You get a profit if you make an investment, but if you charge for all your services, you didn't make an investment, so why do you deserve a profit?
But, I guess it works, since people are doing it.
Albums basically amount to free advertising for the band.
It's not a matter of principle here, it's a matter of how bad the bargain is in reality. In my example, the employee receives a decent guaranteed pay but low percentage of the upside. The founder receives low guaranteed pay but more upside. The label though receives most of the upside and most of the guaranteed pay too.
Because it means more money in their pockets, duh. Accounting in the entertainment industry is as crooked as it gets.
Because, as the article explains, many bands (presumably most of them) never pay back what the label invested. If TMJ never earns them a penny, they have to cover their losses with those who do.
Let us say that an album sale makes $6 for the label and $3 for the band, then the label first takes the $6 and then also takes the $3 to pay down the advance. So even though that album sale in effect gave the label $9 in revenue, they only decreased the loan by $3. So in this example the losses from a 90k$ advance will be completely recovered after 10k sales, but the band will still 'owe' the label until they've made 30k sales. So just because a band still 'owes' a label hundreds of thousands of dollars, that does not mean that the label lost that money.
If you order repeat bank statements from your mortgage bank, are they not allowed to charge you for postage??
As far as the article can show, Warner Bros is out $300K on the deal with little prospect of getting it back. That's presuming the digital download sum was actually $92,000 instead of $65.
That 90-10% repayment split is part of the contract agreement he made with WB. If it isn't he can sue WB.
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Other world examples: When one pays off a mortgage, you need to pay both for the interest portion as well as the consideration portion.
That can vary over time. First you are paying off interest, later a mix.
Again very clearly a contract term and not morally wrong.
Sure, it's in the contact. But it's morally wrong.
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WB put in advance money to make the albums in the first place. Nothing morally wrong there.
Further, lets say that 90% fee on current sales goes into the pool of money for signing new bands who might be successful. Nothing morally wrong there.
WB does not necessarily blow it all on Cocaine binges and executive Porsches.
6 points by pierrefar 2 hours ago | link
The numbers are scary: WB claims to be $300k out but they're not accounting for a sizable revenue stream. The post mentions the band earned $12k in 5 years from albums they control, and they expected the albums WB control to earn 2-5X more. Assume 5x$12, and you'll get closer to $200k.
Do that over quite a few years, and they'll end up owing the band money while the band members are alive. Keep telling them $62 over five years and they'll never ever need to write them a cheque.
How is this not pure and simple theft?
If anyone is owed multiple $100K, for any reason, there should be motivation to hire a legal team to ask for it. Those sorts of cases happen successfully all the time, and the band guy should start his own action.
But he'd need to be nursing circa $500K loss for him to be $100K in credit by the time the settlement was awarded
However, the contract was written so they could do some accounting tricks and make it look like the show was a net loss. He knows the game well enough to know he was never going to see the money. But there was an odd moment where an executive happened to mention the actual billion in profit from the show. And he said something about his cut. At which point the executive said something about how it was still in the red. Even though as a producer he know how much the show cost, he could read the subtext and in the interview he said "I want to keep working in Hollywood and I know the game."
However, if he took them to court he could probably get a large payout at the cost of never working in Hollywood again.
They apparently tried to pull something similar with Peter Jackson and the billions of dollars from LOTR, though Jackson did end up taking them to court.
If we're going to stick to this mortgage comparison: do you think it would be fair if all the banks colluded to charge interest rates starting at 90%?
Right/wrong, morally/legally that doesn't bother me. Is it fair? That's the question. The answer IMO is "No".
This is what riles me, especially when as a consumer it is very difficult to find this kind of information so it is difficult to make "fair" purchases to stop this kind of thing.
Do you think it's "fair" that banks offer Interest Only[1] mortgages, where you the householder can pay off 100% of the price of the house... and then owe the bank the same amount again?
I understand why you are riled... but see my other post about my friend who offered better terms to bands and got no business[2]
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[1] http://www.thisismoney.co.uk/mortgages-and-homes/tips-and-gu...
What is unfair is selling these mortgages with endowment plans as a "dead cert" to consumers like banks did in the 80s in the UK. They were all successfully sued and settled in the late 90's / 2000s.
In the UK the council that sets interest rates is an independant entity.
If a new band approaches a record label for a contract, the label knows how much it will cost to produce and promote their album, but given the fickleness of the public taste, they don't know whether that album will sell ten thousand copies or ten million. And after the band has sold ten million albums, it will have a lot more negotiating leverage in the next round of contract negotiations.
So the record label has every incentive to lock the band into a contract that grabs as much as possible for the label. Bands that only sell a modest number of copies get screwed by this arrangement, but if the band members only expected to sell a modest number of copies of their album, they wouldn't be seeking a deal with a major record label to begin with, right?
That's typically not true in the US....
> This is what riles me, especially when as a consumer it is very difficult to find this kind of information so it is difficult to make "fair" purchases to stop this kind of thing.
Actually, it's pretty easy. If you're buying in a store, it's almost certainly from a "rip-off record company".
Come on. I have a different viewpoint. I happen to think it is completely "morally defensible" thank you.
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One of my best mates at University (in Sydney) graduated in Law and set up business helping unsigned Bands on equitable terms for low fees.
Unfortunately for him, there were not enough bands who sought his low-cost, equitable contracts. They preferred the expensive, "morally-indefensible" contracts with terrible terms.
My friend is now a primrary school-teacher and enjoying life a lot more.
What do you have to say about that? Or will you just say I'm "missing something"? or "you don't get it"
What they are missing, however; is the payment from the band. Presumably they agreed to pay back the full amount out of their pockets in the original contract. And where does their personal income flow from? Royalties. This is how I see the numbers if they were to pay back the loan:
Gross Profit: $4,000,000 TMJ Share: 400,000 Warner Share: 3,600,000
TMJ Profit: $0 Warner Profit: $4,000,000
Warner Bros. will essentially make a 10x ROI before TMJ earns a dime. Just because bands willingly sign these contracts does not make them morally defensible. The record labels are clearly making a killing off artists who simply break-even, and I think people are finally starting to realize this...perhaps your friend's business was just ahead of its time.