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Five Things Congress Could Do for Music Creators That Wouldn’t Cost the Taxpayer a Dime Part 3: Create an Audit Right for Songwriters
[This post originally appeared in the Huffington Post]
Once a song is distributed to the public with the permission of the owner of the copyright in the song, the U.S. Copyright Act requires songwriters to license songs for reproduction and distribution under a “compulsory license.” This license is typically called a “mechanical license” because it only covers the “mechanical reproduction” of the song and does not, for example, include the right to use the song in a YouTube video or a motion picture, create a mashup or reprint the lyrics of the song.
When the Congress first developed the compulsory mechanical license in 1909, the concern was that “the right to make mechanical reproductions of musical works might become a monopoly controlled by a single company.” This monopoly never came to pass, and given the fragmentation in music licensing in the current environment, is unlikely to ever come about.
The user of the compulsory license (or “licensee”) has to comply with the rules for these licenses — including an obligation to account and pay royalties. If the licensee fails to comply, then the songwriter can in theory terminate the license, although making that termination stick usually requires an expensive copyright infringement lawsuit.
The bare compulsory license was not widely used before the advent of Internet music services — and then became something of a weapon of its own — music services bought into the “long tail” theory and tried to clear millions of songs overnight by massive mailings of notices of their intention to use the work. Given that songs are frequently co-written, this required sending huge numbers of notices. Behind each notice — supposedly — is a royalty account and statement of usage as required by law.
So if you’re following, songwriters suddenly were required to license to services they did not ask to be included in (unlike artists recording “cuts” the songwriter solicited), and only a limited paper trail to confirm the accuracy of royalty payments.
Trust, But Don’t Verify
Intuitively, you are probably thinking that songwriters would have the right to make the licensee provide evidence to demonstrate if this morass actually resulted in correct payments, right? Checking the evidence is called a “royalty compliance examination” or an “audit”. Since there is no “auditor general” of compulsory licenses appointed by the Congress, it would seem strange to believe that the intent of Congress was to codify the moral hazard of allowing the person doing the paying to examine their own books.
And yet, in the current practice, the fox is squarely among the chickens. This is because the government requires that the licensee merely “certifies” their own statements (i.e., promises the statements are true). This certification is done on a monthly basis by an officer of the licensee and annually by the licensee’s CPA. And songwriters are told “trust me.”
The Industry Standard
It’s safe to say that this certification process is drastically different than any industry-standard mechanical license. There is a long history of audits in the music business — the State of California even passed legislation in 2004 protecting the artist’s right to audit record companies. But when it comes to songwriters, the federal government forces songwriters to take the compulsory license, tells them the royalty rate they are to be paid, but does not permit songwriters to audit the licensee.
Instead, the government permits the licensee to “certify” their own statements (i.e., promises the statements are true). This certification is done on a monthly basis by an officer of the licensee and annually by the licensee’s CPA. And songwriters are told “trust me.”
The Blanche Dubois Approach to Royalty Accounting
As Blanche Dubois said in A Streetcar Named Desire, “I have always depended on the kindness of strangers” and until the Congress updates this certification business model, that’s exactly what songwriters are expected to do, too.
The compulsory license requires certification by the licensee on a monthly basis and by a CPA on an annual basis.
An officer of the licensee is to include this certification oath with the songwriter’s monthly statement:
“I certify that I have examined this Monthly Statement of Account and that all statements of fact contained herein are true, complete, and correct to the best of my knowledge, information, and belief, and are made in good faith.”
The Annual Statement of Account requires this certification by a Certified Public Accountant for the licensee:
“We have examined the attached “Annual Statement of Account Under Compulsory License For Making and Distributing Phonorecords” for the fiscal year ended (date) of (name of the compulsory licensee) applicable to phonorecords embodying (title or titles of nondramatic musical works embodied in phonorecords made under the compulsory license) made under the provisions of section 115 of title 17 of the United States Code, as amended by Pub. L. 94-553, and applicable regulations of the United States Copyright Office. Our examination was made in accordance with generally accepted auditing standards and accordingly, included tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances.”
Do you think that the CPA has in fact examined millions of annual statements? Does the CPA’s risk manager or insurance carrier know that the CPA is certifying to a multitude of songwriters that the CPA has actually “examined the attached “Annual Statement of Account…” when it is highly unlikely that the CPA has done any such thing?
Congress crafted this language in a much simpler time. Remember — there are now millions of these statements every month. Do you think that the certification oath could possibly be true every time? Some of the time? How would you find out?
Certification is a One-Way Street
This certification runs only one way — the government only offers licensees and CPAs the opportunity to certify that the books are correct, not that they are incorrect. Under current practice, if a company or CPA is squishy about how accurate their books and records are, songwriters typically get no certifications at all and just an uncertified royalty statement if they are lucky.
What conclusion should be drawn from a failure to certify? Why not provide an alternative certification — that the licensee’s books and records cannot be certified. While it may be unrealistic to think that companies would ever disqualify their own books, it is not unrealistic to think that a CPA might choose this option on the annual statement of account given the CPA’s licensing responsibilities.
And it is definitely not unrealistic to think that the company’s books would be more likely to be accurate if the company knew that this disqualification option were available to the CPA. But the simplest thing Congress could do is to create an audit right for the compulsory license.
Let’s Keep it Simple
Chairman Goodlatte has said he intends to update the Copyright Act to bring it into line with the digital age. The Congress already allowed audits for the compulsory license for sound recordings and the webcasting royalty established under Section 114. This mechanism that Congress created in the recent past is working quite well.
Chairman Goodlatte could borrow heavily from the audit rights for the Section 114 compulsory license for sound recordings, and allow songwriters to conduct group audits under Section 115 to avoid a multiplicity of audits.
These changes would bring help bring song licensing into the 21st century and allow songwriters to enjoy greater confidence that they are being paid properly. Creating an audit right under Section 115 compulsory licenses would allow market forces to work to align the incentives toward better payments for songwriters.
The MTP Interview: An Inconvenient Truth: Songwriters Guild President Rick Carnes talks about the effect of piracy on American songwriters
American songwriters are one of our greatest sources of culture as well as important contributors to America’s “soft power“–our ability to win hearts and minds around the world by attraction and not by force. As Professor Joseph Nye would say “Lennon trumped Lenin.” (See Center for Strategic & International Studies Smart Powerfavored by the Obama Administration in the “change” direction for U.S. foreign policy.)But Internet analysts, self-appointed futurists as well as self-annointed consumer advocates almost always misunderstand the role of songwriters and the negative effects that rampant piracy has had on them. People who just write songs don’t sell t-shirts, don’t play shows, don’t have all the other income streams available to them that the EFFluviati point to as subsititute revenues for the cruel theft of labor value by companies like Kazaa, Morpheus, Limewire and the Pirate Bay.You hear a lot of talk about “follow on” artists or “remix culture”? Songwriters are the ones who are most often “followed upon” and “remixed out of culture”. And as noted in this interview, there are fewer and fewer original professional songwriters around every year.Rick Carnes is the President of the Songwriters Guild of America, and is a tireless advocate for American songwriters on Captiol Hill. He lives in Nashville, the songwriting capitol of the world.
[Interview for MTP by Chris Castle]
MTP: There is a popular image of a songwriter sitting in front of a piano in a little cubicle at the Brill Building or Music Row and grinding out the hits.What kind of business relationships do songwriters have today?
Carnes: Most songwriters today are independent operators. Music piracy was the death knell for the day of music publishers having staffs of songwriters. The Brill Building is still there but the last time I visited it was to talk to the folks at Saturday Night Live. There wasn’t a songwriter in sight. Business relationships now are with lawyers and managers. They put together the deals and venture capitalists put up the money. The deals are done to get
the next big recording artist signed to a label and then everyone gets a piece of the action in some 360 deal.Used to be you found a great singer then you looked for a great song.
Now you find a great deal maker then look for someone with deep pockets.
MTP: Are there more or fewer songwriters working today than there were 10 years ago?If there’s a change, what forces in the business are causing that change?
Carnes: The days of music publishers who have large staffs of professional songwriters seem to be over. Music publishers used to have both established writers and their ‘farm team’ of new talent. Now they have neither. The people they sign today (if any at all) are either working recording artists or ‘future’ recording artists. The days of the ‘stand alone’ songwriter appear to be over.
There are multiple causes for this situation but most of the damage was wrought by two specific problems. The first being that the internet has turned into a Cyber-Somalia.
