How The RIAA Screws Artists With Creative Accounting

Ernesto
July 8, 2011
41
RIAA
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riaa Yesterday we posted an article about the Swiss IFPI boss who quit following fraud allegations.

In the U.S. the RIAA is not a stranger to creative accounting either, although they do stick within the boundaries of the law.

In an excellent video titled “How To Sell 1 Million Albums and Owe $500,000″ lawyer Martin Frascogna explains how the record labels screw over artists with sneaky contracts.

The “breakage fees” are a good example. Somehow the RIAA believes 10% of all MP3s “break,” just like vinyl records did decades ago.

Really?

More below.. via Techdirt.

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Anon

Then what the fuck is the point of publishing your music with these companies? A big loan? And was it always like this?
- http://tinyurl.com/ANoiXioNA-personal-info ANoiXioNA
  
  yea it is… and always was.
  
  It’s worse if your music sounds like a top artist…. (competition)
  
  They give you some money…. that you cant pay back…
  Then keep all the music you make…. never releasing it for sale….
  
  All so they can kill the competition of the artists they spend millions on……
  
  They have been doing it for years…..
- Anon
  
  It was once said that signing a record deal was akin to swimming through an Olympic pool full of shit and garbage and then doing it again just to prove how much you want the ball and chain known as the contract wrapped around your neck
- Quest
  
  There is a new link: http://youtu.be/NcwgdB0NltY
  
  The old one is no longer active
http://twitter.com/icanhazsake Ninja

Cool! Great to see this here TF!

Those morons wanna give us moral “you wouldn’t steal a car” lessons and keep moaning about how we rob artists and hinder creativity.

Send ‘em a message: “Care to explain how this will encourage small artists if it rips off even the bigger ones?”
- Guest
  
  Do not kid yourself, WE do not decide which artist we love, the RIAA tells us which music we like and which artist we love!
  
  It seems to me that these contracts apply more to new artists who are trying to break through. I guess that when you become big enough, you can probably get a lawyer on your side and fight for a better contract because in the end the music industry does not make money if the artists don’t make songs.
  
  My take on this is that new artists are forced to “pay their way in” and that being taken advantage of in the beginning is the price to pay in order to become famous through the music industry.
  
  Before the internet, the RIAA used to control WHO would play on the radio as well as WHO would play in that stadium and WHO would be advertised in which newspapers, then new artists had no choice but to take it up the backside on their first album in order to get those benefits.
  
  That neabled the RIAA (and still deos) to DECIDE which artist would become popular and which artist would die in poverty.
  
  This is probably why the RIAA is so afraid of the internet, youtube, P2P and alternative ways of marketing music. If the RIAA members lose their stronghold on WHICH ARTIST will make it and WHICH will not, their would be no way for them to impose such unfair contracts on new artists. If the RIAA loses control on the distribution on music, their entire business model goes down the drain and so will their profits.
  
  All of you and all artists and lawmakers must realize that this is MODERN day SLAVERY! If you worked at McDonald’s flipping burgers, the current laws would protect you from such criminal contracts. Funny that as an artist, you don’t enjoy such protections!
- Guest
  
  Do not kid yourself, WE do not decide which artist we love, the RIAA tells us which music we like and which artist we love!
  
  It seems to me that these contracts apply more to new artists who are trying to break through. I guess that when you become big enough, you can probably get a lawyer on your side and fight for a better contract because in the end the music industry does not make money if the artists don’t make songs.
  
  My take on this is that new artists are forced to “pay their way in” and that being taken advantage of in the beginning is the price to pay in order to become famous through the music industry.
  
  Before the internet, the RIAA used to control WHO would play on the radio as well as WHO would play in that stadium and WHO would be advertised in which newspapers, then new artists had no choice but to take it up the backside on their first album in order to get those benefits.
  
  That neabled the RIAA (and still deos) to DECIDE which artist would become popular and which artist would die in poverty.
  
  This is probably why the RIAA is so afraid of the internet, youtube, P2P and alternative ways of marketing music. If the RIAA members lose their stronghold on WHICH ARTIST will make it and WHICH will not, their would be no way for them to impose such unfair contracts on new artists. If the RIAA loses control on the distribution on music, their entire business model goes down the drain and so will their profits.
  
