PA Worldwide on Elektra) he spent close to $100,000 in advances and fees due to the sampling on his album. It came out of his upfront monies (advance) and he bears the burden of paying for it all, even though Elektra released and owns the record. Proof of copyright is easy to obtain by registering your song with the copyright office in Washington DC. You call them (202.707.9100) and ask for an SR Form (sound recording). You fill out the form, listing all of the owners, and mail it back to them with a copy of the song (a ca**ette is good enough) along with the Copyright fee (around $25 or so). This way, if someone steals your song, or a piece of your song, you can sue them for taking it and for your legal fees. With the "poor man's copyright" (mailing your tape to yourself in a sealed envelope with your signature across the sealed flap, and then never opening it when it arrives back to you with a postmark proving the date), you can not sue for damages and it's more difficult to prove your case. The copy right fee may seem like a lot of money to some, but it's nothing compared to what a law suit would cost you.
Performance royalties are money that is paid for the performance of your song. The money is paid based on the percentage of ownership of the song. So if you own 100% of the song, you get the whole check. If you own just the music, which is half the song, then you get half the money. If you own the music with a sample in it that claims half the song, then you get a check for 25%. Ya follow? Performance Rights organizations consist of ASCAP, BMI, and SESAC (which is still quite small). They police the radio stations, clubs, concerts, etc (any place music is played or broadcast), all of whom pay a fee to play the music which the performance rights societies collect and split amongst their members based on the amount of times a record is played. Although the formulas change annually based on play, a Top 10 song played on commercial radio can earn a good chunk of change in the hundreds of thousands of dollars range.
There is another kind of royalty artists receive when their records sell: mechanical royalties. These are paid based upon a pre-set limit placed by Congress which increases automatically every two years. In 1998 and 1999 it was .0715 cents per song, but on January 1, 2000 it increased to .0765 per song. Record labels put caps on mechanical royalties (the slugs) at either 10 songs, 11 songs, or 12 songs, no matter how many songs actually appear on the record, and you get what you negotiate for. Also, there's a slimey little clause that restricts payment of mechanicals (because God knows labels don't make enough money as it is) to anywhere between 75% and 85%. This evil deed is called percentage of statutory rate. Here's the difference those few pennies make as it pertains to an artist's royalty check (I refuse to even consider illustrating the worst bullshit deals such as 10x at 75%) provided they own 100% of the song:
# songs stat mechanical 100,000 sold 250,000 sold 500,000 (Gold) 1,000,000 (Platinum)
11x 85% .6639 per album $66,390 $165,975 $331,950 $663,900
11x 100% .781 per album $78,100 $195,250 $390,500 $781,000
12x 85% .7242 per album $72,420 $181,050 $362,100 $724,200
12x 100% .852 per album $85,200 $426,000 $852,000 $1,704,000
10x 85% .6035 per album $60,350 $150,875 $301,750 $603,500
I based the above chart on the old 1998-1999 rate of .0715 per song, so I could use my friend Fiend as an example. His first album came out in April of 1998 when the stat rate set by Congress was at this rate.
The dollar figure above represents monies due an artist (regardless of recoupment) per album based on ownership of 100% of publishing. So for example, Fiend who is signed to No Limit, provided he owns 100% of his publishing (I can dream can't I?), if his deal gives him 11x rate at 85% (I hate it but it won't kill me) then on his first album, There's One In Every Family, which came out 4/28/98 and sold 565,977 SoundScan units, No Limit would have paid him (hopefully) $378,369.77. If No Limit owns half of Fiend's publishing, he would receive $189,184.88 provided he wrote all of his own songs (which he did, except the verses by other artists who appeared which lowers the ownership percentage and dollar amount) and provided he made all of his own beats (which he did not; he features outside producers on this album like Beats By The Pound).
So there you have it, the real deal on how much money an artist makes. You can subtract out now another 28% to 50% of all income, including show money, (depending on the artist's tax bracket which is determined by how much income was made within any given calendar year) for the IRS who get paid quarterly (hopefully) by the artist's accountant. If the average artist releases a record every two years, then this income must last twice as long... I think about this every time I see my favorite artists flossing in their music videos drinking champagne or every time I see them drive by in a brand new Benz...
The Economics of The Rap Industry
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RAPONOMICS
by, Wendy Day from Rap Coalition
Rap is feeding upon itself and runs the risk of being destroyed economically. If it is not profitable for major labels to put out rap records, they will move along to other genres of music to exploit. Although independent labels appear to be closer to the streets, and therefore closer to understanding why and how records sell, it’s the money, connections, and power of the majors that help expand the rap music genre beyond its current marketplace. If the major labels move on to an area of music that they view as more profitable, such as Latin music or gospel, the reach of rap music will shrink as popular culture is blitzed less and less by rap music on the radio, in stores, and as part of everyday life. To someone, like myself, who is a strong proponent of independence in rap (supporting the “do for self” mentality of artists putting out their own records and owning their own destiny and careers), who also does a fair share of negotiations with larger labels for artists in the rap marketplace, the “damned if you do, damned if you don’t” aspect of this is apparent. If enough money isn’t secured up front in a deal to make an album and support the artist financially for a year or two, and additional money to compensate (by hiring outside companies) for areas where the label is weak, the artist runs the risk of going broke prior to ever seeing an album in the marketplace. On the other hand, if this money is obtained up front, the artist goes further into debt (advances are paid back out of sales before an artist ever sees a royalty) and it takes longer for the label to make back its money before the artist gets a royalty check, if the artist ever sees a royalty. There are even labels that are famous for not paying any royalties, in which case deals have to be negotiated for huge up front funds knowing that there will be no back end royalties. Protecting the artist or not protecting the artist both becomes problematic here.
Major labels supply traditional distribution, and have done so for years. This makes them quite proficient at it since they’ve had years to work out the kinks. They also have staffs of thousands of employees who are a**igned specific tasks in the record company pipeline. They are often financially solvent conglomerates able to wait out even the slowest paying customers. Due to the large number of artists the label has within any one genre of music, the financial aspects of support to radio, retail, and video outlets become more cost effective (it becomes cheaper to financially support a rap radio station in New York, for example, if there are fifteen artists who will receive radio play). It’s no secret that a major label has the opportunity to build fame for an artist more readily than a small independent label. But because they are bigger with more employees (meaning certainly more bureaucracy), they are unable to respond immediately to the needs of the consumers or sudden shifts in trends-- and they really suck at being able to spot new and up coming trends. They are often unable to adapt to a changing climate; for example, there are still many major labels who refuse to work street records on the streets, still dumping tons of money into radio play unsuccessfully because that’s all they know, not understanding the difference between the audience for a Master P record and the audience for a Will Smith record. Yet often, due to the size of a major label, and backing by major corporations with shareholders, they can afford to spend more money to build an artist’s career. And although, money isn’t everything, it helps build artists’ careers through exposure, which leads to sales, and therefore increases the reach of the entire rap genre. It was with the backing of major labels that artists were able to secure television appearances, their own TV shows, soundtracks, film deals, etc, which strengthened the rap genre as a whole. The popularity of rap music in pop culture led to McDonalds and Coca Cola commercials featuring rap music. It led to Barney rapping in a Fruity Pebbles breakfast cereal commercial. It led to people’s grandparents recognizing the name “Puffy” and hearing on the nightly news that he has befriended Donald Trump. This increased exposure leads to even more endorsements, larger publishing deals, and a plethora of opportunities for the artists and rap music. These are some of the things that make rap profitable and lead to rappers actually making money instead of going the route of the old R&B artists and dying broke.
Since 1995, there have been around 500 rap records released each year except for 1999 where the numbers doubled (1995 saw 469 releases; 1996 saw 482 releases; 1997 saw 497 releases; 1998 saw 477 releases; and 1999 saw 997 releases). Yet only such a small percentage of those releases sell at Gold or Platinum level (500,000 plus, and 1,000,000 plus, respectively). In 1998, there were 477 rap records released. Of this amount, only 12 went platinum and only 14 went Gold. That’s a tiny 5% of all of the rap records released--very ugly odds. In fact, only 57 sold above 250,000 units. In 1999, there were 997 records released and only 51 sold more than 250,000 units. Of those 51 releases, 11 were releases that sold above 1 million units (Platinum) and 20 releases that sold above 500,000 units (Gold). And yet those 31 Gold and Platinum records, out of 997 releases, accounted for 63% of the rap sales volume in 1999. If the “average” rap record costs $1,000,000 to create, market, and promote (and I could argue that this figure is low, but it’s the average figure Craig Kallman, President of Atlantic Records gave me), then just to break even a label must sell 123,000 records. As I look at the records over the past two years that have gone platinum, I see artists with budgets of far more than one million dollars. So for the basis of this analysis, the figure of 250,000 records sold was chosen. Hopefully at this point an artist begins to see some royalties (royalties are paid after an artist pays back all of the recoupable expenses such as recording costs, half the video costs, half of the independent promotion costs, etc). If the artist makes money and the label makes money, then everyone should be happy.
