Note: This was originally completed on 11/20 /99, since that time a new revolution has taken place which has brought us to the crossroads where both greater freedom or greater tyranny lie as options. The revolution is that spawned by Napster and it's progeny. The future will either be one of enhanced access to art and information for the individual or a continued limitation on this supply (and a greater loss of privacy in the name of commerce). We at AUSLANDERMUSIC embrace the idea of free music exchange among individuals and groups. We believe when facing a choice between liberty and the bottom line, we favor the former. Thus, we are working on a contract that will include free digital music as part our business plan.
Stay tuned as we join the revolution.
THE INTRODUCTION
The land surrounding Austin Texas has been the birthplace for many revolutions politically and artistically. This region once again will play a vital role in a great change. The live music capital of the world and the second most wired city in the nation will combine its talents to reshape the music industry and in the process, liberate the musician.
The story of the musician this century is a story of abuse and enslavement. This is hardly hyperbole. The record companies have made it a practice to usurp the musician's participation in the profits that his music creates while minimizing his creative freedom. Yet, the times they are a changing.
With the proliferation of digital recording and the possibility of worldwide distribution via the Internet, the record companies are facing a major revolution. Like with all revolutions, the aristocrats often loose their heads for a time until they can re-establish themselves and co-op the revolution. We are in this period of adjustment.
With the new technology, the major record companies are facing the guillotine. Artists and consumers are the Robspierre of our day. Indeed the peasants are angry as Public Enemy's Chuck D's comments suggest, "The biggest pirates have been the record companies. The people running the record labels could be selling Brillo pads for all they care. It's not about the art at all. They enjoyed such a big spill when they were ahead of the curve and sold something (compact discs) that cost 80 cents to manufacture for $10 or $15. They did that for years. This is the way things get balanced. The chickens have come home to roost."
Specifically, Chuck D is referring to MP3 technology, the main weapon in the digital revolution. The major labels have tried to prevent this technology from entering the marketplace. MP3 makes it possible to send a reasonably sized music file with near CD quality over the Internet. MP3 contains no copy prevention technologies or watermarks. The labels claim that this technology will mean vast amounts of music piracy and possibly the death of the retail music industry. In order to "protect artists", the labels claim the proliferation of MP3 technology must be prevented. However, the "dirty little secret" is that the real threat lies not in the ease of piracy, but a redistribution of power within the record industry.
As Chuck D points out, "The labels invented the wild, wild West, and now that everybody's got a gun, what are they gonna do?" He believes this is causing the recent consolidation of labels in the industry. "The executives and legal and accounting [staffs]Öare finding ways to downsize and cash out before everything changes, and my attitude is, 'Fuck them all,' They are scrambling because this is something they know little about, and they are scared of it."
Chuck D is not alone. Tom Petty, Alanis Morissette, Rage Against the Machine, and the Beastie Boys have all had run-ins with their labels over their attempts to post MP3's on the web. However, established acts are just one faction in the revolution. Small independent online record labels will have the greatest impact on the industry.
Auslander Music Inc. will serve as a model for the new structure of the post revolutionary music industry. The Auslander model will redefine the relationship between the label and the artist. Auslander will utilize Internet distribution as well as traditional means to promote and establish the artist. This will be accomplished while maximizing both the artist's creative freedom and profit participation.
The music industry has made it a practice of abusing its position of power over the artist. Horror stories abound everywhere in the history of American pop music. For Example, Mick Fleetwood was forced into bankruptcy because of Fleetwood Mac's royalty structure. British Invasion bands, the Who and the Kinks litigated years to receive a reasonable portion of their publishing royalties. Sting received only 25% of his share of Police profits. Additionally, Elton John has been litigating for over 20 years in an attempt to regain some of his publishing profits. These major acts can afford to fight or are at least in a position to make future profits. Yet, the landscape is littered with smaller acts that were unable to litigate or otherwise defend themselves.
Record companies take advantage of this fact as a matter of policy:
Finally, the two most important pop music acts this century participated in only a small portion of the profits they generated. Elvis, "The King of Rock" was a peasant when it came to his relative earnings. As Marc Eliot noted, "[t]he man who sold more records than anybody else in history, who made thirty movies and played 700 sold out concert performances, died worth less than $7 million; about one week's donation to the Vegas crap tables for the Colonel [his manager]."