Professional songwriters used to live on advances from their music publisher. These advances were to be recouped from record sales only (“mechanicals” is the industry term for these revenues). Music piracy killed record sales so that made it impossible for music publishers to recoup the advances they paid songwriters so they stopped signing writers and let go of the ones they had when their contracts ran out.For example, the music publisher I was writing for in 1998 had twelve great songwriters on staff. By 2008 they had no songwriters on staff. For the math impaired that is a reduction of 100%.
The second major problem was/is a practice by the record labels of putting “controlled composition” clauses in their artists recording contracts. For the non-lawyers reading this,
these clauses are a very complicated system established by the record labels to insure that they don’t have to pay the full statutory rate imposed by the US Copyright office for the songs recorded by the artist that the artist either writes or “controls”. [Editor’s note: this includes songs co-written with a producer or other writer who is not the artist or a member of a group artist. It started right about the time that another SGA member, Hoyt Axton, helped to spearhead indexing the mechanical royalty rate to the Consumer Price Index in 1976.]
Once an artist signs a recording contract containing one of these clauses (and since all the major labels have them they have little choice) the [beginning] artist will receive, at most, 75% of the statutory rate for recording any song they write or co-write. It is the co-writing that causes problems for the professional songwriters. The record labels, because they can pay a lesser rate for any song written or co-written by the recording artist, insist that the artists now write or co-write all their songs. This has lead to a tremendous drop in the number of professional songwriters and, in most cases, the quality of the songs. The public is constantly complaining about having to pay US$12 to US$18 dollars for an album with only one or two goods songs on it. You can trace the cause of this problem back to the early eighties when all the record labels began implementing control compositions clauses in their contracts. Since then the norm on an album is one or two professionally written (or co-written) songs and a lot of filler songs that the artist wrotein order to satisfy the record label’s demand for cheap music.
MTP: Tell me about what you do at the Songwriters Guild and the untold riches you are being paid for the job?
Carnes: I am President of the Songwriters Guild of America and if I am supposed to be getting “untold riches” someone forgot to tell me!The mission statement of the SGA is two words “Protect Songwriters”. That lack of specificity has forced me to show up in all kinds of places I never thought I would be! I was the lead witness in the latest Copyright Rate Board hearing. I have testified on behalf of songwriters in both the Senate and the House of Representatives on many issues concerning song writers rights, and I have spent the last ten years flying all over the country talking to people about the harm that is being done to American music by the widespread theft of songs on the internet by a mob of anonymous looters.
MTP: What is the most common question you get from your membership?
Carnes: How do I get a song cut by Beyonce?
MTP: What are your top three legislative issues for this Congress?
Carnes: The performance right in an Audio Visual download;
Controlled Compositions;
Fighting Music Piracy (as always)
(If I could add a fourth it would be a ‘bail-out’ for all the songwriters who lost their jobsbecause their intellectual property was not protected by the US Government on the Iternet)
MTP: Who are you listening to at the moment, and what new music interests you the most?
Carnes: Luca Mundaca. A fabulous new Brazilian jazz artist who plays great guitar, sings like an angel, and writes amazing melodies. I have no idea what she is singing about since I don’t speak Portuguese. But the songs knock me out anyway. That’s what I call great songwriting.
MTP: Where do you think that songwriters are going to end up in the next 5-10 years?Meaning what role do you think they have in the music business?
Carnes:Songwriters were the number one loser of income in the US economy in 2004 (Music piracy taking its toll). So we are used to tough times. I hope to see a bottom form somewhere in the steep drop in record sales and a rebound sometime in the next ten years. If that doesn’t happen I guess we will all end up sleeping in the subway!
The real role of songwriters in the music business is to add meaning to people’s lives.
That is not a job you want to leave to amateurs. It is a job for professionals.
MTP: Do you find that members of Congress do not have a clear idea about the role of songwriters as a general rule?
Carnes: I think they understand the role of songwriters better than the typical major record label executive. At least the Members I have talked to understand that the Constitution includes provisions for royalties for creators because without them the quality of life suffers. While it is true that the Copyright laws are very difficult to understand in great detail, the general principle that creators have a right to control the copying of their work is understood by all except the most radical of the ‘Free Culture’ advocates. There are a couple of people on the Hill who think that ‘Fair Use’ extends to sharing a copyrighted song with the entire world for free.
MTP: Who do you view as the greatest commercial opponents of songwriters?