As of December 31, 1999, rap releases have jumped from 477 in 1998, to 997in 1999. The majors released a few less records than last year (majors released 203 rap records in 1998, and 199 in 1999). But they made less money in sales than they did last year by selling about 3 million units less (in 1999, 91% of all rap sales dollars went to a major label, even though they only released 20% of the titles; and in 1998, 91% went to the majors as they released 43% of the titles). We better hope this trend upswings. Most people understand that rappers don’t make money from their record deals, which leaves touring, appearances on other artists’ records, and endorsements as the only way for an artist to really earn income. Due to the negative connotation of “violence” at rap shows and the expense of insuring rap tours, touring has become relegated to the more commercial rap acts or rap acts who can perform on R&B tours. Shows are becoming less and less frequent in rap. By appearing on too many other artists’ records, an artist runs the risk of over exposing himself (or herself). There was a time in early 1999 when Big Pun was slated to appear on 25 different songs, and more recently Cash Money appears to be placing their artists on songs with everyone in an attempt for other labels to cash in on the Cash Money phenomenon while Cash Money increases their coffers. Aside from diluting the artist through over exposure, appearances on other records can also be problematic because legally the record label can take that appearance money and put it towards recouping the artist--in almost all cases, the label owns the right to the artist’s performance (even on other artists’ records). This leaves one last way for artists to earn income outside of the record deal: endorsements. And the only way for endorsements to be plentiful is to have rap, as a genre, reach a ma** cross section of popular culture-- and that means the ma**es who are actually perceived to spend money. Companies will only utilize rap artists and rap music to sell products as long as the main stream buying public reacts to it. And if the mainstream buying public reacts more positively to Ricky Martin, the Backstreet Boys, N’Sync, and Brittany Spears, then that is who marketers will employ to hawk their goods, instead of rap artists.
So the question remains, how do we keep rap from self-destructing economically? We need to be certain that the artists make money, but we also need to be certain it is profitable for record labels to release rap records, especially the ones that are able to influence and affect popular culture. And they are often their own worst enemies in terms of selling units and working projects properly to begin with. After making a list of all rap artists that have sold above 250,000 units per year since 1993, it is apparent that we in rap music (hip hop is the culture; rap is the musical form) must find a solution to this problem or all rap will go back underground, serving a very small portion of the marketplace, making it very difficult for artists to squeeze out a living doing what they love most: making music.
There are12 labels (out of 39) who appear on the following chart with artists selling above 250,000 units consistently. These labels seem to get it, for the most part, and if their artists are getting paid, well then it’s victory!
LABELS WITH CONSISTENT SALES ABOVE 250,000 UNITS
based on sales volume according to SoundScan (add 000)
1993 1994 1995 1996 1997 1998 1999 TOTALS
Def Jam 4319 1736 2877 2037 3922 17364 5154 37409
Columbia 2874 1703 1138 7949 7344 1582 2653 25243
Death Row 9432 1635 10476 2234 297 338 24412
No Limit 1019 6032 11150 4135 22336
Interscope 2703 544 811 4355 9827 18240
Bad Boy 2530 11948 690 2676 17844
Jive 3138 553 1428 3402 3328 2188 884 14921
Relativity 5709 1716 1961 1790 514 11690
Universal 1319 1056 810 8378 11563
Elektra 773 1396 2705 3124 2832 10830
Priority 1782 791 2730 1554 1663 1652 286 10458
Loud 1601 1503 1203 2280 1785 1023 9395
This chart is based on figures obtained from SoundScan as of 12/31/99 and is based on total sales within a calendar year. The chart does not take into consideration the amount of money spent on promoting the artist or how many rap records each label released in a given year (it is only taking into consideration sales volume for the releases that sell above 250,000 units each year). All releases are based solely on rap and do not include any R&B releases. This chart also separates No Limit and Priority even though Priority staff is responsible for promotion, sales, and distribution of No Limit, because No Limit is separate in the A&R, marketing, and publicity capacities for all No Limit artists. It also separates Death Row and Interscope, but not RocAFella and Def Jam, or RuffHouse and Columbia, even though their respective staffs helped work some of the projects.
How To Get A Record Deal
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This is the question I am asked most frequently-- obviously by people who don't know me, because those who do know me ask me how they can sell more records on their own, not how can they get into a slave contract and become a sharecropper. But once again, for those who don't want to do for self, I will attempt to break it down from my vantage point. I see three ways to get a deal in this industry; and let me preface this by saying that I'm talking about a rap record deal with a reputable record label that has a track record and that has experienced some success in the rap music industry through selling records. I'm not talking about the bogus labels that spring up daily all over the country and decide "Poof! I'm a record label." These should be avoided at all cost until they have a proven track record, as most of them can't even do as much for an artist as the artist can do for him or herself. And I'm certainly not talking about the labels that already exist within the industry yet can't seem to sell more than 30,000 records, even with a talented artist.
So, I see three ways to get a deal (that you'd want to have) in this industry.
1. Get put on by an established artist (but bear in mind that you may only be as successful as that artist. It's rare that someone puts you on and you blow up larger). This means coming up under Busta Rhymes, Fat Joe, Snoop, Missy Elliott, etc. With any luck, the artist who puts you on is fair and doesn't do to you what was done to him or her when they were coming up. The examples I listed above have all been fair to the artists coming up under them so far.
2. Create a buzz. In a perfect world, you want everyone in the industry and on the streets talking about you before you get signed. Thirstin Howl III is a perfect example of an underground artist with a strong buzz. The trick is to keep it going til you get signed and then turn it up a notch so that the whole industry is buzzing about when you're going to drop (Ja Rule was a great example of someone who kept up the buzz). This doesn't mean you have to be from New York, Crooked Lettaz from Jackson, MS had an incredible buzz in Baton Rouge and Jackson surrounding them, which is how the Source discovered them for Unsigned Hype (through journalist extraordinaire, Charlie Braxton in Mississippi, and Riggs in New York), which led to the industry discovering them.
3. Sell units. This is of course my favorite one, because it proves to the labels you can sell (which means you'd better) and you have more control over the "fairness" of your deal, and often a choice of labels you want to sign with. In a perfect world, you want to be with a label that not only believes in you, but has an experienced hard-working staff in every department that can really make your project happen.
The average record deal for a new artist starts around $125,000 and 12 or 13 points (which really means 12 to 13 per cent of the retail selling price after you pay back all the expenses). There's a joke in the industry that no matter how many points you get in your contract as a new artist, it comes out to about 80 cents a record, if you ever recoup (recoup means paying back all the expenses). I can count on one hand the number of rappers I know who've ever even seen a royalty check (royalties are part of the "back end"). The way to increase the figures in any deal, in favor of an artist, is for the label to realize that their risk is reduced. A label takes a risk when signing any new artist (risk meaning that the label could dump hundreds of thousands of dollars into an artist's career and the artist might only sell 8,000 records, which means the label loses a lot of money), but anything that can reduce that risk is considered a plus, and rewarded. This even applies to established artists. For example, Snoop Dogg when shopping a new deal will be able to say: he has Dr Dre producing for him again, he is expanding his awareness into mainstream America by appearing in a full length motion picture in 2001, and he has an autobiography out now in bookstores called Tha Doggfather which is getting great reviews. That's the way to maximize opportunity. Slick Rick is about to renegotiate his deal with Def Jam or leave. The way he is maximizing his opportunity is by obtaining letters of intent from other platinum rap artists and producers to appear on his record. I am also shopping a cartoon idea that will star a number of artists, one of which is Rick. I am also looking for film opportunities for Rick. Anything that increases his ability to sell records beyond the 550,000 units his last album sold at Def Jam will help the label to see that he is a low risk commodity, even though he is a rap icon and considered “old school.” This is how to get the little "extras" in a record deal. Those extras could include more up front money (this is a double edge sword because up front money is recoupable, therefore it is just more debt. You want to get up front money for a number of reasons: to invest in something that will bring you more money like a studio or real estate, to force the label to make your project a priority by being so far in debt with them that they have to work your project hard to get their money back, to make certain you make money from a record label that has a reputation for not paying royalties or back end money, etc), more points on the back end, a better “stat rate,” less stuff to recoup, etc.
If you have a deal with a reputable label that seems to believe in you and you are confident that you are a priority, you may want to reduce the front end advance in favor of a larger split on the back end. With Twista's former deal at Atlantic we took no money up front in order to get 50% on the back end. Of course Twista had just appeared on a Platinum single by Do Or Die, and the perception in the industry was that he blazed that song. His deal worked financially, but would have really worked to his benefit had there not been a production company in the middle collecting the money. When I negotiate a deal, there are also times where I secure money up front for the artist that will be dumped back into the artist's project because I know the label won't. For example, in almost every deal I've ever negotiated with a major label, I've gotten between $25,000 and $75,000 for the artist to hire his own street team to work his project. Most of the radio driven majors don't understand the importance of building the artist on the streets first, so very often the artist has to do this for self. This fund is never recoupable. An artist shouldn't be taxed for an area where the label is weak, nor should the artist be taxed for something that falls under marketing of the record, like a street team. But in order to negotiate something like this, the artist must have something that the label deems worthy enough.
I guess what I'm saying is that you shouldn't take just any old record deal, you should have a deal with as many extras to guarantee your success as the label gets to guarantee your profitability to them. You are taking a risk with the label as well, but they NEVER see it like that. They always see their risk.
Regardless of the level of your recording contract, you need to go into your deal with the attitude that the label is your partner (even if you never make a dime, because it is YOUR career), and even if they drop the ball, you should be able to pick up the ball and run with it. They have many artists on their label, but you only have one career. Don't let yourself become the topic of an article in Blaze about "whatever happened to..."!! Bear in mind that the REAL hard work begins after you get a deal. You set the tone with your label. If the label has 3 artists, and 2 are lazy and never show up to stuff that they set up, but one is hardworking and arrives on time to everything, guess which artist will get the best push REGARDLESS OF THEIR LEVEL OF TALENT! Human beings work at record labels and it is human nature to work whatever causes the least resistance and stress. If it's easier to work an Ice Cube record than a Ras Ka** record then that is exactly what will happen. If it's easier to work a Master P record than an Ice Cube record then that is what will happen. It has nothing to do with the level of talent or the sound of the music. This is a business. That's why it's called the music BUSINESS.
NOW U KNOW...
LOVE
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Label Executive Money Breakdown
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I used to run big record companies and now I run a small company, Artemis Records, which I also partially own. Universal and Warner Music Group, two of the big four international music companies, have fired me. Artemis is distributed internationally by Sony and in the U.S. by RED, which is predominantly owned by Edel, a European indie. I have a tangled web of friendships and feuds with executives and artists at every company. My wife, Rosemary Carroll, is an attorney who represents many artists. I am not objective, but I have opinions.
In the frenzy to identify exactly how the Internet will improve the music business, some Web executives and tech savants have claimed that digital distribution will lead to fairer and more generous contracts for artists. These claims are based on the oft-repeated a**umption that major-label recording contracts are unfair to artists, allowing the labels to grab a disproportionate share of profits. Cathartic as it is to vent at record companies and carry the banner for artist empowerment, it seems to me that many of the attacks on the inequitable sharing of the pie have been overstated. The problems most artists have with record companies (and there are many legitimate problems, don't get me wrong) have nothing to do with how the money is divided up, so long as we are talking about acts that actually sell enough records.
It goes without saying that the blockbuster artists who sell millions of albums make lots of money. Not only do such sales levels generate millions of dollars in royalties (and goose important income streams such as publishing and performance fees), but they also provide these artists enormous leverage to renegotiate. Why, you ask, would a record company owed several albums by an artist improve her deal? Because record company executives are judged on their annual, sometimes even quarterly, performances.
When I was at Mercury Records, we agreed to give Shania Twain an increase in her royalty rate in the range of 40 percent if she would deliver Come On Over in time for a fourth-quarter release in 1997. Shania had a weak deal despite having sold 10 million copies of her previous album, The Woman in Me. The boost in royalty rate was conditional upon Shania finishing her work quickly; she did, and the Q4 (ed note: fourth quarter) release of Come On Over significantly propped up the PolyGram numbers for 1997. And in the process, the renegotiated rate has earned Twain at least an extra $10 million. Every artist coming off a multimillion seller has similar leverage with the bosses of the big companies.
Conversely, artists who have a relatively small audience, say under 50,000 albums, clearly make no money for themselves or their record companies in the major-label game, so it really doesn't matter how their royalties are calculated or what their rate is.
But let's look at mid-level artists, many of whom: Aimee Mann, Chuck D and Michelle Shocked, to name a few have been outspoken critics of the major-label system. These are the artists who are most often plagued by the legitimate problems I alluded to above: insensitive executives who pressure them to copy current hit sounds; rapidly changing corporate cultures in which an artist can be romanced into signing in one season and virtually ignored by the time he delivers his album (often for reasons having nothing to do with the quality or even the commercial viability of the record), and the increasing demand on the soon-to-be-four remaining major record groups to act as efficiently managed profit centers for their multinational parent companies. This type of pressurized quarter-to-quarter accountability strikes many as antithetical to the spirit of the days when many labels stood loyally by their artists for year after year, building careers lovingly and patiently until sometimes, the big payoff arrived, or if not, so what? Why can't all labels, goes the daydream, be like Warners in the 1970s?
That this image of art making nice with commerce is as much nostalgia-tinged fantasy as reality does little to diminish the hold it has on the collective unconscious, especially that of singer-songwriters. It should be noted, though, that this golden era of artist development was facilitated by a one-time-only, post war, baby boom that dramatically spiked the number of album-friendly record buyers. And any artist around then will tell you that the royalty rates back then were anything but golden. The profits generated by these factors provided the labels the ability to stick with artists for longer periods of time, also known as “artist development." The collapse of artist-development budgets was forestalled in the '80s when $9.98 ca**ettes were replaced by $16.98 CDs, a “conversion" which permitted continued double-digit annual growth despite the smaller Gen X pool of buyers. When sales of catalog CDs reached a saturation point in the early '90s and companies were still required to show the same growth, cutbacks in staff and a reduced commitment to artist development began in earnest.
Up until the 1970s, record companies unquestionably hoarded a disproportionate share of the profits, and many artists, especially black artists, didn't get paid at all. Over the last several decades, however, as the business grew, a cla** of lawyers emerged to take advantage of the record companies' needs for marketable product, and the deals themselves have vastly improved for the artists.
Some of the criticisms leveled at the labels hark back to earlier eras. For example, some PR-hungry artists and managers have claimed that there are still “breakage" clauses in contracts, remnants from the days of vinyl. In reality most companies, including the one I ran, have long since eliminated them.
There are, however, still boilerplate formulas called “packaging deductions" (a 25 percent reduction from the CD list price) and “free goods" (15 percent). Putting aside the murky origins of such clauses, the practical effect is straightforward: they reduce the value of a point on a $16.98 CD to between 10 and 11 cents (a point is shorthand for a royalty percentage). For the purposes of this article, I am a**uming a point equals 10 cents, and that the royalty rate for our hypothetical mid-sized artist is l4 points, or $1.40 per album.
So let's take our mid-level artist, and say that she managed to sell 200,000 copies of her latest CD. How does the artist make out? Based on a royalty rate of $1.40 per album, 200,000 CDs sold results in earned income of $280,000. However, before the artist buys her mom a car (or pays off her college loans), she first needs to deal with the dreaded recoupment. If our artist received a $25,000 advance and spent another $115,000 making the record, this $140,000 is deemed recoupable, which means that the label can collect that amount against royalties.
Also, let's a**ume the artist received $70,000 in tour support (recoupable) and another $70,000 in recoupable video and promotional support (this is usually split between the label and artist). That adds up to $280,000 in recoupable advances, thereby canceling out the $280,000 earned by the artist on points from her CD sales. Royalty-wise, it's a wash. (There's a holdback for returns of 15-20 percent, but royalties for these “reserves" are usually paid out in 18 months minus any actual returns.)
Album royalties, luckily, are not the only stream of income for an artist. Artists who write their own material enjoy a tremendous economic advantage over those who do not. If an artist writes her own songs, she earns additional monies known as mechanical royalties. a**uming a mediocre .75 percent mechanical rate per song times 11 (a roundabout number of songs on an album), the hypothetical writer-artist would earn around 60 cents an album, or $120,000 on sales of 200,000 units. (Artists with a strong contract can get up to 85 cents in mechanicals per album-and these payments are all “from record one,'' and not subject to any kind of recoupment.) Solo artists like Mann or Shocked also don't have to divide royalties with other musicians, although they will have to pay managers, lawyers, and accountants (standard is approximately 25 percent of net income). They also can make extra money -facilitated, in our hypothetical, by the sale of 200,000 albums - from concert appearances, merchandise like T-shirts, and performance royalties, from radio airplay for example, which are collected and distributed by ASCAP and BMI. None of this is to suggest that an artist selling 200,000 albums is living large; she is, however, considerably ahead of 90 percent of Americans.