  All of you and all artists and lawmakers must realize that this is MODERN day SLAVERY! If you worked at McDonald’s flipping burgers, the current laws would protect you from such criminal contracts. Funny that as an artist, you don’t enjoy such protections!
  - http://twitter.com/icanhazsake Ninja
    
    Sad but true. I couldn’t care less about charts or the radio nowadays. All set up to play whoever they want.
    
    I listen to a station that has a nice selection of less known songs that appeal to the general public while I’m with others and my own phone with shitloads of mp3 I downloaded (along with – WOW – bought material).
    
    It’s sad you MUST resort to the internetz and p2p to find good music.
    - Trololol
      
      All the good music I find comes from watching Guardsman Bob’s League of Legends stream XD
  - http://twitter.com/icanhazsake Ninja
    
    Sad but true. I couldn’t care less about charts or the radio nowadays. All set up to play whoever they want.
    
    I listen to a station that has a nice selection of less known songs that appeal to the general public while I’m with others and my own phone with shitloads of mp3 I downloaded (along with – WOW – bought material).
    
    It’s sad you MUST resort to the internetz and p2p to find good music.
- Lol
  
  If I could steal a car, but the car would still be there for the original owner (i.e. copying it), I think everyone would… so YES – I would steal a car. :D
  - http://twitter.com/icanhazsake Ninja
    
    Oh yeah, I would too. And I’d give my money for the maker for ‘no reason’ if the car was good. Or I’d delete it if it was bad.
  - http://twitter.com/icanhazsake Ninja
    
    Oh yeah, I would too. And I’d give my money for the maker for ‘no reason’ if the car was good. Or I’d delete it if it was bad.
  - Honest
    
    Your analogy is not accurate. It would go more like this:
    
    A person invents or creates a unique car that people seem to like, and has a method of creating an exact reproduction of that car, and relies on the sale of that reproduced car to pay his mortgage, buy food, put his kids through college, etc… and you come along and steal the car without payment, rather than creating your own car… that would be wrong. Simple.
    - http://www.creativebarcode.com M J Horn
      
      100% correct.
      
      The same applies across the entire creative industries. People forget that Creators only earn money from their work if it is ‘bought’ by others who benefit from their work – whether music, photography, design, fashion, film and so forth.
      
      If their work is just copied or lifted and no-one pays – all Creators and their families will struggle. And eventually, it will demotivate Creators to the point no-one will benefit.
      
      Just be fair – if it is not yours, ask permission to use or pay for the product or piece of work that you like enough to want to own.
      
      See http://www.creativebarcode.com – a not for profit company that is trying to deal with this issue for the design and broader creative industries industry worldwide – where businesses can often misappropriate creative works for their commercial gain at the expense of the Creator.
    - http://www.creativebarcode.com M J Horn
      
      100% correct.
      
      The same applies across the entire creative industries. People forget that Creators only earn money from their work if it is ‘bought’ by others who benefit from their work – whether music, photography, design, fashion, film and so forth.
      
      If their work is just copied or lifted and no-one pays – all Creators and their families will struggle. And eventually, it will demotivate Creators to the point no-one will benefit.
      
      Just be fair – if it is not yours, ask permission to use or pay for the product or piece of work that you like enough to want to own.
      
      See http://www.creativebarcode.com – a not for profit company that is trying to deal with this issue for the design and broader creative industries industry worldwide – where businesses can often misappropriate creative works for their commercial gain at the expense of the Creator.
    - http://twitter.com/icanhazsake Ninja
      
      LOL? I copied the car. No stealing here. I gave him money because the car was awesome. Profit! I’m using the car for personal uses, no money made over it so it’s non commercial sharing ;))
      
      If things were so bad that creating wasn’t worth then why the Android Market is so damn full of good and free apps?
      
      You two failed ;)
    - http://twitter.com/icanhazsake Ninja
      
      LOL? I copied the car. No stealing here. I gave him money because the car was awesome. Profit! I’m using the car for personal uses, no money made over it so it’s non commercial sharing ;))
      
      If things were so bad that creating wasn’t worth then why the Android Market is so damn full of good and free apps?
      
      You two failed ;)
    - http://www.creativebarcode.com M J Horn
      
      Ninja – your naivety astounds. You didn’t pay for the car in your former post – you took it without permission and laughed. No concept of the value to the person you took it from.
      Why is Android so full of great Apps you ask? – well it’s new and most producers are being rewarded commercially and/or are providing App download legally through a small $payment price or free via Apple and other stores and sites. Their choice of terms.
      
