I am already greatly unimpressed with the music industry.
I learned a lot about cost breakdowns while negotiating my last record deal, and the Victory Records whistleblow that came out a few years ago further illuminated the subject. But this takes the cake.
If you aren’t already familiar with the scheme, the record labels use recoupable expenses to make money off artists while keeping them in debt. See N’SYNC.
Fees that are paid by the band are paid to the record label; even if the band is losing money, that money is being paid to the label. If the artist is actually making money, the label diverts the money to group ads, tour production, management, and keeps it. Either way, the label is still making $4 on each CD sold, plus getting paid back the recoupable royalties.
Google Ads Revenue Stream
Anyways, Google has just informed me today of another way in which artists are bound to get screwed by labels. This comes from an article criticizing Google for not doing enough to prevent piracy. Google has in turn responded with the following, which you can read at the original article here:
Google created revenue for record labels by selling adverts around their music videos on YouTube.
No CD Sales means No Royalties
Let us discuss the implications of this new revenue stream.
Let’s say an artist is very popular. Ordinarily, the artist will sell quite a few albums. They receive a royalty for each time a song is played on the radio, and every album sold.
What if the record label releases the music for free download as part of a “promotion”, and puts the majority of the songs up on YouTube?
CD sales go down, radio play perhaps as well, but ad revenue from YouTube goes up.
Unless the YouTube ad revenue is included in the royalty deal under the contract, well, now the label is no longer required to share that income with the artist. The artist is on the hook for the album production, music video production, and advertising, but has lost their income from album sales & radio play.
If you are negotiating a record deal, be sure to include a royalty agreement for YouTube ads. Or you may find yourself without the means to pay down your recoupables.