Who is the incredible bonehead who said rap artists make a lot of accounting business software uk money? Wrong, wrong, wrong, wrong, wrong!! Because the fans expect their favorite artists to be very wealthy, and have an interesting, far above average, glamorous lifestyle, this puts an incredible amount of accounting business software uk pressure on accounting business software uk the artists to appear wealthy. And it's not just the fans; I can't tell you how many times I've been out with rappers along with people in accounting business software uk the industry, and the industry opportunists have expected the artists to pick up the dinner check. I've even seen people have an attitude if the artist doesn't pay for accounting business software uk everything. This is small minded and ignorant because the artist is ALWAYS the last to get paid.
Everyone gets their cut first:
· the label (78% to 92% after they recoup most expenses),
· the manager (15% to 20% of accounting business software uk all of accounting business software uk the artist's entertainment income),
· the lawyer (by the hour or 5%-10% of accounting business software uk the deal),
· the accountant (by the hour or 5% of accounting business software uk all income), and, of accounting business software uk course,
· the IRS (25% to 35% depending on accounting business software uk the tax bracket).
Add to this the artists' own payroll responsibilities: fan club, website, security, office and/or studio, etc, and family members he, or she, is expected to support or help financially.
Once an artist releases a record, the pressure is on accounting business software uk to portray a successful image to fans, friends, families, and people around the way. People expect the artists to be well dressed, drive an expensive car, live in accounting business software uk a very nice house, etc. Think about it. Don't you expect artists "to look like artists?" Would you admire Jay-Z as much if he drove a broken down old 1994 Grand Am instead of accounting business software uk that beautiful, brand new, top of accounting business software uk the line Bentley?
Sadly, when an artist gets signed to a record label, especially a rap artist, he or she receives somewhere between 8 and 13 points. What that means is 8% to 13% of accounting business software uk the retail sales price (less inane deductions that whittle that small percentage down another few points), after the record label recoups the money it puts out (the advance, the sample clearances, the producer advances, usually half the cost of accounting business software uk any videos, any cash outlays for accounting business software uk the artists, half of accounting business software uk the radio promotion expenses, most of accounting business software uk the street promotion expenses, etc.). The artist has to sell an incredible amount of accounting business software uk units to make any money back. Here's an example of accounting business software uk a relatively fair record deal for accounting business software uk a new rap group with some clout in accounting business software uk the industry and a terrific negotiating attorney:
ROYALTY RATE: 12%
We're going to assume that there are 3 artists in accounting business software uk the group, and that they split everything equally. We're also going to assume that they produce their own tracks themselves, contributing equally, without sampling.
Suggested retail list price (CDs) $12.98
less 15% packaging deduction (usually 20%) =$11.03
gets paid on accounting business software uk 85% of accounting business software uk records sold ("free goods") =$9.38
So the artists' 12% is equal to about $1.13 per record sold. In most deals, the producer's 3% comes out of accounting business software uk that 12%, but for accounting business software uk the sake of accounting business software uk brevity, in accounting business software uk this example the group produced the whole album, buying no tracks from outside producers, which is rare.
Let's assume that they are a hit and their record goes Gold (although it is rare that a first record blows up like this). Let's also assume they were a priority at their record label and that their label understood exactly how to market them (which is also rare). So they went Gold, selling 500,000 units according to SoundScan (and due to the inaccuracies in accounting business software uk SoundScan tracking at the rap retail level, 500,000 scanned probably means more like 600,000 actually sold--but they'll only be accounted to for accounting business software uk the 500,000 SoundScan verified units instead of accounting business software uk what actually has sold).
GOLD RECORD = 500,000 units sold multiplied by $1.13 = $565,000. Looks like a nice chunk of accounting business software uk loot, huh? Watch this: Now the label recoups what they've spent: the cost to make the record, independent promotion, 1/2 the video costs, some tour support, all those limo rides, all those out of accounting business software uk town trips for accounting business software uk the artists and their friends, etc.
$565,000
-$300,000 recoupable stuff (recording costs, etc)
--------
$265,000
-$100,000 advance
--------
$165,000
Still sounds OK? Watch... Now, half of accounting business software uk the $265,000 stays "in reserve" (accounting for accounting business software uk returned items from retail stores) for accounting business software uk 2 to 4 years depending on accounting business software uk the length specified in accounting business software uk the recording contract. So the $100,000 advance is actually subtracted from $132,500 (the other $132,500 is in accounting business software uk reserves for accounting business software uk 2 years). Now, there's also the artist's manager, who is entitled to 20% of accounting business software uk all of accounting business software uk the entertainment income, which would be 20% of accounting business software uk $265,000, or $53,000. Remember, the artist is the last to get paid, so even the manager gets paid before the artist. The attorney is entitled to 10% of accounting business software uk the upfront value of accounting business software uk the deal, which in accounting business software uk this case was $200,000, so the lawyer made $20,000 the day the contract was signed (which the label paid directly), which the artist pays back now out of accounting business software uk royalties.
So the artists are in accounting business software uk debt to the label yet their album went Gold, and they are experiencing some pretty good fame and perceived success. Unless they are making money in accounting business software uk other areas (shows, mostly) they are completely broke. In two years when the reserves are liquidated, IF they've recouped, they will each receive another $44,166. IF they've recouped. Guess who keeps track of accounting business software uk all of accounting business software uk this accounting? The label. Most contracts are "cross-collateralized," which means when the artist does not recoup on accounting business software uk the first album, the money will be paid back out of accounting business software uk the second album. Also, if the money is not recouped on accounting business software uk the second album, repayment can come out of accounting business software uk the "in reserve" funds from the first album, if the funds have not already been liquidated.
Even if all the reserves are paid in accounting business software uk our example, each artist only actually made 6 cents per unit. The label made and/or recouped about $8 per unit. This example also doesn't include any additional production costs for accounting business software uk an outside producer to come in accounting business software uk and/or do a re-mix, and you know how often that happens.
So each artist in accounting business software uk this group has received a total of accounting business software uk about $26,000 (pretty much just the initial advance, less the manager's cut). After legal expenses and costs of accounting business software uk new clothing to wear on accounting business software uk stage while touring, etc, each artist has made so little before paying taxes (which the artist is responsible for-- remember Kool Moe Dee?). Let's look at the time line now. Let's assume the artists had no jobs when they started this. They spent 4 months putting their demo tape together and getting the tracks just right. They spent another 6 months to a year getting to know who all of accounting business software uk the players are in accounting business software uk the rap music industry and building a local buzz while shopping their demo. After signing to a label, it took another 8 months to make an album and to get through all of accounting business software uk the label's bureaucracy. When the first single dropped, the group went into promotion mode and traveled all over promoting the single at radio, retail, concerts, and publications for accounting business software uk free--unless they had a radio hit as their single, in accounting business software uk which case they began getting some show money for accounting business software uk about half or a third of accounting business software uk the dates they performed. This was another six months. The record label decided to push three singles off the album so it was another year before they got back into the studio to make album Number Two. This scenario has been a total of accounting business software uk 36 months. Each member of accounting business software uk the group made $70,000 for accounting business software uk a three year investment of accounting business software uk time, which averages out to a little over $23,000 per year. In corporate America, that works out to be $11 per hour (before taxes).
OK, so it's not totally hopeless. Since we're using the fantasy of accounting business software uk a relatively fair deal, let's look at publishing from a relatively fair perspective. There are mechanical royalties and performance royalties to figure in. Mechanical royalties are the payments that Congress stipulates labels must pay based on accounting business software uk copyright ownership and publishing ownership. These payments have nothing to do with recouping, but everything to do with who owns the publishing. Publishing is where the money is in accounting business software uk the music business.
Although publishing can be quite cumbersome to understand, the most basic principle is that when an artist puts pen to paper, or makes a beat, the artist owns the publishing. It's that simple. Whoever creates the words or music owns those words or music. Where it gets confusing is all the different ways to get paid on accounting business software uk publishing, all the ways to split publishing with other folks, and all the ways artists get screwed out of accounting business software uk their publishing. In the 14 years I've been doing this, I have heard so many times, artists say that they don't care about losing a song or two because they can always make a ton more. That's stupidity. It's undervaluing one's ability. That's like saying it's OK to rob me of accounting business software uk my cash, because I can go to the ATM machine and get more money. Wrong!! It's never right to rob someone. The "I can make more" defense immediately goes out the window when the creator sees someone else make hundreds of accounting business software uk thousands of accounting business software uk dollars off a song. Every time!! So why not protect yourself in accounting business software uk the door?
Publishing reminds me of accounting business software uk real estate. When you make a song, you are the owner of accounting business software uk that property: the landlord. Sometimes you sell off a piece of accounting business software uk the land for accounting business software uk money (but you NEVER give away your land, right??) and if someone else wants to use your property, or rent it, they have to pay you rent to use it.
A copyright is proof of accounting business software uk ownership of accounting business software uk a song, both lyrics and music. If there is a sample in accounting business software uk the music, you are automatically giving up part of accounting business software uk the song, at the whim of accounting business software uk the person who owns the rights to the original song (not necessarily the original artist). In order to "clear the sample," you send your version of accounting business software uk the song to the owner of accounting business software uk the original composition or whomever owns the publishing (and to the owner of accounting business software uk the master, meaning original record label or whomever now owns the master). Then you negotiate two prices with those two owners. Some are set in accounting business software uk stone and you get to either agree to their price or to remove the sample. It's not uncommon to spend close to $100,000 in accounting business software uk advances and fees due to the sampling on accounting business software uk an album. This usually comes out of accounting business software uk upfront monies (advance) and the artist bears the burden of accounting business software uk paying for accounting business software uk it all, even though the record label owns the record.
