Gotta LOVE this ...more music biz reality.
Log By Mark Van Cleave
© 2003 MVC
Aside from the colorful language, Courtney does have some interesting points
Courtney Love Does The Math
By Courtney Love (Courtney Love's speech to the Digital Hollywood
online entertainment conference, given in New York on May 16.)
Today I want to talk about piracy and music. What is piracy? Piracy is
the act of stealing an artist's work without any intention of paying
for it. I'm not talking about Napster-type software.
I'm talking about major label recording contracts.
I want to start with a story about rock bands and record companies, and
do some recording-contract math:
This story is about a bidding-war band that gets a huge deal with a 20
percent royalty rate and a million-dollar advance. (No bidding-war band
ever got a 20 percent royalty, but whatever.) This is my "funny" math
based on some reality and I just want to qualify it by saying I'm
positive it's better math than what Edgar Bronfman Jr. [the president
and CEO of Seagram, which owns Polygram] would provide.
What happens to that million dollars?
They spend half a million to record their album. That leaves the band
with $500,000. They pay $100,000 to their manager for 20 percent
commission. They pay $25,000 each to their lawyer and business manager.
That leaves $350,000 for the four band members to split. After $170,000
in taxes, there's $180,000 left. That comes out to $45,000 per person.
That's $45,000 to live on for a year until the record gets released.
The record is a big hit and sells a million copies. (How a bidding-war
band sells a million copies of its debut record is another rant
entirely, but it's based on any basic civics-class knowledge that any
of us have about cartels. Put simply, the antitrust laws in this
country are basically a joke, protecting us just enough to not have to
re-name our park service the Phillip Morris National Park Service.)
So, this band releases two singles and makes two videos. The two videos
cost a million dollars to make and 50 percent of the video production
costs are recouped out of the band's royalties.
The band gets $200,000 in tour support, which is 100 percent
The record company spends $300,000 on independent radio promotion. You
have to pay independent promotion to get your song on the radio;
independent promotion is a system where the record companies use
middlemen so they can pretend not to know that radio stations -- the
unified broadcast system -- are getting paid to play their records.
All of those independent promotion costs are charged to the band.
Since the original million-dollar advance is also recoupable, the band
owes $2 million to the record company.
If all of the million records are sold at full price with no discounts
or record clubs, the band earns $2 million in royalties, since their 20
percent royalty works out to $2 a record.
Two million dollars in royalties minus $2 million in recoupable
expenses equals ... zero!
How much does the record company make?
They grossed $11 million.
It costs $500,000 to manufacture the CDs and they advanced the band $1
million. Plus there were $1 million in video costs, $300,000 in radio
promotion and $200,000 in tour support.
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