Carnes: The Major record labels are our biggest ‘commercial’ opponents. They have wreaked havoc on the songwriting community by forcing controlled composition clauses into their artist recording contracts. After them it would be all those companies out there that want to use our songs to sell something else (like advertising) and not pay us a dime. Anytime you go on a website that is offering free music they have no license to use and selling your visits to that site to advertisers you are looking at one of the ‘greatest commercial opponent of songwriters’. I wish I could offer you a list but it would be too long to type in one sitting. Besides,didn’t Richard Nixon get in trouble for having an Enemies List?
I hear a lot of talk from Google and the big online companies about their “partnerships” with the “music industry”.I find more often than not when you drill down on what that means is deals with major labels.
MTP: Do you ever have any of these companies come to you to ask you what you think or try to make a deal with your members?
Carnes: Yes we have had companies come to us about deals. But that is because our catalog administration program has some hit songs that you have to have in order to compete
in the market. So in terms of whether these services are ‘reaching out’ to smaller labels
and music publishers the SGA is not a good gauge.
MTP: If you had to rank the top five online companies as the “best” meaning most friendly to songwriters, who would they be and why?
Carnes: Songwritersguild.com would be number one *grin* (a shout out here to our webmaster)
After that I am not a fan of any particular online company since I have had to spend the last three years of my life fighting them in rate court to try to get a decent interactive streaming rate. (Which we finally won!) But I am a subscriber to Rhapsody and I check out MySpace a lot since I have so many friends that are artists and in bands. MySpace, at least, has exposed a lot of indie music.
MTP: And the five “worst”?
Carnes: Whoever the top 5 p2p sites are today. And just for the record, I am not a fan of Google because I believe their search algorithm reduces all art to the lowest common denominator. That’s a real culture-killer if I ever saw one.
MTP: Anti-copyright organizations often try to tell musicians and the music industry that they have their eye on the wrong ball, that they can offset the decline in CD sales by selling another T-shirt to fans who it would be easy to find because they were all on email.
Carnes: Songwriters don’t sell T-shirts. We’re too ugly and we dress funny. Songwriter fan clubs meet in phone booths so the email lists are too small to monetize effectively.
But seriously folks, songwriters don’t sell concert tickets, or ancillary merchandise. We make our money on record sales and radio airplay. Or, we USED to make our money on record sales. Illegal downloading ended that. Now we are looking for new jobs.
The most infuriating thing about being lectured to by anti-copyright groups about how songwriters need to get a new ‘business plan’ is who gave them the right to tell us how to make a living? Who are they to say we shouldn’t fight to defend our rights? In truth, I find their suggestions are unbelievably arrogant and self-serving.
MTP: Do you find that there are a lot of self-appointed music industry experts who have never sold a record?I’m thinking of a specific event at which I was sneered at by Eben Moglun at Future of Music Policy Summit II in 2001 for questioning the affect of piracy on independent artists and I was told more or less that I was a primitive thinker because I didn’t see that declines in CD sales would be made up by merch.I’m also thinking of a panel I was on with Corynne McSherry of the EFF at which she wedged the audience by asking the crowd if “Silicon Valley” was going to let “Hollywood” push it around. Thankfully the “Silicon Valley” fans and the “Hollywood” fans hadn’t been tailgaiting or painting themselves funny colors. [Editor’s note: And if “Silicon Valley” wouldn’t listen to “Hollywood,” would “they” listen to musicians in Bollywood, Miami, Seattle, Austin, New Orleans, London, Harlem, in no particular order. Do you have similar experiences?
Carnes: There do seem to be a lot of people trying to make the rules who never played the game.
I have had some interesting back and forth on some panels but I must say that the most interesting panel I have ever witnessed was at the Leadership Music Digital Summit a couple of years back. The subject was how the music biz could ‘compete with free’.
For some reason there was an actual economist on the panel who was totally silent for the entire panel until the very last when he spoke up and said that anyone who thinks there is a business model that competes with free is out of his mind. In any Capitalist society consumers are taught from cradle to grave to always get the best ‘deal’ they can, and NO DEAL beats free. I mention his comment only because it was the first time that I ever saw these ‘self-appointed music industry experts’ ever called on any of their malarkey by a real expert and the discussion was concluded in one sentence.
Castle: If you had to pick the most important issue of 2009 for songwriters, could you and if you could, what would it be?