The Beatles did not fair much better with their record company. In the 1980's the Beatles finally settled an $80,000,000 lawsuit with Capitol Records over unpaid royalties. This was only one of countless lawsuits the Beatles have been embroiled in over the years. Eliot is correct when he points out that "[t]he difficult and financially tangled history of the Beatles represents the ongoing exploitation of rock artists that has been a part of the business form the earliest days of rhythm and blues."
Aside from outright theft suffered by musicians in the past, the modern industry standards amount to highway robbery. The following list of industry standards represents the most egregious attempts to deprive the artist of artistic control and participation in profits. This list of "Raw Deals" is by no means exhaustive but highlights some of the problems that the Auslander Music model will solve.
What happens when "Johnny Peasant" gets signed with a big Aristocratic label? Johnny Peasant signs a "recording contract" in which the Aristocrat hires Peasant on an exclusive basis to perform on a recording in order to make a "phonorecord." The label determines what will be on the record. *Wait* The Aristocrat determines what will be on Peasant's album. We normally think of an artist's album as the artist's album. As we can see, this is not the case. In order to work with the Aristocrat, Peasant must forfeit all creative control over the content of his album.
The Beatles with their infamous "Butcher Cover" protested this practice. Capitol Records (famous aristocrat) had made it a practice to provide different songs on its American releases than it's European releases. Thus, Revolver in England was not the same as Revolver in America. Capitol Records had in the Beatles' eyes "butchered" their albums.
Raw Deal #2
Note too, that the way these contracts are structured, the artist is simply a hired hand used to record his own music! The artist may retain composition/publishing rights but these are often forfeited to the Aristocrats in different ways at different times.
Raw Deal #3
The Aristocrat pays for all the costs associated with the recording, but these costs are considered "advances" against future royalties. Note here, how the nice old Aristocrat picks up the tab for all the production costs. Yet, Johnny Peasant is still on the hook for these incurred costs. What is really happening is that the Aristocrat is loaning money to Peasant so that he can make his album.
Of course, we just learned that it is really
not his album; so in effect, the Aristocrat is loaning Peasant money
so he can make the
Aristocrat's album. *Huh?* Seems like Peasant
would be better off borrowing money from a bank so at least he will own
what he is recording. Unfortunately, prior to the revolution, banks would
not loan Johnny Peasant the huge amount of money it would take to make
an album. Even if he had the money, how would he get it distributed?
Viva La Revolution.
Raw Deal #4
But, the Aristocrat pays Johnny Peasant something after all right? Well yes, this "something" is aptly called a "royalty." The royalty is a percentage of the suggested retail price less taxes and duties on records sold. This percentage is typically 7-12% of the retail price. Note, since Johnny Peasant is unknown, he will most likely not be able to bargain for more than 7%. Regarding foreign sales the artist receives a smaller percentage. Typically, the artist can only hope for 50% of his American percentage for world wide sales and perhaps 75% for Canadian or European sales. Therefore, instead of receiving 7%, Peasant only gets 3.5% on international sales!
Raw Deal #5
In calculating royalties, the Aristocrat first deducts a "packaging charge." This is the first of many examples of strange traditions that have developed to shrink the profit participation of the artist. As Donald Passman explains, "In theory, this is the cost of the 'package,' and it's deducted because the artist should get a royalty only on the record, not the package. In reality, it's a charge of much more than any package actually cost, and is thus only an artificial way to reduce the artist's royaltyÖthe industry norm is 20% for cassettes and 25% for compact discs and other 'new configurations.'"
To review, although most of us think of the package and cover art as an extension of the artist's expression, the cost of this portion is not part of the royalty calculation. Additionally, the artist has no say as to what is on the package (or expressed as cover art). Recall the "Butcher Cover" controversy, the Beatles had slipped the cover by on the American release of Yesterday & Today. Once the executives at Capitol became aware of the cover, they recalled the album and in some cases pasted over the original.
Raw Deal #6
The Aristocrats also deduct a certain amount from the units delivered, paying royalties on only those units sold. Usually 15% of records shipped are "normal distributor free goods" or as Passman calls them "phony free goods." They are "phony" because it is "just a cute way of discounting the purchase price." Thus, the Aristocrat deprives the artist of another slice of the pie.