      Choose to copy from them or download illegally and cheat the talented people and be smug about it – fair enough but be true to yourself.
      
      Don’t rejoice and believe you got one over on a profit making corporate. You got one over on an individual talented person and their rights to earn something from what they produced, that you couldn’t and that you valued enough to download. So stealing cheats the individual Creators and by default, their family.
      
      What do you do to earn a living? Whatever it is – let us all have it for free without your permission or remuneration.
      
      Most people in this discussion group are talented, honest, individual Creators not faceless corporates
      
      Did we two lose? No, we never even entered your self-invented competition, so how could we?
      
      We stated ethics and honesty as our preffered way of approaching the subject and our choices in life. You can do the opposite – its your prerogative but don’t co-join us in your life choices.
    - http://twitter.com/icanhazsake Ninja
      
      @Horned guy:
      
      Now where to start crushing your flawed arguments?
      
      “…you took it without permission and laughed.” No I didn’t take anything. I copied. And I paid a fair amount. No raw materials were used in the process of copying. Anyway, it was just some funny analogy because comparing physical goods to digital stuff is not quite right exactly because there’s a limiting factor to the physical goods that’s the raw material used in the manufacturing process. Actually it’d be nice if we could ‘download’ cars and do long run tests to see if they are really worth paying when we felt it was worth. But that’s another story.
      
      “..well it’s new and most producers are being rewarded commercially and/or are providing App download legally through a small $payment price or free via Apple and other stores and sites.” Funny, I own an Android phone and I plan to root it at some point to install cracked apps. Still, at prices as low as $0,99 and free versions of the same program that give about the same experience than the paid one I haven’t felt the urge to install anything illegal so far. That doesn’t mean I won’t do in the future and even if I do it doesn’t mean I’m not supporting the developers from apps that are worth the money. I always do it.
      
      “Choose to copy from them or download illegally and cheat the talented people and be smug about it – fair enough but be true to yourself. ” I am true to myself. I download like crazy. And I spend more than I would like in the originals of stuff I’ve downloaded. I don’t “cheat” talented ppl. I prevent opportunist idiots pretending to be talented ppl from cheating me. I also do reasonable spending of my earnings. Unfortunately I have to eat so I have to be selective and buy what fits to my earnings. Sorry if I can’t support all the freeload ‘talented ppl’ that happen to be in my downloaded folder.
      
      “Don’t rejoice and believe you got one over on a profit making corporate.” Oh no, this article along with several other examples show that the corporations in question are also fucking up the TRUE talented ppl. So, even if I DID cheat on those ppl, I wouldn’t be the only one =) Difference is MAFIAA does it legally. Actually, I’m rethinking my spending and now I give full priority for direct donations to the artist whenever possible.
      
      “What do you do to earn a living? Whatever it is – let us all have it for free without your permission or remuneration.” If it’s bad I won’t even release to the public, I don’t expect to earn anything for a bad work. Actually I’ve done several jobs where the any earnings were bind to the end result. And, wow, ppl pay MORE than you ask if you do a good job. So, I don’t work expecting remuneration. I work to deserve what I earn.
      
      “Most people in this discussion group are talented, honest, individual Creators not faceless corporates.” Yes, and quite a few of those talented creators happen to agree with me.
      
      “Did we two lose? No, we never even entered your self-invented competition, so how could we?” Learn to read. I said you failed in adding any good argumentation to the discussion. And you failed twice now.
      
      “See http://www.creativebarcode.com.. (trimmed)” Oh, now we are talking about it. COMMERCIAL use you say. File sharing is NON-COMMERCIAL USE. Hopefully those bar code guys will solve this problem: http://www.techdirt.com/blog/wireless/articles/20110708/16213815026/patents-as-theft-how-oracle-microsoft-seek-to-profit-android-despite-having-nothing-to-do-with-it.shtml
      
      And Mr Horned Guy:
      http://www.techdirt.com/articles/20110625/19243714865/trolls-town-drunks-internet.shtml
      Please, you are making assumptions about me much like MAFIAA assumes all sharers are freeloaders that pay for nothing. The educated TF readers know this is bs. I would smack your face with several recepits from original goods I’ve downloaded but I don’t think it would matter if you are truly extremist as you sound.
    - http://www.creativebarcode.com M J Horn
      
      OK @ninga you made your point.
      
      Ironically, I think we might be more on the same side than these posts reveal.
      
      Particularly your last paragraph – I agree. The issue we Creators face is that it is the corporates we consider to be unfairly exploiting the Creators.
      
      One recourse taken by many is to try to stem unfair profits by not paying for product and finding free and pirate downloads. Of course as the video shows, the first person picking up that tab is the honest Creator.
      
      So Ninga, as a Creator possibly affected by this, I can empathise with your anger.
      
      I have been personally affected by sharp practice as an innovator, as have many of my peers, which lead to the Creative Barcode mechanism solution/launch for designers and visual artists created, at own expense, by designers and innovators.
      
      We are not a corporate or government organisation – we are a not for profit created by Creators for Creators.
      
      As such we know, feel and are trying to address the pain in a positive way.
      
      I appreciate you are a maverick – I have some of those tendencies myself – however, I have had to curtail them to try to achieve positive change for the better, for all. It’s just my mission and my job.
      
      Best regards
    - http://twitter.com/icanhazsake Ninja
      
      Maybe it was a bad choice of words from both sides. Hopefully you got my point. It’s not about getting everything for free. It’s about sensible spending on something that’s not needed for basic survival and on what is truly worth that money. Unfortunately much more content is produced than any of us can pay for and a good portion of this content is of questionable quality.
      
      I’m not naive to the point of believing all ppl that share files are good guys that will do their best to pay for what is worth their money. There are the ones that draw a bad picture for the file sharers. I believe they are not the majority and that’s precisely why I strongly disagree with the current copyright laws and that non-commercial sharing should be completely legal.
      
      I’m the owner of a respectable amount of CDs and DVDs (ironically I haven’t bought many digital tracks yet due to the lack of availability and abusive prices in my country). Much of this content was downloaded either before or after I bought them (yes, I download because it’s easier than ripping and I prefer not to use the original DVDs to keep them as clean and well cared as possible). And yet in the eyes of the MAFIAA I am a criminal. I am only lost sales.
      
      And Mr Horn, do not be naive from your part too. I’m not the only one. Most of my friends do the same. Some of them even buy PHYSICAL pirated content and then the originals for the ones that are really worth it. I completely condemn the act of buying physical media with copyrighted content because many factors such as but not limited to organized crime involved. However he did buy the original so what can I say against them? I do have one friend that believes he’s entitled to everything for free. But he’s what, 1 in 20? How is 5% for a percentage? Is it worth treating every1 as criminals? Why not provide services and experiences that no ‘pirate’ copy can do?
      
      When you and others come with the assumption that all of us file sharers are criminals and that downloading is theft you fail to grasp the true essence of the whole thing. Downloading might be considered theft if (and that’s a huge IF) the downloader doesn’t have any intention of buying ANYTHING he downloads, including what he’ll always use or what he likes to the point of watching/listening several times. Even if you consider this to be theft, will you criminalize everybody because of this single individual.
- Anonymous
  
  Wow this is what you sent me haha!! Well you know what? One way of framing the industry is posting this all over the web.Sending this to senators telling torrent sites to have this posted on their sites, and if this video gets deleted just make copies and blow this up all over the web.They want to talk so bad about how ~~pirates~~ I’m sorry filesharers are the bad people.
  As I always say “KARMA”.Eventually it will bite them right back in the ass!!! Where there is no sunlight there is evil, where there is greed there is desperation.
http://www.facebook.com/people/Zack-Nelson/1287355169 Zack Nelson

The lucky ones only lose money to majors. The one thing that really pisses me off is the fact that some artists end up surrendering their intellectual property rights (where the artist that created the song dosen’t “own” it), and there are labels that like to alter songs to best fit the label (which sends different messages to the artist’s audience then the artist really wanted).

They do more than take money.
- http://twitter.com/icanhazsake Ninja
  
  Aaah yes, when copyright doesn’t protect the artist but rather the middlemen. Reform, any1?
- Anonymous
  
  I remember when what you just said happened to Britney Spears. There was a little scandal (one of the many involving her, better said). It was in regards to her downloading her own songs from the ‘net. And then the record label pretty much put her in her place. She felt there was no harm done because they were her own songs. The record label pretty much laughed at her and pointed out they weren’t HER songs, they were the label’s songs.
  - http://twitter.com/icanhazsake Ninja
    
    Well, if she had to delete them then she was spared of listening to bad music.
http://www.facebook.com/people/Don-Dilly/1624894683 Don Dilly

Im going to show my age here with an example of some of the record industry practises when screwing artists out of cash.