What would the label make on the sale of these 200,000 albums? Are labels making their parent companies' shareholders rich at the expense of these middle-cla** artists? Retailers pay around $10 an album, which amounts to a gross revenue for the label on those 200,000 CDs of $2 million.
No one knows exactly how much distribution and manufacturing costs. The big companies all have large overheads to provide these functions, often creating separate divisions to handle them. The record company presidents run their divisions with internal charges for manufacturing and distribution that add up to around $2.65 a unit. There's obviously profit built into that but the per-unit amount varies, depending on the amount of overall record-group volume as well as unpredictable outside events such as retail bankruptcies. As a rule of thumb, I was always told to a**ume about $1.00 a unit profit on these combined functions. For the purpose of this exercise I'm a**uming a “real" cost of $1.65 per unit for combined manufacturing and distribution.
Here are the record company's expenses:
· Recording and recoupable marketing costs: $300,000
· Mechanicals: $120,000
· Non-recoupable marketing: $600,000
· Manufacturing and Distribution: $330,000
· Total label expenses: $1,350,000
This leaves $650,000 in profit, right? Not necessarily. Out of that comes all of the salaries of the people who work at the record company. These include the people who do the color separations for CD covers, who create Web sites for artists, and who make hundreds of calls to radio stations, journalists, and retailers. Struggling divisions spend more, but a healthy U.S. record company with a decent catalog allots around 20 percent of their gross revenues to overhead, or, in this instance, $400,000.
That still leaves the label with a profit of $250,000, right? Yes, and the middle-level artist has reason to gripe, but not without coming to terms with a fundamental fact: big record companies weren't established to enable artists to sell 200,000 copies. Big record companies need big sales. Even the most astute A&R people are wrong two-thirds of the time. On average, even at a successful company the cost of promoting and marketing a label’s "misses" eats up most of the profits, from not only the mid-level successes but even the gold-plus hits. Executives at major labels, then, are usually disappointed by sales of 200,000.
A major record company's profits come from the Shania Twains of the world, the very artists who have the least to complain about. Remember the $600,000 allocated to marketing on 200,000 albums, this represents 30 percent of the total revenue. On an album that goes on to sell millions, the share of income spent on advertising and promotion drops to 10 percent, leaving an extra $2 an album profit for the label. After a certain point, albums sell themselves through word of mouth.
Based solely on these numbers, you might wonder why Seagram spent all those billions to buy PolyGram. Those sky-high valuations take into account two other crucial factors: international profits and catalog value.
Album prices are higher in Europe and Japan, and artist royalties are usually reduced to three-quarters of the U.S. rate. Hence, labels clear more profit per unit sold. And once again, with rare exception, the artists who generate strong international numbers are those with big pop hits.
Secondly there is the a**et value of owning a catalog, which is why master ownership is so jealously guarded. The Beatles' albums still sell millions each year. Bob Marley's Legend anthology sold five million copies in the '90s. Catalogs of hits make very high margins and generate money for decades through re-issues, compilations, licensing for soundtracks, etc. It is widely a**umed that the widespread use of MP3 music files on the Internet, like the introduction of any new format for music, will drive up the value of hit catalogs, but the key word here is "hit." No one ascribes much catalog value to an album that sold 200,000 in its first release.
Mid-level artists are, in essence, valuable to labels only in terms of their future potential, or if they garner such great press that they help a particular executive burnish his or her reputation as a sensitive soul. Such repute, alas, is far less valuable in the marketplace than an expertise in marketing megabits or implementing cost cutting.
One major label doing very well in the last year showed an aggregate profit margin (including a calculation for distribution and international) of a little over 10 percent. Nonetheless, there was increasing pressure from the parent corporation and from Wall Street to raise the margin to over 15 percent. Nine times out of 10, this is done by signing fewer new artists and by taking fewer marketing risks on the new artists under contract (staff cutbacks usually follow suit, as well).
If an album fails to create immediate excitement, word comes from on high to shift manpower and marketing dollars to a different project. This syndrome, far more than substandard royalty rates, is what devastates artists. After touring tirelessly and building a devoted fan base, after a year or two of pouring their hearts into writing and recording a record, after hearing cries of genius from friends and fans alike, artists naturally believe that with a little more advertising, one more video and a real shot at radio play, they too, could move millions. But the attention span of majors nowadays, with a few exceptions, resembles that of the 13-year-olds at the core of their audience.
Reduction of risk-taking by the major record groups means that cutting-edge musicians are driven to independent labels like mine, which have scarcer resources and lack the added profits from distribution or international sales. Indies have traditionally presented an alternative, both aesthetically and economically to the blockbuster-driven mindset of the majors. In the 1980s, several indie-rock labels such as Dischord and Touch and Go erected a payment system that gave artists 50 percent of the net profits.
This "partnership" may seem more artist-friendly but the net amount of money made by artists on those labels is not demonstrably greater than it would have been with the same level of marketing in a royalty-based system. It's just that the major labels rarely find themselves spending so little in support of one of their albums. More recently the redoubtable Ani DiFranco has chosen to control her own infrastructure and forgo bids from majors and indies alike. I'd posit that in exchange for maintaining total business control, DiFranco has probably sacrificed income. (And in return for the greater per-unit margin, she's had to pay a year-round staff and be her own bank.)
This decade's version of the indie-label-as-salvation mantra is, of course, the Internet-based music company. There has been much talk about the bloat of the majors, and of how much more efficient the Internet will be. This is true up to a point, although bear in mind that the big companies (when they make the move to digital) will benefit from the same efficiencies that Internet companies are relying on, and they'll have the added clout of their catalogs. Undoubtedly the math will change with the advent of Net distribution. But Internet startups claiming the change will be seen in the next year or two are selling snake oil. Companies that have reaped positive PR by offering "artist-friendly" contracts and "new business models" have yet to mint a single real-life success story. One hundred percent of nothing is still nothing. If these companies start adding value to an artist via marketing and promotion, those costs will add up and inevitably be pa**ed along.
Looking beyond the royalty mcguffin, there are some legitimate changes brought about by technology that could be especially advantageous to our mid-level artist. These include:
Lowered recording costs. Remember the $115,000 recording budget? Home-studio systems like ProTools have dramatically reduced recording costs. This means that artists under contract can keep more of the money from an advance, and that unsigned artists can make a decent album much more cheaply which increases their likelihood of getting a deal (funding and marketing) and making money sooner. If an artist makes an album for $45,000 instead of $115,000, with all other a**umptions in the earlier model staying the same, they would begin earning their $1.40 per unit royalty after 150,000 albums sold instead of 200,000.
Cutting out the middleman. The biggest piece of the $16.98 pie still goes to retailers. For many years to come, retail is going to be very important to most artists. Some cult artists may make their music available exclusively on the Internet, thus permitting a much higher margin for them and/or lower prices for the consumer.
Retiring the CD. Manufacturing and distribution costs are obviously going to decline as more and more music is delivered through the Internet. The savings from digital delivery can be divided among the artist, the label and possibly the consumer. (Online and offline concert ticket pricing has taught us that the price for music is determined not by the physical costs of delivery but by what consumers are willing to pay). In theory, in a pure digital marketplace, if an album costs $14, with half going to the artist, a royalty flow on the more cheaply produced album described above could commence at only 10,000 units sold, depending on the artist advance.
Before we celebrate the coming renaissance, recognize that it will take years before many of these costs are reduced, and that until labels figure out replacement revenue streams, they'll be loath to adapt to the new models.
Furthermore, there is no evidence that marketing costs, a major expense for labels, will decline. In a complex Internet environment, it will still take serious dollars to expose new music to potential fans, and top marketing and promotion staffs will never come cheap. Artists should be able to make a living at a lower sales level, but the vast majority of aspiring musicians, critical favorites, and local bar bands will still have a hard time supporting themselves and their families. The biggest obstacle to commercial fulfillment for all but the few genuine stars will not be the music business, but the wants pf the people: the cruelest, most fickle and most generous boss of all.
Danny Goldberg, president of Artemis Records and Sheridan Square Entertainment, has worked hands on with more popular musical talent than literally any other recorded music executive in the 1990s. He is also one of the very few who has worked with every major genre of popular music: rap, country, folk, cla**ical, jazz, pop, rock, R&B and jazz.