Proof of accounting business software uk copyright is easy to obtain by registering your song with the copyright office in accounting business software uk Washington DC. You can either call them (202.707.9100) and ask for accounting business software uk an SR Form (sound recording) or download one from their website ( copyright.gov/forms/formpai.pdf). You fill out the form, listing all of accounting business software uk the owners, and mail it back to them with a copy of accounting business software uk the song (a cassette is good enough) along with the Copyright fee (around $35 or so). This way, if someone steals your song, or a piece of accounting business software uk your song, you can sue them for accounting business software uk taking it and recover your legal fees. With the "poor man's copyright" (mailing your tape to yourself in accounting business software uk a sealed envelope with your signature across the sealed flap, and then never opening it when it arrives back to you with a postmark proving the date), you can not sue for accounting business software uk damages and it's more difficult to prove your case. The copyright fee may seem like a lot of accounting business software uk money to some, but it's nothing compared to what a law suit would cost you.
Performance royalties are money that is paid for accounting business software uk the performance of accounting business software uk your song. The money is paid based on accounting business software uk the percentage of accounting business software uk ownership of accounting business software uk the song. So if you own 100% of accounting business software uk the song, you get the whole check. If you own just the music, which is half the song, then you get half the money. If you own the music with a sample in accounting business software uk it that claims half the song, then you get a check for accounting business software uk 25%. Ya follow? Performance Rights organizations consist of accounting business software uk ASCAP, BMI, and SESAC (which is still quite small). They police the radio stations, clubs, concerts, etc (any place music is played or broadcast), all of accounting business software uk whom pay a fee to play the music which the performance rights societies collect and split amongst their members based on accounting business software uk the amount of accounting business software uk times a record is played. Although the formulas change annually based on accounting business software uk play, a Top 10 song played on accounting business software uk commercial radio can earn a good chunk of accounting business software uk change in accounting business software uk the hundreds of accounting business software uk thousands of accounting business software uk dollars range.
There is another kind of accounting business software uk royalty artists receive when their records sell: mechanical royalties. These are paid based upon a pre-set limit placed by Congress which increases automatically every two years. In 2000 and 2001, it was .0765 cents per song, and in accounting business software uk 2002 and 2003, it was .0815 per song. In 2004 and 2005, it went up to .0865 cents, and in accounting business software uk 2006 it became .091 cents where it will stay until Congress raises it again.
Record labels put caps on accounting business software uk mechanical royalties at either 10 songs, 11 songs, or 12 songs, no matter how many songs actually appear on accounting business software uk the record, and you get what you negotiate for. Also, there's a slimy little clause that restricts payment of accounting business software uk mechanicals (because God knows labels don't make enough money as it is) to anywhere between 75% and 85%. This evil deed is called “percentage of accounting business software uk statutory rate.” Here's the difference those few pennies make as it pertains to an artist's royalty check (I refuse to even consider illustrating the worst bullshit deals such as 10x at 75%) provided they own 100% of accounting business software uk the song:
I based the above chart on accounting business software uk the old 1998-1999 rate of accounting business software uk .0715 per song, so I could use Fiend (No Limit Records) as an example. His first album came out in accounting business software uk April of accounting business software uk 1998 when the stat rate set by Congress was at this rate.
The dollar figure above represents monies due an artist (regardless of accounting business software uk recoupment) per album based on accounting business software uk ownership of accounting business software uk 100% of accounting business software uk publishing. So for accounting business software uk example, Fiend who was signed to No Limit at the time, (provided he owns 100% of accounting business software uk his publishing--I can dream can't I?), if his deal gives him 11x rate at 85% (which I am sure is higher than he got) then on accounting business software uk his first album, There's One In Every Family, which came out 4/28/98 and sold 565,977 SoundScan units, No Limit would have paid him (hopefully) $378,369.77. If No Limit owns half of accounting business software uk Fiend's publishing, he would receive $189,184.88 provided he wrote all of accounting business software uk his own songs (which he did, except the verses by other artists who appeared which lowers the ownership percentage and dollar amount) and provided he made all of accounting business software uk his own beats (which he did not; he features outside producers on accounting business software uk this album like Beats By The Pound).
So there you have it, the real deal on accounting business software uk how much money an artist makes. You can subtract another 25% to 35% of accounting business software uk all income, including show money, (depending on accounting business software uk the artist's tax bracket which is determined by how much income was made within any given calendar year) for accounting business software uk the IRS who get paid quarterly (hopefully) by the artist's accountant, who gets paid 5% of accounting business software uk the total artist's entertainment income for accounting business software uk this luxury (that's 5% of accounting business software uk the net income, meaning BEFORE taxes). If the average artist releases a record every two years, then this income must last twice as long... I think about this every time I see my favorite artists in accounting business software uk their music videos drinking $300 a bottle champagne, or every time I see them drive by in accounting business software uk a brand new Benz...
Rap Coalition
rapcoalition.org/ rapcoalition.org/
rapcointelpro.com/ rapcointelpro.com/
HelpfulAngel.com/ HelpfulAngel.com/
Wendy Day is an authority on accounting business software uk the business side of accounting business software uk the music industry. She started Rap Coalition, a not-for-profit artist advocacy organization in accounting business software uk 1992. She has worked with Eminem, Master P, Cash Money, Twista, David Banner, and many others. She has built many millionaires and has contributed to the success of accounting business software uk many stars. Wendy also helps artists set up their own companies and start their own record labels!