Raw Deal #7
The payment to the artist is further delayed by the withholding payments on reserves. It is industry standard that the retail outlets can return 100% of the records shipped. The record company shifts the risk of returned albums to the artist via the "reserve." The Aristocrat withholds payment on 35% of goods shipped. The Aristocrat usually does not pay royalties on the reserve amount until two years after the shipment.
Raw Deal #8
Now it gets really ridiculous. Fifty years ago records were made of shellac and were therefore breakable. The Aristocrats began paying only on 90% of the shipment since 10% would arguably break during shipping. The Aristocrats honoring tradition refuse to take this out of the contracts. Thus, combining the effect of free goods and the breakage reduction, the artist is "paid on 90% (for "breakage") of 85% (of free goods)Öresulting in payment on only 76.5% of shipments!"
Raw Deal #9
"Advances" represent a bitter-sweet deal for artists. Remember that the Aristocrat pays for the recording costs which must be "recouped" from the royalties earned by the artist. Well, the Aristocrat will also pay an advance to Johnny Peasant. This sum is usually spent on champagne and hotel room repair bills. Peasant's hangover is even more unpleasant when he realizes that he owes the Aristocrat this sum to be paid out of his royalties. What happens when Johnny Peasant is paid a $100,000 advance and earns only $75,000 in royalties? Peasant owes the Aristocrat $25,000!
Raw Deal #10
Since advances are usually "nonreturnable", the Aristocrat stands to loose money if the album does not reach its recoupment. In other words, in the above example Johnny Peasant will (usually) not have to write the Aristocrat a check for $25,000. Rather, the Aristocrat will "cross-collateralize" the recoupment with future records (sometimes with publishing royalities!). Thus, if Johnny Peasant gets $100,000 for album number 1 and it earns only $75,000, and Peasant gets $100,000 for album number 2 and it earns $125,000, then the Aristocrat is made whole and Peasant neither makes nor owes anything ($0). Peasant's reward for earning royalties beyond his advance for album number 2 is to no longer (theoretically) owe the Aristocrat anything. O' lucky day.
Raw Deal #11
Since compact discs ("CDs") are considered newfangled technology, the Aristocrats pay a smaller percentage royalty on CD's. This is usually 75%-85% of the royalty for cassettes. Why do they do this? After all, the argument that the costs associated with the novelty of CD's warrants reducing the artist's royalties is wearing thin. Perhaps now is a good time to quote Arthur Levy, Columbia Record's national coordinator of publicity,"the bottom line is that the record company calls the shots because the record company is the bank. Which is why all the bands in the world want to sign with the major labels, no matter how free and independent their onstage image might be." In short, the Aristocrats do it because they can.
Raw Deal #12
It may surprise the reader that under the standard recording contract, the Aristocrat is not required to make Peasant's album. Under most contracts, the Aristocrat can pay the artist the minimum union scale for the album in lieu of making the album. If Johnny Peasant is not careful to specify that the deal is over under this scenario, then theoretically he can be refrained from going anywhere else and thus be held hostage without the benefit of having an album made.
Moreover, the Aristocrat is under no obligation
to release the album. Once again, Peasant can protect himself by
inserting a "guaranteed release" provision in the contract; but these contain
complicated notice provisions which can easily result in Peasant's losing
this right. Note, the provision does not require the label to release the
album, rather it simply provides an opportunity for the artist to void
the recording contract.
Raw Deal #13
The Aristocrats are usually under no obligation to keep Johnny Peasant on the company's "top line" label. This is important, if Peasant gets bumped to an inferior label within the company's family then Peasant will receive less promotion and sometimes a reduced retail price upon which royalties are based.
Raw Deal #14
Perhaps one of the most unfortunate scenarios is when a new artist, such as Peasant, signs with a label and gets little or no promotion by the Aristocrat . Often too, the label cools on an artist which was successful in the past. The artist who was once everybody's hero is now treated like a leper. When a major label takes an artist for granted this can be the "kiss of death" for his career. This is the most common horror story within the industry.
The fact is, the Aristocrat has complete discretion as to how much energy and resources it will put into an album's promotion. Peasant is at the mercy of the "shiny shoes" within the Aristocrat's organization. This represents one of the best incentives for signing with a smaller label and one of the best reasons to by pass the traditional labels altogether. Why take the chance on being shelved?