Carnes: Same as every year for the last 10….Illegal downloading.If I may quote a real economist, “Nothing competes with free”.
Add the question I missed:Is Rock and Roll dead?
Yes, Rock and Roll is dead. The genre’ was played out by the mid-seventies but it has survived in a zombie-like fashion for thirty years past its expiration date.
Part of the charm of Rock music is that practically anyone can play it.It can be written by amateurs and performed by teenagers without those difficult and expensive years of training that other forms of music require. Unfortunately that also makes it the perfect ‘corporate’ music. You can get kids who don’t need money to support families or pay house notes to sign contracts that no thinking adult would sign. This allows a record label to exploit ‘this year’s model’ for all they are worth until they reach the end of their contract and want to renegotiate for decent terms. Then they simply replace them with another teen idol. The simplicity of the music has allowed the major labels to treat recording artists like ‘temp workers’.
Hopefully with the decline and fall of the major label system we might finally get to see where the music really wants to go once it is released from this corporate death-grip.
[Editors note: There’s still great music being made every day, some of it is listed in our “New Music Weekend” recommendations posted (pretty much) every Friday and reposted the following Monday on MTP and on Twitter.]
Do it, or we’ll do it for you: Jeremy Hunt and Ed Vaizey stand up for human rights of UK artists
In a move perhaps connected to Google’s prosecution and payment of $500 million forfeiture for promoting the sale of illegal drugs, The Guardian reports that the UK Culture Minister Jeremy Hunt will announce today that the Cameron Government expects “Google and other companies to take action against rogue sites, but could introduce new legislation in the forthcoming communications bill.” (See “Google Faces Pressure to Block File Sharing Sites.” Read a copy of Google’s plea agreement in their prosecution for promoting the sale of illegal drugs.)
Just to put this in a little context, Google’s global head of communications and public policy is married to Steve Hilton, a political advisor to Prime Minister David Cameron. As you would expect, this relationship has come under scrutiny in the UK press, which cannot have been helped by the recent phone hacking scandal. The closeness of Google and Prime Minister Cameron has also been criticized in the Hargreaves Review debacle, so for the Cameron Government to take a position not only pro-artist but also one that will be perceived as anti-Google is really quite remarkable for those of us who read the tea leaves from the sidelines. (Ed Vaizey, a Minister with responsibilities for Culture, Communications and the Creative Industries, has been very supportive of the UK arts community, so what is interesting about this is the combo of opposing Google while supporting the creative community.)
Given that context, Jeremy Hunt is to be commended even more for his principled stand against all those in the wheel and spoke structure that Ellen Seidler calls “Popup Pirates“, the unholy alliance of adserving companies (of which Google is by far the largest), linking sites, cyber lockers, credit card companies and others in the chain. There has been remarkable success in the U.S. with the Protect IP Act in getting companies to come to the table once they have been informed of the problem–except for Google, which is still clinging to the hope that they can fool us all once again behind their substantially tarnished “hear no evil,” “see no evil”, “do no evil” mantra.
The Guardian reports that this isn’t going anywhere with the Cameron Government, as “[g]overnment ministers see Google as one of the key players in the fight against online piracy, chiefly because it is a portal to the web for nine out of 10 UK search engine users….Hunt is believed to be in favour of an independent cross-industry body…that will identify sites used for illicit filesharing and push for them to be blocked. The use of [this] model as a way to combat piracy was first raised as part of communications minister Ed Vaizey’s industry round tables on web blocking at the end of last year. ‘We do not allow certain products to be sold in the shops on the high street, nor do we allow shops to be set up purely to sell counterfeited products. Neither should we tolerate it online,’ Hunt is expected to say.”
Minister Hunt is quoted in the Financial Times as saying “The government has no business protecting old models or helping industries that have failed to move with the times. But those new models will never be able to prosper if they have to compete with free alternatives based on the illegal distribution of copyrighted material.”
Hear, hear.
We commend Messrs Hunt and Vaizey for clearly identifying a legitimate role for government in protecting the human rights of artists online, taking the steps to do something about it, and having the courage to challenge evil when they see it. Not just challenge it, but also shake Old Nick by the tail.
Boldly.
Music Week has the full text of Minister Hunt’s speech.
