S.A. Sebastian: A View From The Bottom

The RIAA is at it again, this time acting in the best interest of the recording artists. What’s happening now is that, on one side the RIAA is teaming up with the Music First Coalition saying that artists should get a performance royalty for radio play, while on the other side, they are saying that the current mechanical royalty rate of 9.1 cents per song paid out to songwriters against album sales, is much too high. The coalition of record labels wants to lower rates to as little as 5 cents per song per album sold, a rate that hasn’t been seen since the 80s.

According the Copyright Office the mechanical royalty rate was fixed at 2 cents per song sold from 1909 until 1977! That’s almost 70 years of the price of albums and tapes (even 8-tracks!) going up, but the payment to the songwriter staying the same.

The important thing to note is that this rate is paid to the people that write the songs, not the performers, and many times not the “artist.” so, for example, Britney Spears puts out a record, she gets a recording advance against record sales of several hundred thousand dollars, plus she gets paid 10-20% of album sales (depending upon the negotiated rate in her contract). That’s between $1-2 per album sold, while the songwriter gets their 9.1 cents per song per album. It is often the case with band’s like Atomic Brother, where the songwriter is the artist, so we would get the songwriter royalty and a percentage of album sales. Also, the songwriter usually splits their royalty 50/50 with a publishing company, which in many cases is the record company. So that 9.1 cent rate is halved to about 4.5 cents.

What does the record company get? All the rest! That’s a big hunk of pie leftover that they are crying about. What do you think is fair? Are the songwriters being burned? Is this really in the best interest of the artist?

The last couple weeks have been real interesting with Radiohead announcing that they would be self-releasing their latest album, In Rainbows, and Trent Reznor telling people to steal his music and that he wants out of his contract. Finally the Radiohead album is out this morning and so is Reznor, he’s free of his contract with Interscope. So, has there been any fallout yet? You bet there has.

According to Billboard thousands have been downloading the new Radiohead album at an estimated voluntary price of £5 GBP. That’s right, voluntary price. Radiohead left it up to the fans to decide how much they would pay for a digital version of the album. According to Yorke, “The wonderful [thing] is that the consumer can decide how much a download is worth,” he added. “I’m not sure how much just a digital download is worth. I’m not sure 79p - the iTunes price - is the right price.”

This has prompted the following response from Guy Hands, from Terra Firma, the group that purchased EMI, “”a wake-up call which we should all welcome and respond to with creativity and energy.” He goes on to ask, “Why should [superstar acts] subsidize their label’s new talent roster – or for that matter their record company’s excessive expenditures and advances?”

Trent Reznor has said if could break free of his deal he would sell his CDs for as little as $4 USD. Now we wait and see what Trent is going to do. It is unsure when Trent will release a new album, especially since Year Zero is still fairly new, but Billboard says, “Billboard understands Reznor, in keeping with past practices, will not decide how to actually release, market and promote the next album until the music is finished.”

What does this mean for bands like NIN and Radiohead? It might mean a drop in sales, but it means a much higher profit margin, and less dependence on touring and merchandise sales to make a living. What a lot of fans don’t know is that while many bands get fronted thousands to millions to record an album, most only make 10-15% of 90% of the retail sales. That advance money gets paid back before they can make any money, and it gets paid back based on those percentages, not overall sales. So they get closer to 100% of the profits, but it also means that they incur the costs of recording, marketing, promoting and manufacturing and anything else the label would pay for.

What does this mean for the labels? If more big bands follow suit, then they won’t have those large album sales dollars to fund their infrastructure, and won’t be able to support signing new artist that currently lose them money. It could mean labels take even less chances with breaking new artists than they do now because they won’t have the money to invest.

What’s this mean for the rest of us? Who knows, but it’s definitely going to be a very exciting time to be in the music industry as things get further shaken up.