Fun_People Archive
16 Jun
Courtney Love/Napster

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From: Peter Langston <psl>
Date: Fri, 16 Jun 100 01:24:16 -0700
To: Fun_People
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Subject: Courtney Love/Napster

X-Lib-of-Cong-ISSN: 1098-7649  -=[ Fun_People ]=-

[Also see "Friends don't let friends sign to major record labels"  
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Forwarded-by: Joe Weihe <>
Forwarded-by: Teri Rhan <>
Newsgroups: misc.invest.stocks,alt.rock-n-roll.metal.metallica
Re: Napster and the record industry

courtney love gave an excellent speech on the creative math that the record
companies do with regards to the artists:

The controversial singer takes on record label profits, Napster and  "sucka
VCs." Editor's note: This is an unedited transcript of Courtney Love's
speech to the Digital Hollywood online entertainment conference, given in
New York on May 16.
			- - - - - - - - - - - -
By Courtney Love
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.

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