Paul B. Ungar, Esq.
Attorney At Law
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Home My Work Clients My Articles Contact How to Make Money and Retain Control of Your Music The best way to sell records is to land a big
record deal with a big company, become a superstar, and make gobs of money
from maniacally loyal fans, who'll buy whatever you write. Isn't that right?
Let's talk realistically. I recently helped one of my rock band clients
from the Northern Va. and If you count all the major labels in the
world, this means that only a few hundred substantial new artist deals are
available each year. I define substantial deals as those in the range of
$200,000 for production and recording costs, $100,000 for a video, and the
typical costs for independent promotion, which usually runs the same amount
as production costs. And how many really talented artists are out there? A
whole lot. I guess that most of them won't be receiving big deals with big
labels. The big deals, however, still are available.
One of my clients recently landed recording and co-publishing deals, each
which feature initial advances in the mid-six figure range. After video and
the promotion costs, the label will spend a million dollars on this project
that most people haven't yet heard about. Big deals happen infrequently because record
company executives have become incredibly picky. Their well-paid jobs depend
on the success or failure of the acts they choose. Many of my clients are
record company executives, and I know they worry about their job security. A
hot issue when negotiating recording company employment agreements is the
golden parachute clause. The parachute is the amount of money the company
owes the executive if it fires him before his contract ends. Record
executives assume at the beginning of their deal that they won't last. If an
executive signs a few big deals each year, he risks millions of his company's
dollars. And the company will hold him responsible if the investments don't provide
a return. Your End
of the Big Deal It's harder than ever to land a rock star-type
deal these days. But, let's examine the big deal if you are lucky to receive
one. The following deal is typical for a new artist
on a major label. A new artist's typical royalty for a CD sold through normal
retail outlets in the A record company fronts the money for all of
its deals. The band owes the company, however, for every dollar it spends.
So, the company spends $200,000 for recording costs, $50,000 for advances to
the band members, their manager and lawyer, $75,000 for a cheap video, and
$300,000 for independent promotion and marketing. (Of course, I could
negotiate the contract so that only half of the video production and
marketing expenses are recoupable.) The band is $437,500 in the red, and it needs
to sell 437,501 CDs to make $1 in record royalties. The band almost must have
a gold record to break even. (Profit from publishing revenue, however, is for
another article.) More
Problems with the Big Deal Another major provision in new artist
contracts is that the record company may approve material the band records.
The company also may approve individual producers and other creative elements,
which must be commercially satisfactory. In other words, the company must
like what you're doing. If it doesn't, you must keep trying until the company
is happy. The only way to change the phrase from commercially satisfactory to
technically satisfactory is after the band has sold millions of records. The good news is that the band in our example
has a big deal with a big company. The bad news is that the band has no
creative control over its music, and it may never see another record royalty. The band members also must tolerate their
label's corporate politics. The A&R executive who hired the band could
loses his job. His replacement could try to impress her boss by cleaning
house and dropping the band. Also, the record company only accounts to its artists
twice a year – even when it owes people money. And for new acts, the
record company often keeps 25 percent of royalties for two or more years as a
reserve. Nice system, huh? Do it
Yourself What if you can't score a big deal? What if
you don't want to score a big deal? Well, you can market a CD yourself and make
much money. Let's say you spend $2,000 for recording expenses, and each CD
costs you $2.00 for duplication and printing inserts. Also, assume that you
wrote, produced, and performed the music yourself. You can sell each CD
$15.00 directly to your fans. After selling 135 units, you've recouped your
recording costs. Subtracting other costs you may incur, you now can make at
least a $10 profit per unit sold. .If you sell 10,000 CDs, you have a
$100,000 profit. Remember our newly-signed band? If the band sold only 10,000
units, its A&R executive would lose his job – and the band its
contract. A sale of 100,000 units also would be a disaster. But, if you sold
100,000 CDs, you would be a millionaire. Sounds simple, right? I know that it isn't
easy to sell 10,000 or 100,000 units. A band must always work on advertising
and promotion to reach these numbers. If you go this route, you must think of
clever ways to attract your potential fans'attention. You may need to spend
some money to do it. The Internet isn't the cure for all of the world's
problems. But look at the economics of scale. If you keep costs low, then you
only must reach a small number of the millions of people online to make a lot
of money. You also keep creative control over your music by remaining
independent. For most people, control is more important than the money. -
Paul B. Ungar, Esq. Home My Work Clients My Articles Contact Page
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