Rappers Don't Make Loot
Quote:
ARTISTS DON'T MAKE MONEY FROM RECORD DEALS
By, Wendy Day from Rap Coalition
Who is the incredible bonehead who said rappers make mad loot? Wrong, wrong, wrong, wrong, wrong!! Because the fans expect their favorite artists to be crazy paid and livin' large, this puts an incredible amount of pressure on the artists to appear wealthy. And it's not just the fans; I can't tell you how many times I've been out with rappers along with people in the industry, and the industry slobs have expected the artists to pick up the dinner check. I've even seen people cop an attitude if the artist doesn't pay for everything. This is small minded and ignorant because the artist is ALWAYS the last to get paid. Everyone gets their cut first: the label, the manager (15%- 20% of all of the artist's entertainment income), the lawyer (by the hour or 5%-10% of the deal), the accountant (by the hour or 5% of all income), and, of course, the IRS (28% to 50% depending on the tax bracket).
Once an artist releases a record, the pressure is on to portray a successful image to fans, friends, families, and people around the way. People expect the artists to be well dressed, drive an expensive car, etc. Think about it. Don't you expect artists "to look like artists?" Would you admire Jay-Z as much if he drove a busted old 1990 Grand Am instead of that beautiful, brand new, top of the line Bentley?
Sadly, when an artist gets signed to a label deal, especially a rap artist, he or she receives somewhere between 8 and 13 points. What that means is 8% to 13% of the retail sales price, after the record label recoups the money it puts out (the advance, the sample clearances, the producer advances, usually half the cost of any videos, any cash outlays for the artists, etc.). The artist has to sell hella units to make any money back. Here's an example of a relatively fair record deal for a new rap artist with some clout in the industry and a terrific negotiating attorney:
ROYALTY RATE: 12%
We're going to a**ume that there are 3 artists in the group, and that they split everything equally. We're also going to a**ume that they produce their own tracks themselves.
Suggested retail list price (ca**ettes) $10.98
less 15% packaging deduction (usually 20%) =$ 9.33
gets paid on 85% of records sold ("free goods") =$7.93
So the artists' 12% is equal to about 96 cents per record sold. In most deals, the producer's 3% comes out of that 12%, but for the sake of brevity, in this example the group produced the whole album, buying no tracks from outside producers, which is rare.
Let's a**ume that they are a hit and their record goes Gold (although it is rare that a first record blows up like this). Let's also a**ume they were a priority at their record label and that their label understood exactly how to market them. So they went Gold, selling 500,000 units according to SoundScan (and due to the inaccuracies in SoundScan tracking at the rap retail level, 500,000 scanned probably means more like 600,000 actually sold).
GOLD RECORD = 500,000 units sold x $ .96 = $480,000. Looks like a nice chunk of loot, huh? Watch this. Now the label recoups what they've spent: independent promotion, 1/2 the video cost, some tour support, all those limo rides, all those out of town trips for the artist and their friends, etc.
$480,000
-$100,000 recoupable stuff (NOT advance)
--------
$380,000
-$ 70,000 advance (recording costs)
--------
$310,000
Still sounds OK? Watch... Now, half of the $380,000 stays "in reserve" (accounting for returned items from retail stores) for 2 to 4 years depending on the length specified in the recording contract. So the $70,000 advance is actually subtracted from $190,000 (the other $190,000 is in reserves for 2 years). Now, there's also the artist's manager, who is entitled to 20% of all of the entertainment income which would be 20% of $310,000, or $62,000. Remember, the artist is the last to get paid, so even the manager gets paid before the artist.
So the artists actually receive $19,333 each for their gold album, and in two years when the reserves are liquidated, IF they've recouped, they will each receive another $63,000. IF they've recouped. Guess who keeps track of all of this accounting? The label. Most contracts are "cross-collateralized," which means if the artist does not recoup on the first album, the money will be paid back out of the second album. Also, if the money is not recouped on the second album, repayment can come out of the "in reserve" funds from the first album, if the funds have not already been liquidated.
Even after the reserves are paid, each artist only actually made 50 cents per unit based on this example. The label made about $2.68 per unit. This example also doesn't include any additional production costs for an outside producer to come in and do a re-mix, and you know how often that happens.
So each artist in this group has received a total of about $82,000. After legal expenses and costs of new clothing to wear on stage while touring, etc, each artist has probably made a total of $75,000 before paying taxes (which the artist is responsible for-- remember Kool Moe Dee?). Let's look at the time line now. Let's a**ume the artists had no jobs when they started this. They spent 4 months putting their demo tape together and getting the tracks just right. They spent another 6 months to a year getting to know who all of the players are in the rap music industry and shopping their demo tape. After signing to a label, it took another 8 months to make an album and to get through all of the label's bureaucracy. When the first single dropped, the group went into promotion mode and traveled all over promoting the single at radio, retail, concerts, and publications. This was another six months. The record label decided to push three singles off the album so it was another year before they got back into the studio to make album number two. This scenario has been a total of 36 months. Each member of the group made $75,000 for a three year investment of time, which averages out to $25,000 per year. In corporate America, that works out to be $12 per hour (before taxes).
OK, so it's not totally hopeless. Since we're using the fantasy of a relatively fair deal, let's look at publishing from a relatively fair perspective. There are mechanical royalties and performance royalties to figure in. Mechanical royalties are the payments that Congress stipulates labels must pay based on copy right ownership and publishing ownership. These payments have nothing to do with recouping, but everything to do with who owns the publishing. Publishing is where the money is in the music business. Suge Knight claims to have started Death Row Records with the money he made from owning Vanilla Ice's publishing for one song: Ice Ice Baby. It may not be true, but it could be. Avatar Records (home of Black Xuede) is financed through the publishing that the CEO has purchased over the years. Although publishing can be quite cumbersome to understand (just when I think I get it, I read something else that makes me realize how little I know about the subject), but the most basic principle is that when an artist puts pen to paper, or makes a beat, the artist owns the publishing. It's that simple. Whoever creates the words or music owns those words or music. Where it gets confusing is all the different ways to get paid on publishing, all the ways to split publishing with other folks, and all the ways artists get screwed out of their publishing. In the 8 years I've been doing this, I have heard so many times, artists say that they don't care about losing a song or two because they can always make a ton more. That's stupidity. It's undervaluing one's ability. That's like saying it's OK to rob me of my cash, I can go to the ATM machine and get more money. Wrong!! It's never right to rob someone. The "I can make more" defense immediately goes out the window when the creator sees someone else make hundreds of thousands of dollars off a song. Every time!! So why not protect yourself in the door?
Bill Brown at ASCAP breaks it down more simply than anyone I've ever heard. He compares publishing with real estate. When you make a song, you are the owner of that property: the landlord. Sometimes you sell off a piece of the land for money (but you NEVER give away your land, right??) and if someone else wants to use your property, or rent it, they have to pay you rent to use it. I love that analogy. It's so crystal clear!
A copyright is proof of ownership of a song, both lyrics and music. If there is a sample in the music, you are automatically giving up part of the song, at the whim of the person who owns the rights to the original song (not necessarily the original artist). In order to "clear the sample," you send your version of the song to the owner of the original composition or whomever owns the publishing (and to the owner of the master, meaning original record label or whomever now owns the master). Then you negotiate the price with those two owners. Some are set in stone and you get to either agree to their price or to remove the sample. On DJ DMD's last album (22: PA Worldwide on Elektra) he spent close to $100,000 in advances and fees due to the sampling on his album. It came out of his upfront monies (advance) and he bears the burden of paying for it all, even though Elektra released and owns the record. Proof of copyright is easy to obtain by registering your song with the copyright office in Washington DC. You call them (202.707.9100) and ask for an SR Form (sound recording). You fill out the form, listing all of the owners, and mail it back to them with a copy of the song (a ca**ette is good enough) along with the Copyright fee (around $25 or so). This way, if someone steals your song, or a piece of your song, you can sue them for taking it and for your legal fees. With the "poor man's copyright" (mailing your tape to yourself in a sealed envelope with your signature across the sealed flap, and then never opening it when it arrives back to you with a postmark proving the date), you can not sue for damages and it's more difficult to prove your case. The copy right fee may seem like a lot of money to some, but it's nothing compared to what a law suit would cost you.
Performance royalties are money that is paid for the performance of your song. The money is paid based on the percentage of ownership of the song. So if you own 100% of the song, you get the whole check. If you own just the music, which is half the song, then you get half the money. If you own the music with a sample in it that claims half the song, then you get a check for 25%. Ya follow? Performance Rights organizations consist of ASCAP, BMI, and SESAC (which is still quite small). They police the radio stations, clubs, concerts, etc (any place music is played or broadcast), all of whom pay a fee to play the music which the performance rights societies collect and split amongst their members based on the amount of times a record is played. Although the formulas change annually based on play, a Top 10 song played on commercial radio can earn a good chunk of change in the hundreds of thousands of dollars range.