Raw Deal #15
Besides the risk of being ignored, the risk of perpetual options is a cause for great concern. Options within the standard contract maximize the Aristocrat's control over the artist while minimizing its obligation. It is standard for the Aristocrat to commit to only one album while maintaining the option to require the artist to produce up to 7 more albums! Options are never good for the artist. As Passman points out, "[I]f you're a flop, you'll never see the money; if you're a success, it will probably be less than you are worth."
Raw Deal #16
Another area in which the Aristocrat has too much discretion is in the "delivery requirements", which include the requirement that the album be "commercially satisfactory." If the Aristocrat does not like Johnny Peasant's album, then as Passman explains, "(a) at best, they send you back to the studio (at your expense), or (b) at worst, they take the position that you haven't delivered an album as required by the deal, and thus you're late and they can terminate the contract.
Raw Deal #17 (ad infinitum)
"Controlled composition clauses" are another example of how the Aristocrat abuses the artist. The artist may own the underlying rights to the composition of the songs on the "phonorecord" made by the record label. Normally, the artist would receive a statutory royalty for every "copy" of the song that is made. Yet, in the recording contract Johnny Peasant must license his composition rights to the Aristocrat at a discounted rate usually 75% of the statutory minimum. They get you coming and going.
There are many other examples of Raw Deals that are standard elements in the recording contract. Many of these can be contracted around but for the new artist the majority cannot. Suffice it to say, a record contract is not an invitation to freedom and fair play.
Finally, as if to illustrate how the Artistocrats have not changed their "get whatever you can" attitude, the major labels have been engaged in grabbing the domain names of its bands. For example, "when manager Cliff Burnstein recently brought Sony a new act called Crazy Town, he did so with the domain name crazytown.com already registered. Sony tried blocking the band from printing the name on the album cover. In protest, the group hastily recorded a song called "www.crazytown.com.'" Fortunately, by some strange luck the band's contract allowed them to keep the new song on the album.
Now that we know just how evil the Aristocrats
are, what are chances that they will be overthrown?
THE DIGITAL REVOLUTION
The Technology
The historian is hard pressed to find a revolution, which was not instigated by an advance in technology. The advances in digital recording technology have dramatically reduced the cost of producing a high quality "phonorecord." Both hardware and media prices have fallen through the floor compared to just twenty years ago. This has led to an increase in the number of studios available. Moreover, compact disc manufacturers and duplication services have proliferated in great numbers. All of these factors mean that one can make a master recording and have 1,000 compact discs pressed from $5,000 to $10,000! No longer must Johnny Peasant give up everything just to get an album made.
This has been the case for well over 10 years. Yet, the decreased recording costs, though welcomed, were hardly significant enough to cause a revolution. However, the Internet and compression technologies (in particular MP3) have provided the missing element to a full-blown revolution: distribution.
Most of the press surrounding MP3 technology
has centered on the ease with which pirating is possible with MP3 and the
industry's attempt to provide an alternative platform which secures copyright
protection. The labels claim that they are fighting the good fight to insure
that artists get compensated. But is this the real issue?
The Dirty Little Secret
Blair Hardman, owner and producer of the independent label Zone Music, was right on target when he noted that "MP3 is changing the whole shape of the music industryÖThe downside is that bootlegging is possible, but the upside is that artists can get their music out there without going through a record company." This is the real source of the Aristocrats' concern. Van Baker of Data Quest a San Jose technology consulting company argues that "while record industry concerns about piracy are legitimate, the bottom line for RIAA [the Recording Industry Association of America] and the small number of record labels which dominate the recording industry is that their business model -- and stranglehold -- is brokenÖAny small record label can distribute and promote on the Internet." Thus, the revolution begins.
But it is not only the smaller label, which will storm the Bastille. The Internet provides a unique opportunity for the individual to express himself and share his music. "Tons of independent artists who are recording music can now put their music out there," said Dane Jasper of Sonic.net, a Santa Rosa internet service provider, "[t]his is part of the social aspect of the Internet, the revolt from within. The Internet is empowering people to do things that corporations didn't allow them to do. If you're an artist, you can put up your artwork; if you're a musician, you can put up your music.
