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Courtney Love does the math

The controversial singer takes on record label profits, Napster and "sucka VCs."

By Courtney Love
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June 14, 2000 | Today I want to talk about piracy and music. What is piracy? Piracy is the act of stealing an artist's work without any intention of paying for it. I'm not talking about Napster-type software.

I'm talking about major label recording contracts.

I want to start with a story about rock bands and record companies, and do some recording-contract math:

This story is about a bidding-war band that gets a huge deal with a 20 percent royalty rate and a million-dollar advance. (No bidding-war band ever got a 20 percent royalty, but whatever.) This is my "funny" math based on some reality and I just want to qualify it by saying I'm positive it's better math than what Edgar Bronfman Jr. [the president and CEO of Seagram, which owns Polygram] would provide.

What happens to that million dollars?

They spend half a million to record their album. That leaves the band with $500,000. They pay $100,000 to their manager for 20 percent commission. They pay $25,000 each to their lawyer and business manager.

That leaves $350,000 for the four band members to split. After $170,000 in taxes, there's $180,000 left. That comes out to $45,000 per person.

That's $45,000 to live on for a year until the record gets released.

The record is a big hit and sells a million copies. (How a bidding-war band sells a million copies of its debut record is another rant entirely, but it's based on any basic civics-class knowledge that any of us have about cartels. Put simply, the antitrust laws in this country are basically a joke, protecting us just enough to not have to re-name our park service the Phillip Morris National Park Service.)

So, this band releases two singles and makes two videos. The two videos cost a million dollars to make and 50 percent of the video production costs are recouped out of the band's royalties.

The band gets $200,000 in tour support, which is 100 percent recoupable.

The record company spends $300,000 on independent radio promotion. You have to pay independent promotion to get your song on the radio; independent promotion is a system where the record companies use middlemen so they can pretend not to know that radio stations -- the unified broadcast system -- are getting paid to play their records.

All of those independent promotion costs are charged to the band.

Since the original million-dollar advance is also recoupable, the band owes $2 million to the record company.

If all of the million records are sold at full price with no discounts or record clubs, the band earns $2 million in royalties, since their 20 percent royalty works out to $2 a record.

Two million dollars in royalties minus $2 million in recoupable expenses equals ... zero!

How much does the record company make?

They grossed $11 million.

It costs $500,000 to manufacture the CDs and they advanced the band $1 million. Plus there were $1 million in video costs, $300,000 in radio promotion and $200,000 in tour support.

The company also paid $750,000 in music publishing royalties.

They spent $2.2 million on marketing. That's mostly retail advertising, but marketing also pays for those huge posters of Marilyn Manson in Times Square and the street scouts who drive around in vans handing out black Korn T-shirts and backwards baseball caps. Not to mention trips to Scores and cash for tips for all and sundry.

Add it up and the record company has spent about $4.4 million.

So their profit is $6.6 million; the band may as well be working at a 7-Eleven.

Not to say this doesn't really happen, but is Courtney Love really qualified to do math? I'm not sure she is even qualified to sing.

Putting out so much crap is why the record industry is in the :john: ,it doesn't have anything to do with the so-called pirates. If they focused on quality and stopped releasing CDs by everyone who wants to make one, they could lower the prices and still increase margins by reducing the overall costs.

She actually makes some good points. Can't believe it came from "Hole".

She probably made some good points BUT, as far as her math goes:

20% royalty from a CD that costs $17.99? That's not $2, that's $3.60.

Quote:That leaves $350,000 for the four band members to split. After $170,000 in taxes, there's $180,000 left. That comes out to $45,000 per person.

Those are some steep taxes. I've got news for her...that band wasted their $25K on their business manager. Sheesh, go to H&R Block and you'll do better.

Quote:That's $45,000 to live on for a year until the record gets released.

I don't know the terms of their contract, but shouldn't they be performing or something? If this is a year after completed production, they they can *gasp* work for that year. If it includes the record production, then they just got $45K (well more actually) for that 6 months, and they can *gasp* work for the next 6 months.

Quote:The two videos cost a million dollars to make and 50 percent of the video production costs are recouped out of the band's royalties.

Presumably, someone gets royalties for the airing of the videos. Here is an area that gets fuzzy b/c most of us aren't privvy to real contracts. Where did that money go?

Quote:The record company spends $300,000 on independent radio promotion. You have to pay independent promotion to get your song on the radio; independent promotion is a system where the record companies use middlemen so they can pretend not to know that radio stations -- the unified broadcast system -- are getting paid to play their records.

Ok, so "Payola" isn't dead. No surprise there. But, once again, royalties are derived from this airplay. Who gets that money?
If the band sees none of these royalties then why doesn't Love spell that out clearly? That's a huge travesty, that should enrage people. If the band does get some of those royalties then her math is off once again.

Honestly, this doesn't help the situation, b/c it's not reality either.

BTW, if you want to see a great response to the structure of the recording industry,

Check out this month's Inc. magazine...the "Global Entrepreneur" section. I'll try to remember to post a link when it's available on line.

DrTorch Wrote:Those are some steep taxes. I've got news for her...that band wasted their $25K on their business manager. Sheesh, go to H&R Block and you'll do better.

I don't know the terms of their contract, but shouldn't they be performing or something? If this is a year after completed production, they they can *gasp* work for that year. If it includes the record production, then they just got $45K (well more actually) for that 6 months, and they can *gasp* work for the next 6 months.

Presumably, someone gets royalties for the airing of the videos. Here is an area that gets fuzzy b/c most of us aren't privvy to real contracts. Where did that money go?

Ok, so "Payola" isn't dead. No surprise there. But, once again, royalties are derived from this airplay. Who gets that money?
If the band sees none of these royalties then why doesn't Love spell that out clearly? That's a huge travesty, that should enrage people. If the band does get some of those royalties then her math is off once again.

The label has their own manager that you are forced to use.

Are you seriously falting the artist for needing to work again that year given how much the RIAA took out of that deal?

The money went to the RIAA no doubt. The tax consumers pay on CD burners.. you know, the one to help those starving artists? The artists haven't seen a DIME of it yet.

Once again -- smells like RIAA backpeddling to me. I know for a fact if it's a ClearChannel station, it's going to the RIAA.

She isn't the only one who has this sort of math. Read this by the producer of Nirvana's "In Utero" album.....
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