There is another kind of royalty artists receive when their records sell: mechanical royalties. These are paid based upon a pre-set limit placed by Congress which increases automatically every two years. In 1998 and 1999 it was .0715 cents per song, but on January 1, 2000 it increased to .0765 per song. Record labels put caps on mechanical royalties (the slugs) at either 10 songs, 11 songs, or 12 songs, no matter how many songs actually appear on the record, and you get what you negotiate for. Also, there's a slimey little clause that restricts payment of mechanicals (because God knows labels don't make enough money as it is) to anywhere between 75% and 85%. This evil deed is called percentage of statutory rate. Here's the difference those few pennies make as it pertains to an artist's royalty check (I refuse to even consider illustrating the worst bullshit deals such as 10x at 75%) provided they own 100% of the song:
# songs stat mechanical 100,000 sold 250,000 sold 500,000 (Gold) 1,000,000 (Platinum)
11x 85% .6639 per album $66,390 $165,975 $331,950 $663,900
11x 100% .781 per album $78,100 $195,250 $390,500 $781,000
12x 85% .7242 per album $72,420 $181,050 $362,100 $724,200
12x 100% .852 per album $85,200 $426,000 $852,000 $1,704,000
10x 85% .6035 per album $60,350 $150,875 $301,750 $603,500
I based the above chart on the old 1998-1999 rate of .0715 per song, so I could use my friend Fiend as an example. His first album came out in April of 1998 when the stat rate set by Congress was at this rate.
The dollar figure above represents monies due an artist (regardless of recoupment) per album based on ownership of 100% of publishing. So for example, Fiend who is signed to No Limit, provided he owns 100% of his publishing (I can dream can't I?), if his deal gives him 11x rate at 85% (I hate it but it won't kill me) then on his first album, There's One In Every Family, which came out 4/28/98 and sold 565,977 SoundScan units, No Limit would have paid him (hopefully) $378,369.77. If No Limit owns half of Fiend's publishing, he would receive $189,184.88 provided he wrote all of his own songs (which he did, except the verses by other artists who appeared which lowers the ownership percentage and dollar amount) and provided he made all of his own beats (which he did not; he features outside producers on this album like Beats By The Pound).
So there you have it, the real deal on how much money an artist makes. You can subtract out now another 28% to 50% of all income, including show money, (depending on the artist's tax bracket which is determined by how much income was made within any given calendar year) for the IRS who get paid quarterly (hopefully) by the artist's accountant. If the average artist releases a record every two years, then this income must last twice as long... I think about this every time I see my favorite artists flossing in their music videos drinking champagne or every time I see them drive by in a brand new Benz...
The Economics of The Rap Industry
Quote:
RAPONOMICS
by, Wendy Day from Rap Coalition
Rap is feeding upon itself and runs the risk of being destroyed economically. If it is not profitable for major labels to put out rap records, they will move along to other genres of music to exploit. Although independent labels appear to be closer to the streets, and therefore closer to understanding why and how records sell, it’s the money, connections, and power of the majors that help expand the rap music genre beyond its current marketplace. If the major labels move on to an area of music that they view as more profitable, such as Latin music or gospel, the reach of rap music will shrink as popular culture is blitzed less and less by rap music on the radio, in stores, and as part of everyday life. To someone, like myself, who is a strong proponent of independence in rap (supporting the “do for self” mentality of artists putting out their own records and owning their own destiny and careers), who also does a fair share of negotiations with larger labels for artists in the rap marketplace, the “damned if you do, damned if you don’t” aspect of this is apparent. If enough money isn’t secured up front in a deal to make an album and support the artist financially for a year or two, and additional money to compensate (by hiring outside companies) for areas where the label is weak, the artist runs the risk of going broke prior to ever seeing an album in the marketplace. On the other hand, if this money is obtained up front, the artist goes further into debt (advances are paid back out of sales before an artist ever sees a royalty) and it takes longer for the label to make back its money before the artist gets a royalty check, if the artist ever sees a royalty. There are even labels that are famous for not paying any royalties, in which case deals have to be negotiated for huge up front funds knowing that there will be no back end royalties. Protecting the artist or not protecting the artist both becomes problematic here.
Major labels supply traditional distribution, and have done so for years. This makes them quite proficient at it since they’ve had years to work out the kinks. They also have staffs of thousands of employees who are a**igned specific tasks in the record company pipeline. They are often financially solvent conglomerates able to wait out even the slowest paying customers. Due to the large number of artists the label has within any one genre of music, the financial aspects of support to radio, retail, and video outlets become more cost effective (it becomes cheaper to financially support a rap radio station in New York, for example, if there are fifteen artists who will receive radio play). It’s no secret that a major label has the opportunity to build fame for an artist more readily than a small independent label. But because they are bigger with more employees (meaning certainly more bureaucracy), they are unable to respond immediately to the needs of the consumers or sudden shifts in trends-- and they really suck at being able to spot new and up coming trends. They are often unable to adapt to a changing climate; for example, there are still many major labels who refuse to work street records on the streets, still dumping tons of money into radio play unsuccessfully because that’s all they know, not understanding the difference between the audience for a Master P record and the audience for a Will Smith record. Yet often, due to the size of a major label, and backing by major corporations with shareholders, they can afford to spend more money to build an artist’s career. And although, money isn’t everything, it helps build artists’ careers through exposure, which leads to sales, and therefore increases the reach of the entire rap genre. It was with the backing of major labels that artists were able to secure television appearances, their own TV shows, soundtracks, film deals, etc, which strengthened the rap genre as a whole. The popularity of rap music in pop culture led to McDonalds and Coca Cola commercials featuring rap music. It led to Barney rapping in a Fruity Pebbles breakfast cereal commercial. It led to people’s grandparents recognizing the name “Puffy” and hearing on the nightly news that he has befriended Donald Trump. This increased exposure leads to even more endorsements, larger publishing deals, and a plethora of opportunities for the artists and rap music. These are some of the things that make rap profitable and lead to rappers actually making money instead of going the route of the old R&B artists and dying broke.
Since 1995, there have been around 500 rap records released each year except for 1999 where the numbers doubled (1995 saw 469 releases; 1996 saw 482 releases; 1997 saw 497 releases; 1998 saw 477 releases; and 1999 saw 997 releases). Yet only such a small percentage of those releases sell at Gold or Platinum level (500,000 plus, and 1,000,000 plus, respectively). In 1998, there were 477 rap records released. Of this amount, only 12 went platinum and only 14 went Gold. That’s a tiny 5% of all of the rap records released--very ugly odds. In fact, only 57 sold above 250,000 units. In 1999, there were 997 records released and only 51 sold more than 250,000 units. Of those 51 releases, 11 were releases that sold above 1 million units (Platinum) and 20 releases that sold above 500,000 units (Gold). And yet those 31 Gold and Platinum records, out of 997 releases, accounted for 63% of the rap sales volume in 1999. If the “average” rap record costs $1,000,000 to create, market, and promote (and I could argue that this figure is low, but it’s the average figure Craig Kallman, President of Atlantic Records gave me), then just to break even a label must sell 123,000 records. As I look at the records over the past two years that have gone platinum, I see artists with budgets of far more than one million dollars. So for the basis of this analysis, the figure of 250,000 records sold was chosen. Hopefully at this point an artist begins to see some royalties (royalties are paid after an artist pays back all of the recoupable expenses such as recording costs, half the video costs, half of the independent promotion costs, etc). If the artist makes money and the label makes money, then everyone should be happy.