According to reporter Matt Peiken, "The net is leveling and crowding the playing field by knocking down most of the financial walls normally separating bands from fans. As Chuck D expounds, "[internet distribution] gets music across to the people, and the business is irrelevant. I'm happy to be a contributor to the bomb. The three R's (radio, retail, and record companies) aren't fucking with me anymore."
In fact, the digital revolution (like many other political revolutions in history) will enable the creation of an entirely new class of musicians: the middle class. According to publicist Hal Bringman of Los Angeles, "[the Internet] is creating middle-class musicians, when before you have starving artists and you had the Alanis MorrisettesÖ Now, there are bands who can sell just enough to make a decent living."
Note, the comments from the founder and director of MP3.com (a major faction of the revolutionary army) Michael Robertson, "[w]e talk about a new middle-class of musician emergingÖIf a band sells 20,000 CD's now, they go hungry. But if they can do that through the Net, that's $100,000 (through MP3.com) just on CD sales. You're not going to get on Top 40 playing surf rock or Celtic rock, but maybe now you can make a living." This is good news for the musician and the consumer.
Even newer artists with greater commercial potential are rejecting big label contracts in favor of the freedom and fairness the Internet provides. According to the Electronic Engineering Times, "[a]rtists care about copy protection, but their primary goal is to get the traditional label out of the music scene. They are pointedly rejecting lucrative contracts with major labels in favor of file-distribution deals with the likes of MP3.com and Audio Galaxy."
But the revolutionary army consists of more than just the "unknowns." Many established artists share's Chuck D's enthusiasm for being "contributors to the bomb." The Grateful Dead long time supporters of free concert recording and other liberal approaches to copyright have begun to provide MP3 recording on the internet. Alanis Morissette much to the dismay of her record company signed an agreement with MP3.com to support her concert in exchange for a percentage ownership in the Internet company.
Tom Petty in an act of defiance placed his new single on MP3.com for two days last spring before Warner Brothers forced him to take it down. The single was downloaded 157,000 times during the two-day period! Petty's insurrection was rewarded by providing him with 157,000 email addresses which will serve as potential leads for marketing his merchandise and promoting his tours (the artist's main source of income given his recording contract). Moreover, as reported in Bill Board magazine, "The Beastie Boys have been playing a game of 'cat and mouse' with Capitol Records by placing MP3 files of rare songs on their official site before being asked by the label to take them down."
No doubt, many established acts will follow Chuck D's lead and leave the Aristocrats as soon as they get the opportunity. "People are leaving the labels because they want to experiment in a way the labels won't," according to Marc Schiller president of a consulting firm for bands and labels.
But wait what about the piracy issue? Billy O'Connell the manager of Kristin Hersh of the Throwing Muses expressed it best, "[i]n my mind the [copying] issues are bothersome. But they've been there all along with cassettes. We all know better. I'm not speaking against copyright - we call make our money from song publishing. But it's also not the monster we think it is," or perhaps the "monster" the Aristocrats would have us believe it is.
In fact, people who one might think would be against MP3, such as the independent label Creation (home of the popular band Oasis), are coming out in support for the platform as the comments of Andy Saunders from Creation suggests, "obviously we survive on our copyrights. But we love the subversive morality of the open Internet." The revolution presents a paradigm shift, the importance of which goes beyond paranoia about copyright protection. The Aristocrats' greatest concern, as noted by the Los Angeles Business Journal, is that "digital distribution and marketing are the wave of the future, and the big labels will not be in control."
The fact is people will pay reasonable fees for MP3 downloads. The copyright concerns of the Aristocrats are merely a distraction, a manufactured emergency designed to get the government to act on its behalf to insure its continued control of the music industry. Indeed, the major labels are burning the Reichstag in the hope that the spectacle will distract the public and lawmakers from simple facts like the sales at MP3.com which continue to double on a monthly basis!
Although it is true that at first, the primary use of MP3 on the Internet was for bootlegged songs, the fact is, since the arrival of online music labels and other legal MP3 postings, the incidence of MP3 piracy has declined.
Steven Grady, an executive at the internet record label Goodnoise, is correct that "[t]he best thing to do to fight illegal MP3s is to make legal MP3s availableÖMost of these people are music fans, not criminals."