Google’s response? According to the Financial Times “‘Google has industry-leading measures to fight online piracy,” it said. “We work hand in hand with copyright owners to remove infringing material from search results. Without a court order, any copyright owner can already use our removals process to inform us of copyright infringing content and have it removed from Google Search. We recently announced a series of measures that make this process even easier, bringing our removal time down to an average of four hours.’”
Google’s “measures” are clearly designed to try to fake out the creative community, lawmakers and judges (see The Complete Checklist on Google’s Non-Antipiracy Antipiracy Policies).
Another reference point for Google’s intentions is found in a statement by Google’s Executive Chairman (and who was CEO during the time that the U.S. Government successfully ran seven sting operations against Google for promoting the sale of illegal drugs): “‘If there is a law that requires DNSs [domain name systems, the protocol that allows users to connect to websites] to do X and it’s passed by both houses of congress and signed by the president of the United States and we disagree with it then we would still fight it,’ he added. ‘If it’s a request the answer is we wouldn’t do it, if it’s a discussion we wouldn’t do it.'”
But the quotation that is perhaps most revealing is this one, which Schmidt made at a conference at which both Minister Hunt and Schmidt were speakers: “”We would prefer to try to use best practices within the industry instead of regulations. If there is legislation it should be based on the best practices of the leading companies.'”
In other words: Google does what Google wants to do and it makes the law in its own image, whether it’s stealing copyrights or selling drugs.
Artist Glossary of Industry Terms: “Mechanical Royalties”
“Mechanical royalties” refer to monies paid to songwriters or music publishers for reproductions of songs in sound recordings (either for permanent downloads or streaming mechanicals). Mechanical royalties (or “mechanicals”) are usually paid by record companies (or outside the US, by digital retailers).
In the United States these rates are set by statute and have varied over the years. The historical rates for permanent downloads or compact discs are available from the U.S. Copyright Office. (http://www.copyright.gov/carp/m200a.pdf) The current minimum rate for a permanent copy (such as a digital download or a CD) of a song is 9.1¢. Different rates apply to certain kinds of subscription services and for other forms of exploitation.
Mechanical royalties are usually collected by music publishing administrators or music publishers, including collecting societies such as the Harry Fox Agency in the United States or CMRRA in Canada.Distinguish the mechanical royalty—a reproduction based royalty—from the performing right royalty—based on the public performance of a song.It’s also important to keep in mind that in the US digital retailers (such as iTunes) do not currently pay mechanical royalties directly to a publisher or collecting society. Instead, a US digital retailer will pay mechanical royalties for permanent downloads to the owner of the sound recording which will use the “pass through” license permitted in the US. Other rules apply outside the US which typically will see a digital retailer licensed by the prevailing authors rights society on a country-by-country basis.
Copyright 2010 Christian L. Castle. All Rights Reserved.
See Also: Bank Accounts/Tax Returns/Accountants
See Also: Have you Registered with SoundExchange?
See Also: Performing Rights Society Affiliation
20 Questions for New Artists: Performing Rights Society Affiliation
There is a bit of strategy involved with affiliating with a performing rights society in the United States. All the societies have a creative staff. The decision to affiliate with a particular society should be made after the artist/writer has taken some meetings with the performing rights society and decided if there’s more love coming from one than another.
Most of the time we like to wait until the music is fairly well formed and the band has gelled into a working unit before approaching the societies unless there’s a reason to move more quickly, such as getting a film or TV license, or substantial radio/webcasting play. In more experienced bands, the writers will already have an affiliation, so it is a good idea to know this in advance for purposes of servicing the creative staff with new music, competing for slots on compilations and festival shows, etc.
The major U.S. performing rights societies are the American Society of Composers, Authors and Publishers (http://www.ascap.com/), Broadcast Music, Inc. (http://www.bmi.com/) and the Society of European Stage Authors and Composers (http://www.sesac.com/).
See also: Bank Accounts/Tax Returns/Accountants
See Also: Have you Registered with SoundExchange?
Copyright 2009 Chris Castle and Amy Mitchell
Artist Glossary of Industry Terms–Advance
Artist Glossary of Industry Terms: “Advance”
An “advance” is almost always defined as a pre-payment of royalties, whether the advance is paid by record company to an artist, a publisher to a writer or a merchandiser to an artist. An advance is also sometimes called a “minimum guarantee”.
Advances in the music industry do not earn interest and are not loans. It is a popular misconception that artists are “in debt” to their record companies or writers to their publishers. By any normal definition of “debt” this is not true for two big reasons and many smaller ones: The advance payment does not earn interest and it does not have to be repaid. The advance is only “recoupable”—meaning that the advance is applied against earned royalties.
For example, if Artist A was paid an advance of $100 in 1970 and did not earn $100 of royalties until 2010, no interest would apply and the $100 in 1970 dollars would be paid dollar for dollar in 2010 dollars ($100 in 1970 would be worth approximately $600 today). If Artist A earned $1 a year in royalties from 1970 until 2009, but earned $500 of royalties in 2010, Artist A’s royalty account would be “debited” with $100 when the advance was paid in 1970, credited with $1 a year for 39 years, and then credited with $500 in 2010. Artist A would receive none of the $1 per year for 39 years, but would receive $439 in 2010.
During the years 1970 to 2010, Artist A was “unrecouped”. Artist A did not owe the record company any money, and interest did not run on the unrecouped balance. Artist A also got to pay off the advance in inflated dollars over time, so the actual cost to Artist A of earning the $100 is lower the longer it takes to recoup the advance.
A word to the wise: One problem with the misinformation floating around the Internet that “artists are in debt to record companies” is that it creates an opportunity for an unscrupulous or unknowledgeable record company to try to convince a new artist that the advance really is an actual debt. Run, do not walk, from such an offer.
Copyright 2010 Christian L. Castle. All Rights Reserved.
See also: Bank Accounts/Tax Returns/Accountants
See Also: Have you Registered with SoundExchange?
They call it "red" for a reason: why Abbey Road doesn’t come in a box
I was at a dinner in Rome a few years ago at which the dinner speaker was Terry Fisher of that law school whose name cannot be said and author of various books that touch the music world. (“Touch” might not be the right word.)
I witnessed yet another example of what I call the “Abbey Road in a box” speech given by someone who has probably never been to a state of the art recording studio, who has never made a record in such a studio and who hasn’t bothered to actually do any rigorous research about it.
The problem was that he was speaking to a room full of policy wonks who hadn’t been in a studio, either, but most or all of whom thought that what was said by a professor from that law school was somehow important. And worse yet–had some effect on intellectual property laws in their countries. These people uncritically trusted what Fisher uncritically said (the subject of which was “the rise of the amateur” intoned with the importance of “the decline of Western civilization”). And of course there was no Q&A for a dinner speech.
The other problem was that I was the only person in the room who knew first hand that you can’t make a record in your bedroom that sounds as good as a record made at Abbey Road. Professional recordings are made in accordance with the professional standards of a discipline that has evolved over time into a serious academic course of study based in research and governing bodies. All of which Fisher ignored. (And in addition to being downright insulting, that “rise of the amateur” thing turned out to be quite the bust.)
Now if I were to say to a serious audience that the scaling paradigm of Moore’s Law is coming to an end without being able to engage in a serious discussion of the memristor or comparable technology, it is doubtful that even a room full of policy wonks would let me escape unchallenged. Yet Fisher and people like Fisher routinely make these “Abbey Road in a box” claims without so much as a raised eyebrow. The ones who are making records in their bedrooms want to believe that it sounds as good as Abbey Road and have no reference point, and the ones who know better are working.
I was once listening to what passed for a “mix” by one of these Abbey Road in a box aficionados. The playback was on studio speakers. I noticed an incredible amount of compression (which my ears hear as distortion) and that all the levels were in the red. I said (or rather, shouted), “All the levels are in the red.” I got blank looks from the purported engineer and the artist/producer. “The levels,” I said. “In the red.”
Again blank looks from the digital natives.
“THE RED, GET IT?” I reached over and tapped on the sound level meter that was practically buried all the way to the right–in the red part of the measurement range. “THAT RED.”
They handed me a pair of ear buds and told me they mixed for ear buds because that was how everyone listened to music. Like that made it alright.
* * * * * *
There is an excellent piece on NPR called The Loudness Wars: Why Music Sounds Worse which discusses this phenomenon. The piece is predominantly an interview with Bob Ludwig, who is the greatest mastering engineer on the planet (as I have introduced him at SXSW) and a very serious player in a world that exists far outside of Harvard Yard and the house with the little red door. If you are at all interested in the study of the science of audio engineering or the art of sound recording, you should read this article and pay close attention to what Bob Ludwig and Professor Oxenham have to say.
A good illustration:
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