I just stumbled across this article by famed producer Steve Albini, which appeared in the early 1990s in Maximum Rock ‘n’ Roll Magazine.
It sets out, in clear terms, exactly why I wince every time some band gets terribly excited about all that “free money” they just got from signing to a record label:
These A & R guys are not allowed to write contracts. What they do is present the band with a letter of intent, or “deal memo,” which loosely states some terms, and affirms that the band will sign with the label once a contract has been agreed on. The spookiest thing about this harmless sounding little memo, is that it is, for all legal purposes, a binding document. That is, once the band signs it, they are under obligation to conclude a deal with the label. If the label presents them with a contract that the band don’t want to sign, all the label has to do is wait. There are a hundred other bands willing to sign the exact same contract, so the label is in a position of strength. These letters never have any terms of expiration, so the band remain bound by the deal memo until a contract is signed, no matter how long that takes. The band cannot sign to another laborer or even put out its own material unless they are released from their agreement, which never happens. Make no mistake about it: once a band has signed a letter of intent, they will either eventually sign a contract that suits the label or they will be destroyed.
Other than thinking that some things on Albini’s list of costs were surprisingly cheap (legal fees) and others unnecessarily expensive, my only real issue with the piece was the false impression it gives of the level of record company profit from their end of the deal.
Revenue. Is. Vanity.
That’s true of your advance – you only have as much money as you have left after every expense has been paid – and it’s also true of record sales.
Back when this was written, before Amazon et al, music retailers had, as standard, a 100% markup on the price of albums. I know this because like other young music enthusiasts, I worked in a record store. They bought CDs in at £8 and sold them at £16. Sure, they have their own overheads, but every other person in that distribution chain was making maybe £1 apiece and the retailer was making £8. These days, when you buy an album for £9 or £10, there’s a far more equitable split of profits right down the chain.
I always baulked at the breakages clause in the “standard Sony 80-pager”. They knocked of 20% for breakages, which might have been fair in the 1920s when long-players were fragile and frequently shattered in transit but is bloody ridiculous now. It’s not the only crazy line in the contract, but it’s one of the few places they actually earn their vile reputation. The rest of it isn’t more intrinsically unfair than any other expensive loan you’ll take out.
Nobody walks into a bank, takes out a mortgage, and thinks that Barclays is doing them some kind of personal favour by giving them free money. Why the hell did you ever think that a record contract was any different? It’s not run by philanthropy – nor cruel villainy, either. It’s a horrifically expensive bank loan that will take you many years to repay.
I don’t think there’s further need to repeat myself, since I’ve covered this subject before, but articles like this only go partway to dispelling the absurd myths that surround the music industry. It’s expensive, cold, mechanical, and filled by underpaid enthusiasts who’d be better off doing almost anything else.
The one thing you need to remember is that only the band’s income is presented as a net figure, and everyone else’s costs are listed as gross income. That’s not to say that the producer hasn’t earnt a sweet deal from all of this, but that – like everything else – you really need to read between the lines to get the full story.
Revenue is vanity.