Bill Nelson the vocalist,guitarist and songwriter for the 70s british prog rock band Bebop Deluxe. In fact it was his band and was the one consistant member throughout the life of the band yet while the band was critically acclaimed he has never received a royalty cheque (either as artist or songwriter) from EMI in the 40 years since the ban was formed or during its 8 year life.

http://www.jagshouse.com/music/billnelson.html
Noah C.

I have a question, though.

The record company grossed approximately 4.9 million even out of fee’s.

Let’s start from the beginning:

Artist advance: – $1,000,000
Artist sells CDs: $3.9 profit.
Artist obtains royalties: $3.45 million profit.

It may be just as corrupt as I think it is. If I’m correct, and the artist still somehow owes the $500,000… even though they profited approximately 4 million from them with all the math done? Some knowledgeable answer this. I’ve already emailed the Law Firm asking this question. Let me hear your opinions on this.
- Mossenuckle
  
  Did you watch the video? You forgot the part where the artist only gets 10% of the profits. After all the fees, not including the advance, the record has profited 4.91 million, of which the artist gets 10%. So the artist only earns $491,000.
  - Noah C.
    
    Yes, I did. The artist obtains about 491,000. I put that in there. The Artist SHOULD owe nothing to the company because it’s already grossed them 3 million-ish, therefore they’re still profiting. I don’t understand this. If you have an answer to the question, then answer it. If not, don’t bother.
Thomas van Amerongen

Why not take the container charge and reserves from the 10 miljon. Thats what I would do, being a label.
Cavelord

Its more like $200,000 dollars in the hole. They did get a $300k advance to spend the way they want, it didn’t go towards anything from the record label. Of course, they probably spent all that money first thing…:)
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Thesouthernlord

this video, although it has some truth to it, is inaccurate. the recording cost of records includes producers and mixers as well as mastering for release. im in a decently successfull band, and we were ‘advanced’ 80k for our most recent album. there are 5 of us in the band and 25k was split 5 ways for the members, and the rest was spent on the production of the album(living quarters for the band, travel, producer, studio, mixing, mastering). however this guy is right when about the bands not making money. we’ve sold over 200,000 records and never seen royalties of any kind. maybe were just smarter business men when it comes down to it. if people get that far in debt, it is their own fault
- l3lacle
  
  How is the video inaccurate from the evidence you provided? Is it that you are lumping recording cost to include the minor break down of paying producers mixers etc? The only possible differences are that the maximum cost of producing an album is 55k or some of the contract points prior to the advance aren’t in your contract(which I can’t tell from your post). The size of the advance will be mainly based off the expected return. If you got the same advance ratio as the video($1/expected album sold) your label expected you to sell 80,000 records; Your label could have underestimated you or the advance ratio in the video could be off. Either way, both you and the video take ~30% artist royalty and ~70% production from the advance.
  - l3lacle
    
    Nevermind, I see from re-watching the video that you are saying he is double counting the producer and mixer ($200,000). So the fictional artist in the video is really making $491,400 – recording cost ($500,000 from video though possible to do for less) = -$8600
  - l3lacle
    
    Nevermind, I see from re-watching the video that you are saying he is double counting the producer and mixer ($200,000). So the fictional artist in the video is really making $491,400 – recording cost ($500,000 from video though possible to do for less) = -$8600
OKAW

Remember kids, the RIAA wants you to know that when you pirate music, you hurt THE ARTIST, which upsets them, because clearly, they care very deeply for the talent they represent.
Anon

Clicked some ads to support the site :)
Anti1idle

So let me see if I understand this, the label’s main job is to move the “goods” yeah? The loan the artist money to make the music, so in that case isnt the artist the one to take on the risk so they should be the one to own the music? Or are we looking it from label point of view where they putting in 9 million and artist putting in 1 million so it 1:9 split of profit.

No wonder the music industry is afrid of Internet, when people realise the cost of distribution is a fraction of what it used to cost the artist might ask for a bigger percentage. I bet they will replace breakage fee with piracy fee.

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