Once one becomes familiar with the artist's lack of participation in so-called "artist royalties" (as this paper has hopefully demonstrated) the Aristocrats' arguments against MP3 become laughable. Indeed, the disingenuous nature of the RIAA and the major labels' invocation of the "the need to protect the artist" in their attempt to lobby congress and the courtroom for restraints on digital technology is obvious to the informed.
How big will the revolution be? Well, according to Searchterms.com who monitors the most often entered search terms, the only term more popular than" MP3"is "sex." One struggles to think of a better indication of consumer demand.
However, the proliferation of hardware supporting MP3 is a good indication of consumer demand and no doubt will drive it as well. This Christmas one of the most popular presents under the tree will be the Rio Player from Diamond Multimedia. Selling for around $100, this portable device, about the size and weight of a beeper, allows the user to store MP3 files for his listening pleasure. Diamond Multimedia recently won a lawsuit brought by the RIAA attempting to hold the company liable for violation of the Digital Home Audio Recording Act. This proves to be a great victory in the digital music revolution, though surely not the last battle.
Moreover, MP3 related software is becoming very popular. As of April 1999, over 15 million copies of the popular MP3 player Winamp & Macamp have been downloaded. Van Baker of data quest is correct when he describes MP3 as nothing less than a "cultural phenomenon." Presently, MP3 is popular among college students and office workers who have access to large bandwidth. Yet, as cable modems and DSL become more common among the home users, the popularity of MP3 will explode.
Some estimate that online music sales will
reach 1 billion in three years. Some estimates are higher. There is no
way to know for sure. However, it can be reasonably assumed that it will
be big. The various MP3 related companies are already worth millions.
No doubt Wall Street will be a buzz with MP3 talk in the next year as investors
start throwing money at various startups.
THE AUSLANDER SOLUTION
So, it is obvious the revolution is coming, and that the Aristocrats will lose their heads. What will replace the old regime? May I humbly suggest a model for the new label for the digital millenium: Auslander Music Inc.
The above discussion of the individual liberation brought about by MP3 begs the question why Johnny Peasant need's a label at all? The answer lies in the characteristics of the Internet. The Internet allows everything to be heard creating a cacophony that can be maddening to the consumer. As Peiken explains, "Thousands of bands and solo artist you would otherwise never hear about -- nor perhaps want to -- are cramming their music onto the Net, hoping that you'll somehow stumble over it, taste it, like it, and against all odds buy it."
It will be important for bands to distinguish themselves from the other grains of sand on the beach. This will be accomplished through aggressive promotion and association with like genred bands. The associations can be in style, personality, geography, or anything else that works. But, the association will be key. Peiken rightly points out that "searching for artists by geographical location is the coolest part of MP3.com." Auslander Music Inc. is an opportunity to showcase the sound of Austin.
But more than just a label coming from the Austin land, Auslander will be true to it's name (which means "foreigner or stranger" in German) in that it will be an outsider to the traditional record industry and as such will re-write the rules.
The Auslander contract will re-define the relationship between the artist and the label. The goals are to create a model that will allow the label to be reasonably compensated for its services to the artist while maximizing both the artist's creative freedom and profit participation. Built into its unique structure is the incentive to aggressively promote the artist while NEVER putting its interest before the needs of the artist.
How is this possible? Quite simply, the Auslander contract removes any conflict of interest that might otherwise arrive in traditional relationships. Under the Auslander structure, the label is encouraged to allow the artist to leave if he is given a better opportunity. In fact, the label has no choice in the matter!
As will be explained, the only risk to
Auslander is if the artist makes a poor career choice such as leaving for
an under performing label. However, this is a reasonable risk to share
with
the artist.
The Contract
Perhaps what is most significant about the Auslander Contract is what is not in it. Its simplicity should be startling to the entertainment lawyer and encouraging to the suspicious artist. The contract avoids all of the "Raw Deals" cited above:
(1) It begins with a 50/50 revenue sharing between Auslander ("Label") and the artist for all Internet related distribution.
This is based on gross revenues; therefore the artist gets 50% of the earning right off the top. There is no room for the creative accounting that normally accompanies net profit deals. The Label worries about paying for Internet promotion and otherwise keeping the lights on.
(2) The contract assumes delivery of a finished phonorecord. The Label pays for marginal costs of physical CD production.
