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Introduction: Fame Without Fortune
In the eyes of the public, rock star success has a certain look and appeal. All the trappings of a chart-topping position, platinum plaques, sold-out tours, and the luxurious lifestyle, envied by the masses. Yes, but behind the scenes, it’s another story, of inescapable financial demise and ruin. Scenarios, where many of the top-charting artists, who at one time or another, generated tens, or even hundreds of millions of dollars for the coffers of the music industry, have ended up either financially unstable or completely broke and destitute. You may think this is an anomaly, but in the real world of funny money, it is a predictable outcome in the music industry and typical how the gritty business is structured. Evil as it may be, part of the illusion at a certain level is the ‘feel’ of reward, but at its core, the music industry extracts value from the talented. What’s up with that!
Well, to understand how the chips are stacked up against so many artists, you’ll have to understand the game and why so many successful artists struggle financially. We’re talking about shifty contracts, funky accounting systems, and incentivized structures that work behind the scenes, secretly shifting all the risk from corporations onto the creators.
Major record deals typically start with a huge advance; we’re talking about six or seven figures. To a ‘green’ new artist, it can come across like a reward. But that jackpot is a recoupable loan! Don’t get it twisted, that money paid up front will have to be paid back, typically through the artist’s royalties. Boiling it down, the label will recover their dollars from recording costs, video production, marketing, tour support, artist styling and branding, all of which come down to no royalty income at all, for the artist. When all is said and done, the optics in the public eye are “Wow, they made millions.” The label will see it as an investment, and the artist is bequeathed to a stack of debt that can stay negative for years. With this understanding, you can see how artists can sell millions of records and receive a crumb or nothing at all personally, and streaming? – forget about it.
When it comes to creative financing, Recoupment alone is nasty and damaging. But when coupled with Cross-collateralization, it can be a real bitch. This is where labels use a clause in a contract to take profits from one album to cover losses from another album.
In other words, this means:
To sum it up, the labels retain ownership along with the long-term financial upside, while the artist carries the downside of all the risk. Sounds just peachy, doesn’t it?
Talk about a rigged game, even when artists are technically “earning royalties.” Those numbers are often chopped down and reduced through a grinding maze of reductions and clauses:
So, on paper, an artist might look like they’re earning a solid dollar per album, but in reality, when all is said and done, when deductions have been executed, and that dollar gets cut down to mere cents, that bag is pretty empty, even before being split among collaborators.
"Evil as it may be, part of the illusion at a certain level is the ‘feel’ of reward, but at its core, the music industry extracts value from the talented."
“It’s my song!” she says. “I wrote it!” Well, artists who write their own songs typically will assume that they’ll earn more money. But with many contracts, the opposite is true.
Controlled composition clauses allow labels to:
So being top dog and having creative control as an artist could mean earning less, especially under a poorly negotiated deal.
Round and round! With record sales declining, recording labels seek new ways to lock down revenues. Thus, enter the 360 deal.
Under these agreements, labels with itchy fingers take a percentage of:
For artists, touring and merch are more often the only profitable means of making a living. Labels tapping into these income streams can effectively tax an artist’s labor over their entire career. Sadly, sometimes without proportional contribution.
Here’s another stumbling block: royalty opacity. Even with a decent contract, an artist can come face-to-face with this anomaly.
Music money passes through:
Every rung of this ladder introduces delays, errors, missing metadata, or unreported income, hence the “black box.”
As it happens, many artists will never audit their statements, because most will likely not even know they have the power to do it, or the mere fact that the process can be costly and even adversarial.
The result is a system where:
In Summary
The music industry isn’t accidentally breaking artists. In a weird, funky way, it’s designed to:
By the time the accolades of fame arrive, the financial outcome is sadly often already locked in and in full gear.
Image: MaurosArt
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