As of December 31, 1999, rap releases have jumped from 477 in 1998, to 997in 1999. The majors released a few less records than last year (majors released 203 rap records in 1998, and 199 in 1999). But they made less money in sales than they did last year by selling about 3 million units less (in 1999, 91% of all rap sales dollars went to a major label, even though they only released 20% of the titles; and in 1998, 91% went to the majors as they released 43% of the titles). We better hope this trend upswings. Most people understand that rappers don’t make money from their record deals, which leaves touring, appearances on other artists’ records, and endorsements as the only way for an artist to really earn income. Due to the negative connotation of “violence” at rap shows and the expense of insuring rap tours, touring has become relegated to the more commercial rap acts or rap acts who can perform on R&B tours. Shows are becoming less and less frequent in rap. By appearing on too many other artists’ records, an artist runs the risk of over exposing himself (or herself). There was a time in early 1999 when Big Pun was slated to appear on 25 different songs, and more recently Cash Money appears to be placing their artists on songs with everyone in an attempt for other labels to cash in on the Cash Money phenomenon while Cash Money increases their coffers. Aside from diluting the artist through over exposure, appearances on other records can also be problematic because legally the record label can take that appearance money and put it towards recouping the artist--in almost all cases, the label owns the right to the artist’s performance (even on other artists’ records). This leaves one last way for artists to earn income outside of the record deal: endorsements. And the only way for endorsements to be plentiful is to have rap, as a genre, reach a ma** cross section of popular culture-- and that means the ma**es who are actually perceived to spend money. Companies will only utilize rap artists and rap music to sell products as long as the main stream buying public reacts to it. And if the mainstream buying public reacts more positively to Ricky Martin, the Backstreet Boys, N’Sync, and Brittany Spears, then that is who marketers will employ to hawk their goods, instead of rap artists.
So the question remains, how do we keep rap from self-destructing economically? We need to be certain that the artists make money, but we also need to be certain it is profitable for record labels to release rap records, especially the ones that are able to influence and affect popular culture. And they are often their own worst enemies in terms of selling units and working projects properly to begin with. After making a list of all rap artists that have sold above 250,000 units per year since 1993, it is apparent that we in rap music (hip hop is the culture; rap is the musical form) must find a solution to this problem or all rap will go back underground, serving a very small portion of the marketplace, making it very difficult for artists to squeeze out a living doing what they love most: making music.
There are12 labels (out of 39) who appear on the following chart with artists selling above 250,000 units consistently. These labels seem to get it, for the most part, and if their artists are getting paid, well then it’s victory!
LABELS WITH CONSISTENT SALES ABOVE 250,000 UNITS
based on sales volume according to SoundScan (add 000)
1993 1994 1995 1996 1997 1998 1999 TOTALS
Def Jam 4319 1736 2877 2037 3922 17364 5154 37409
Columbia 2874 1703 1138 7949 7344 1582 2653 25243
Death Row 9432 1635 10476 2234 297 338 24412
No Limit 1019 6032 11150 4135 22336
Interscope 2703 544 811 4355 9827 18240
Bad Boy 2530 11948 690 2676 17844
Jive 3138 553 1428 3402 3328 2188 884 14921
Relativity 5709 1716 1961 1790 514 11690
Universal 1319 1056 810 8378 11563
Elektra 773 1396 2705 3124 2832 10830
Priority 1782 791 2730 1554 1663 1652 286 10458
Loud 1601 1503 1203 2280 1785 1023 9395
This chart is based on figures obtained from SoundScan as of 12/31/99 and is based on total sales within a calendar year. The chart does not take into consideration the amount of money spent on promoting the artist or how many rap records each label released in a given year (it is only taking into consideration sales volume for the releases that sell above 250,000 units each year). All releases are based solely on rap and do not include any R&B releases. This chart also separates No Limit and Priority even though Priority staff is responsible for promotion, sales, and distribution of No Limit, because No Limit is separate in the A&R, marketing, and publicity capacities for all No Limit artists. It also separates Death Row and Interscope, but not RocAFella and Def Jam, or RuffHouse and Columbia, even though their respective staffs helped work some of the projects.
How To Get A Record Deal
Quote:
This is the question I am asked most frequently-- obviously by people who don't know me, because those who do know me ask me how they can sell more records on their own, not how can they get into a slave contract and become a sharecropper. But once again, for those who don't want to do for self, I will attempt to break it down from my vantage point. I see three ways to get a deal in this industry; and let me preface this by saying that I'm talking about a rap record deal with a reputable record label that has a track record and that has experienced some success in the rap music industry through selling records. I'm not talking about the bogus labels that spring up daily all over the country and decide "Poof! I'm a record label." These should be avoided at all cost until they have a proven track record, as most of them can't even do as much for an artist as the artist can do for him or herself. And I'm certainly not talking about the labels that already exist within the industry yet can't seem to sell more than 30,000 records, even with a talented artist.
So, I see three ways to get a deal (that you'd want to have) in this industry.
1. Get put on by an established artist (but bear in mind that you may only be as successful as that artist. It's rare that someone puts you on and you blow up larger). This means coming up under Busta Rhymes, Fat Joe, Snoop, Missy Elliott, etc. With any luck, the artist who puts you on is fair and doesn't do to you what was done to him or her when they were coming up. The examples I listed above have all been fair to the artists coming up under them so far.
2. Create a buzz. In a perfect world, you want everyone in the industry and on the streets talking about you before you get signed. Thirstin Howl III is a perfect example of an underground artist with a strong buzz. The trick is to keep it going til you get signed and then turn it up a notch so that the whole industry is buzzing about when you're going to drop (Ja Rule was a great example of someone who kept up the buzz). This doesn't mean you have to be from New York, Crooked Lettaz from Jackson, MS had an incredible buzz in Baton Rouge and Jackson surrounding them, which is how the Source discovered them for Unsigned Hype (through journalist extraordinaire, Charlie Braxton in Mississippi, and Riggs in New York), which led to the industry discovering them.
3. Sell units. This is of course my favorite one, because it proves to the labels you can sell (which means you'd better) and you have more control over the "fairness" of your deal, and often a choice of labels you want to sign with. In a perfect world, you want to be with a label that not only believes in you, but has an experienced hard-working staff in every department that can really make your project happen.
The average record deal for a new artist starts around $125,000 and 12 or 13 points (which really means 12 to 13 per cent of the retail selling price after you pay back all the expenses). There's a joke in the industry that no matter how many points you get in your contract as a new artist, it comes out to about 80 cents a record, if you ever recoup (recoup means paying back all the expenses). I can count on one hand the number of rappers I know who've ever even seen a royalty check (royalties are part of the "back end"). The way to increase the figures in any deal, in favor of an artist, is for the label to realize that their risk is reduced. A label takes a risk when signing any new artist (risk meaning that the label could dump hundreds of thousands of dollars into an artist's career and the artist might only sell 8,000 records, which means the label loses a lot of money), but anything that can reduce that risk is considered a plus, and rewarded. This even applies to established artists. For example, Snoop Dogg when shopping a new deal will be able to say: he has Dr Dre producing for him again, he is expanding his awareness into mainstream America by appearing in a full length motion picture in 2001, and he has an autobiography out now in bookstores called Tha Doggfather which is getting great reviews. That's the way to maximize opportunity. Slick Rick is about to renegotiate his deal with Def Jam or leave. The way he is maximizing his opportunity is by obtaining letters of intent from other platinum rap artists and producers to appear on his record. I am also shopping a cartoon idea that will star a number of artists, one of which is Rick. I am also looking for film opportunities for Rick. Anything that increases his ability to sell records beyond the 550,000 units his last album sold at Def Jam will help the label to see that he is a low risk commodity, even though he is a rap icon and considered “old school.” This is how to get the little "extras" in a record deal. Those extras could include more up front money (this is a double edge sword because up front money is recoupable, therefore it is just more debt. You want to get up front money for a number of reasons: to invest in something that will bring you more money like a studio or real estate, to force the label to make your project a priority by being so far in debt with them that they have to work your project hard to get their money back, to make certain you make money from a record label that has a reputation for not paying royalties or back end money, etc), more points on the back end, a better “stat rate,” less stuff to recoup, etc.
If you have a deal with a reputable label that seems to believe in you and you are confident that you are a priority, you may want to reduce the front end advance in favor of a larger split on the back end. With Twista's former deal at Atlantic we took no money up front in order to get 50% on the back end. Of course Twista had just appeared on a Platinum single by Do Or Die, and the perception in the industry was that he blazed that song. His deal worked financially, but would have really worked to his benefit had there not been a production company in the middle collecting the money. When I negotiate a deal, there are also times where I secure money up front for the artist that will be dumped back into the artist's project because I know the label won't. For example, in almost every deal I've ever negotiated with a major label, I've gotten between $25,000 and $75,000 for the artist to hire his own street team to work his project. Most of the radio driven majors don't understand the importance of building the artist on the streets first, so very often the artist has to do this for self. This fund is never recoupable. An artist shouldn't be taxed for an area where the label is weak, nor should the artist be taxed for something that falls under marketing of the record, like a street team. But in order to negotiate something like this, the artist must have something that the label deems worthy enough.
I guess what I'm saying is that you shouldn't take just any old record deal, you should have a deal with as many extras to guarantee your success as the label gets to guarantee your profitability to them. You are taking a risk with the label as well, but they NEVER see it like that. They always see their risk.
