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Comment by tezza | Hacker News Reader

What is it with lecturing me about missing stuff...???

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"

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I think InclindedPlane was referring to the fact that the article emphasizes that Warner Bros. technically is not out $400k. They've recouped their expenses from the TMJ loan by taking 90% of the band's profits throughout the years. There is no negative cash flow here.

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.

To be fair, the record label profit is more like 1/3 of the revenue, not 100%. Still, compared to 10-15% less every expense imaginable, they make out far better (even on "unrecouped" bands) than the artists.

Well they definitely can't make 100% of the revenues since they do incur expenses. What I'm saying is that in order for the band to make enough money to payback the loan, their music would have to gross $4,000,000 in profits. I'm assuming that the band receives 10% of all profits from sales. So $400,000 / 0.1 would be $4,000,000 going to the record companies (3.6 mill they pay themselves, and the other .4 is the repayment from the band). I know this is an oversimplification of the process but I'm simply emphasizing the corrupt nature of the labels here.

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