This allows for the artist's complete control of the production of the phonorecord including studio costs and cover art development cost. This also means that the artist has complete control over its content! Usually the Label can work a separate production deal or perhaps a rich uncle can pay for it. However with production costs so deflated, it is no longer a problem for an artist to provide his own phonorecord and again it is in his best interest to do so. Note too, this also avoids the problem of the "advance" and all of its subtle evils.
(3) The Label receives 20% ownership/participation in all rights associated with the songs for three albums.
In exchange for it's promotion and marketing via the Internet (and where ever else it can afford to), the Label gets a piece of the intellectual property associated with the phonorecord. This includes all publishing, performing, and synchronization rights et cetera. This is designed to be a clean way to compensate the Label for its efforts to make the album and the artist valuable. By having a one time "swap" the Label does not risk a loss of its investment if the artist leaves the Label after having been made famous by the Label's efforts. The structure is in the spirit of the manager's contract designed to be across-the-board and simple.
(4) The Label licenses its interest in the mechanical royalties associated with all Internet sales.
This avoids the "double dipping" that would otherwise take place. Since the artist owns the sound recording, they do not have to pay themselves for the use of the underlying musical work. However, if the Label owns 20% of the underlying musical work the artist would have to pay the Label for all the CD's & MP3s sold. This plank avoids this messiness.
(5) The artist and Label share in the revenues on a 50/50 basis with any distribution agreements set up by Label for traditional "brick and mortar" stores. All non-internet distribution agreements must be agreed to by the artist.
This allows for traditional distribution. However, it requires that the Label work to establish these distribution channels. If the artist is able to establish his own distribution agreements, then the Label only receives royalties related to the 20% ownership of all associated intellectual property.
(6) In the event that the artist signs with a traditional label ( an Aristocrat) then a) the Label releases it's internet distribution right, b) the Label retains 20% across the board ownership of rights associated with albums made and remaining albums to be made under the term, c) the rights in the sound recording in any remaining (unmade) albums are 20% of the artist's share. d) the Label gets 20% of any advance not associated with the recording costs paid to the artist by the new (Aristocrat) label.
Item "c" avoids the problem associated with the advancement and recoupment issues that exist with a traditional contract. The Label gets paid when the Artist gets paid. Also, the Label participates in any advances given to the artist so the Label carries no recoupment risks.
(7) There will be a "honeymoon" period of _________ where in which either party can void the contract. If the artist chooses to exercise this option then he agrees to pay liquidated damages of ___________ to Label.
This insures that both parties are satisfied with their relationship. It further insures that the Label will receive reasonable compensation for its investment during the period prior to termination. The actual terms will depend on the parties involved and the amount the Label plans on investing in the promotion of the artist's album.
Note, there is no "group provision" that would apply to the scenario of a break up. If the group breaks up it and reforms under a different name -- so be it. In the music industry the goodwill associated with the name is everything. To the extent that the Label promotes the name the Label has ownership in the first three albums made under that name. Besides, if the Label is doing its job the band members will not have an incentive to disband in order to avoid completion of the contract.
This contract serves the purpose of providing
all the right incentives and fair compensation to the record label for
it's services to the artist and the promotion of his music. It is no more
complicated than necessary to provide a means for this relationship without
taking advantage of the artist financially and without interfering with
the artist's creative control over his music and his career.
THE CONCLUSION
The Co-option
As I mentioned in the introduction, the revolution will one-day be co-opted by the "powers that be." This is inevitable. In every system power eventually consolidates. Many things will push this consolidation of power. The record industry will consolidate by buying all the independents, such as Auslander, that fought in today's revolution.
But their power will be fleeting. As long as the individual has access to the Internet he or she has the ability to get their music out there. The cycle continues but the generations are shorter. The independents shake things up the corporate buy them out and screw things up, which paves the way for the new independents.
The future revolutions will be fought over quality and price as the cycle described above plays itself out. Yet, today's revolution will be the most important. This is the one, which liberated the musician financially and artistically. In any business, economy, or system once the people gain the power the quality and ingenuity of their creations explode exponentially...get ready for the explosion.
Special thanks to Ray Davies for informing
us about the man. Special thanks to Donald Passman for telling us
how the man works. Special thanks to Chuck D for showing us that
we don't need the man.