Regardless of the level of your recording contract, you need to go into your deal with the attitude that the label is your partner (even if you never make a dime, because it is YOUR career), and even if they drop the ball, you should be able to pick up the ball and run with it. They have many artists on their label, but you only have one career. Don't let yourself become the topic of an article in Blaze about "whatever happened to..."!! Bear in mind that the REAL hard work begins after you get a deal. You set the tone with your label. If the label has 3 artists, and 2 are lazy and never show up to stuff that they set up, but one is hardworking and arrives on time to everything, guess which artist will get the best push REGARDLESS OF THEIR LEVEL OF TALENT! Human beings work at record labels and it is human nature to work whatever causes the least resistance and stress. If it's easier to work an Ice Cube record than a Ras Ka** record then that is exactly what will happen. If it's easier to work a Master P record than an Ice Cube record then that is what will happen. It has nothing to do with the level of talent or the sound of the music. This is a business. That's why it's called the music BUSINESS.
NOW U KNOW...
21
Hot Traxxx / Metaphysics Schwamborn
« on: September 10, 2006, 02:25:11 PM »
I know his shi hard to get, but here sum few trax on the streetrecords site..This is new material i'm guessing, its nice (but i think the old shi was better)
APOC records is now STREET RECORDS : http://www.metaphysics.de/street/media.html
APOC records is now STREET RECORDS : http://www.metaphysics.de/street/media.html
22
Hot Traxxx / LAYGWAN SHARKIE
« on: August 04, 2006, 03:51:47 PM »
anybody got anything by dude?
sumbudy plz hook us up ! :lol:
sumbudy plz hook us up ! :lol:
23
Hip Hop Events / Immortal tech+wordsworth+ben
« on: June 14, 2006, 01:07:54 PM »
BEN SHARPA LAUNCH (CAPE TOWN)
does anybidy know how 2 get tha tickets...we need mo details for the show! I NEEEEEED 2 GET THERE BUT DONT KNOW HOW 2 GET TICKETS!
word is (from sum unreliable sources) they mite be R90 atcomputicket, but i couldnt even find that event on they site
PeAce
does anybidy know how 2 get tha tickets...we need mo details for the show! I NEEEEEED 2 GET THERE BUT DONT KNOW HOW 2 GET TICKETS!
word is (from sum unreliable sources) they mite be R90 atcomputicket, but i couldnt even find that event on they site
PeAce
24
General Discussion / IMMORTAL TECH -WORDS
« on: June 14, 2006, 10:41:30 AM »
BEN SHARPA LAUNCH (CAPE TOWN)
does anybidy know how 2 get tha tickets...we need mo details for the show! I NEEEEEED 2 GET THERE BUT DONT KNOW HOW 2 GET TICKETS!
PeAce
does anybidy know how 2 get tha tickets...we need mo details for the show! I NEEEEEED 2 GET THERE BUT DONT KNOW HOW 2 GET TICKETS!
PeAce
25
Hip Hop Events / WHERE'S MIZCHIF?
« on: March 31, 2006, 11:54:29 AM »
was just chillin' on my pc n i stumbled upon his photo on another site.. man, had almost 4goten this bruther existed..i mean, i havent heard anything from dude (not even underground) in like 2 3 years or so but last tym i heard he collaboed wid writer's block or sumn.. WHAT HAPPENED 2 THIS CAT MAN!
brutha was fresh tho
brutha was fresh tho
26
General Discussion / Ragga/Reggae
« on: November 15, 2005, 12:41:17 PM »
anybody in tha cape town area wishing to swap sum ragga, hola..
took sum timeout 4rom underground hop n stuf, openned my box of old ragga mixes.. came across summ phat Mr Vegas shi i aint bumped in a while n remembered just how much ragga has influenced my ear 4 hiphop aswell... i played sum nu stuff too n realised that hip hop n ragga have almost taken tha same route tha past couple of yrs.
tha enthusiasm n energy has almost completly been engulfed by tha bling/crystile era n lack of lyrical (and instrumental) creativity is mo apparent.. of course i feel hhop has seen this mo than ragga,,, dyall feel that ragga's gona see tha same ish soon?
on a (almost)liter note: WHAT THA HELL HAPPENED TO rEdRaT;VeGaS;
took sum timeout 4rom underground hop n stuf, openned my box of old ragga mixes.. came across summ phat Mr Vegas shi i aint bumped in a while n remembered just how much ragga has influenced my ear 4 hiphop aswell... i played sum nu stuff too n realised that hip hop n ragga have almost taken tha same route tha past couple of yrs.
tha enthusiasm n energy has almost completly been engulfed by tha bling/crystile era n lack of lyrical (and instrumental) creativity is mo apparent.. of course i feel hhop has seen this mo than ragga,,, dyall feel that ragga's gona see tha same ish soon?
on a (almost)liter note: WHAT THA HELL HAPPENED TO rEdRaT;VeGaS;
27
Hot Traxxx / Metaphysics-EP
« on: November 03, 2005, 03:55:12 PM »
can anyone provide a hookup 4 metaphysics' ELEVATED PERCEPTIONS?
i'm desperate as hell 4 tha stuff, n i cant get any KATKLYZM material either.. help would be aprec. lots
PeAcE
i'm desperate as hell 4 tha stuff, n i cant get any KATKLYZM material either.. help would be aprec. lots
PeAcE
28
Producers - Discussion / Anti-Pop Consortium
« on: August 04, 2005, 03:22:19 PM »
what eva happend 2 APC!?
29
Hot Traxxx / LORD QUAZ RETURNZ!
« on: May 10, 2005, 08:59:21 AM »
COMING MAY 3
Quasimoto - The Further Adventures of Lord Quas STH2110
CD/LP 2005
Produced by Madlib
1. Bullyshit
2. Greenery
3. Crime
4. Hydrant Game
5. Don't Blink
6. Players of the Game
7. Bus Ride
8. Closer feat. Madvillain
9. Maingirl
10. Civilization Day (CD only)
11. Bartender Say
12. 1994
13. Another Demo Tape
14. Raw Deal
15. Mr. Two-Faced
16. The Exclusive feat. M.E.D.
17. Fatbacks
18. J.A.N. (Jive a** Niggaz)
19. Shroom Music
20. Rappcats Pt. 3 (CD only)
21. Strange Piano
22. Life Is...
23. The Clown
24. Raw Addict Pt. 2
25. Tomorrow Never Knows
26. Privacy
D'NO BOUT YALL BUT IM XCITED BOUT DIS... STONESTHROW GOT SUM NYS ISH!
Quasimoto - The Further Adventures of Lord Quas STH2110
CD/LP 2005
Produced by Madlib
1. Bullyshit
2. Greenery
3. Crime
4. Hydrant Game
5. Don't Blink
6. Players of the Game
7. Bus Ride
8. Closer feat. Madvillain
9. Maingirl
10. Civilization Day (CD only)
11. Bartender Say
12. 1994
13. Another Demo Tape
14. Raw Deal
15. Mr. Two-Faced
16. The Exclusive feat. M.E.D.
17. Fatbacks
18. J.A.N. (Jive a** Niggaz)
19. Shroom Music
20. Rappcats Pt. 3 (CD only)
21. Strange Piano
22. Life Is...
23. The Clown
24. Raw Addict Pt. 2
25. Tomorrow Never Knows
26. Privacy
D'NO BOUT YALL BUT IM XCITED BOUT DIS... STONESTHROW GOT SUM NYS ISH!
30
General Discussion / AIDS a genecidal plot?
« on: December 01, 2004, 08:26:00 PM »
this sum sick shit yo..
SEE THIS:
http://news.ncmonline.com/news/view_article.html?article_id=458af7ff503503e4bf6e203e68e45f29
apparently Dr Boyd holds all of tha US government´s secrets on this matter..
also check out: www.boydgraves.com
whether u believe this or not ,i think we can all agree that AIDS is a big problem...especially in African/black communities
keep real hiphop alive n stay educated (African-Intelects-Defy-Suppression)
OH AND BY THE WAY (on a diff note) thanx for tha metaphysics interview Fahfee.. metaphyz reigns!
T
PeAcE
SEE THIS:
http://news.ncmonline.com/news/view_article.html?article_id=458af7ff503503e4bf6e203e68e45f29
apparently Dr Boyd holds all of tha US government´s secrets on this matter..
also check out: www.boydgraves.com
whether u believe this or not ,i think we can all agree that AIDS is a big problem...especially in African/black communities
keep real hiphop alive n stay educated (African-Intelects-Defy-Suppression)
OH AND BY THE WAY (on a diff note) thanx for tha metaphysics interview Fahfee.. metaphyz reigns!
T
PeAcE