Royalty Pain in the Butt

I’ve been reading through more of Shane Simpson’s Music Business (for Australia and New Zealand). For me, it’s been real eye-opener lately.

You see, apart from financial support from family, a couple of loans from the government and a few shares, I’ve only ever had one form of income stream: working for a salary, whether it’s based hourly, bi-weekly or monthly. (I’ve been a teacher, customer service representative, administrator among others).

The concept of earning money from royalties and copyright is an alien concept to me, but I’m finding it fascinating.

And I’m a bit of a creative person myself -played in a band, been doing cartoons -but I’ve never made a dime from my creations, unless you include the $5 earned from the pub head-count on drinks when my band performed back in the 90s ($20 split 4 ways). Those were the days.

But that’s not exactly true. I’ve used my creativity for lesson plans and materials in teaching -especially English as a foreign language in Asia. But the work put in creating materials and cartoons and activities was rewarded financially for that hour only -and technically the school owned the materials that I had created according to the contract. But what was I going to do with posters of cute cartoon characters teaching the present simple?

The whole idea of copyright and royalties is completely different. You can’t say “I’ve done X amount of work, and therefore should get X dollars”. That’s totally meaningless. I’m like the millions of others around the world who like to create. It’s a form of self expression and something I enjoy, but I can’t say to anyone: “look, I’ve written this many songs, I should be compensated.” Can you imagine the 4 million or so songwriters around the world expecting to get paid per song or hour?

And so the idea of being compensated for one’s creative works is based upon marketing, promotion and demand for those works. And so you’re compensated for every CD, tape, record, book and broadcast made of your work, even if it’s ever so slightly per item.

And it’s this concept that makes the music record business such an involved, dicey affair. I never needed a lawyer to sign my contracts to work as a teacher, but if you’re signing with a record company, you’re going to need a lawyer, and a specialized one for the music business at that.

The great thing about Shane Simpson’s hefty volume is that it goes into details about some of the traps or clauses that could cost an artist thousands or hundreds of thousands in potential income -you could say ‘the devil is in the details’.

A basic example is the royalty rate an artist is due -the rate may look attractively high, but it makes a difference if it’s based on the wholesale price or the retail price. That could make a difference between $2 to $3 per CD -may not seem much, but that’s %33 difference and a lot of money when 200 000 CDs are sold.

Not only that, contracts may include ‘packaging deductions’ off the royalty base, reducing the amount you can claim a royalty percentage by up to 25%. So if your royalty rate is 15%, You might think you’re getting 15% of a $27 CD (if GST is taken out), when in fact you’re only getting 15% of $20 or thereabouts. Bummer dude!

But wait, there are more catches! Depending on what’s stated in the contract, the record company may exercise a right to use your CDs as promotional CDs to give to retail outlets, and therefore claim you can’t be paid royalties on those CDs. This could be in things like: give a dealer 12 CDs for the price of 10 to entice him to buy more CD’s from the record company. If you’re not protected in the contract, it could be your CD’s given away, to promote the other artists in the company.

So, what’s a few promotional CDs, you may ask? Well, from what I’m reading in Simpson’s book, artists can get screwed on both sides – reduced royalty base on the one hand, and items recoupable on the other side. That is, items the record company can recoup from your royalties for things like recording and touring.

But that’s where you need to check your contract. What if record company executives can recoup their daily taxi fairs and fancy dinners from your royalty income. That means you may see a royalty statement for years of what’s technically paid to you, but you never actually see the money.

It’s enough to make you want to go DIY all the way.


studio slave


%d bloggers like this: