A point was being made in the wrong place...

[Siswai]

Why can't the music be free and we pay to watch these entertainers perform them?

[transa firma]

[roboto]

Successful entertainers get paid too much as individuals in the long run anyway. The studios and execs get paid WAY too much money.

Music, sports, television, movies, DJs, etc. Its insane. The talent that is displayed for the most part is not even remotely up to par dollar for dollar either.

A good deal of that money would be better served in the school system.

[transa firma]

|
|

you're in danger pip. the metrics almost gotchu.
_________________
´¯`·.¸¸..><((((º>.¸¸.·´¯`·.¸·¸<º))))><
`·.¸¸.¸><((((º>`·.¸¸.·´¯`·.¸·¸><((((º>

[Noise850]

Hello, Everyone, this is T.mouse's audio friend Nate. You may remember be from such feature threads as the discussion about raves being too loud on the old forum and the discussion about the Crescent Room sound system in this new forum.

First off, I would like to clarify on Eddie and yossarian's debate about audio CD-Rs. As someone who is proficient in Copyright Law (although, I am an audio engineer and not a lawyer), I feel qualified to comment.

The Audio Home Recording Act of 1992 amended the current Copyright Law by adding sections 1000 through 1010. You may look it up as you wish. This act established a royalty of digital audio media and recorders as well as a forced implementation of a Serial Copy Management System inside the recorders. This act is applicable to DAT, DCC, Mini-Disc and CD-R as well as any new media technology to be established, defined in section 1001. Section 1004 defines the Royalty Payments for both Digital Audio Recording Devices (2% of wholesale price) and Digital Audio Recording Media (3% of wholesale price).

Section 1004(b) Digital Audio Recording Media

"The royalty payment due under section 1003 for each digital audio recording medium imported into and distributed in the United States or manufactured and distributed un the United States, shall be 3 percent of the transfer price [wholesale price]. Only the first person to manufacture and distribute [media made inside the U.S.] or import and distribute such medium [in the case of foreign manufactured media, like Mitsui, the importer pays the royalty] shall be required to pay the royalty with respect to such medium."


I hope that clarifies the debate over CD-Rs. Now onto the ORIGINAL topic of this thread, the internet DJs and royalties.

Under Copyright Law, there is a separation between the musical composition (sheet music) and the actual sound recording. For all intents and purposes, the sound recording is considered by Copyright Law as a derivative work of the underlying musical composition. The musical composition enjoys the 5 major rights under the law:
1. The right to make copies
2. The right to prepare Derivative Works
3. The right to Distribute Copies
4/5. The right to Perform or Display Publically (the Law establishes differentiation between perform and display, based on the type of work)

Sound Recordings Differ in that they share the first 3 rights, but do not share in the 4th and 5th performance rights except for Digital Audio Transmission (the internet). Currently, when a CD is played on the radio or in a club, there are established royalties for the underlying musical composition of the song. The performance rights are called "Small Rights" in that it is not a dramatic performance and more often than not, the material consists of a single performance (you wont hear an entire album on the radio or in a club at once). Venues/analog transmitters will acquire a Blanket License through ASCAP, BMI, SESAC to cover any number of copyrighted material to be played. In the case of clubs or other venues it is based on average attendance, amount of material played, etc.

As I have said before, Sound Recordings ONLY have performance rights for digital transmission as established in the Digital Performance Right in Sound Recordings Act of 1995. When that same CD is played in a club or on the radio, no amount of royalties are due to the record label. This is what allows DJs of any kind of music the ability to perform for profit in any venue, as long as the venue has a blanket license for the copyrighted material. Once a DJ compiles a mix CD and sells that CD for profit, the DJ is infringing upon the right to make copies and the right to distribute copies, unless the DJ has a licensing agreement with both the music publisher and the recording label of each track featured on the mix CD.

I hope this has cleared up the issue of DJs paying royalties as far as performances and CD sales, now on to digital audio transmission.

MP3s, P2P file sharing, and any other transmission of copyrighted material digitally is illegal under current Copyright Laws. It violates both the Sound Recording's right to make copies, distribute copies, and digitally perform as well as the Musical Composition's rights to the same. As of right now, the Big 5 record labels are attempting to form a legitimate method of mp3 download; however, I feel their current methods are wrong. I also feel the actions made by the RIAA are generating an extremely large amount of negative publicity that will only further hurt the acceptance of any digitally transmitted legitimate music program.

Even though it is illegal to do so, I personally have mixed feelings about the moral implications of downloading music based on the method by which Record Labels operate.

Artists receive royalties based on the calculation of their royalty percentage (called points) of the list price of a product, after certain deductions, to arrive at a "penny rate," which is the amount per product sold the artist receives. This computation will vary from record label to record label as there is no set standard. What I will provide is a generalization computation.

Royalties for Artists are based on Record sales of a $16.98 Standard Retail List Price (SRLP) of a CD.

Back in the early days of phonographic records, the record itself was made of shellac, an easily breakable material. A large number of records delivered to the store would indeed arrive broken, and that percentage was taken off the artist's royalties as they are computed per unit sold by the RECORD LABEL not the actual store. The broken records would still be shown as shipped items even though the store was issued a refund. This common practice of "breakage" sliced off about 10% of the royalty computation. Since the development and use of vinyl and other modern plastic media, breakage is a thing of the past, but still remained in recording contracts. It is now defined as "paying on 90% of all items sold."

Next, artists are charged a packaging fee for the product. For cassettes this figure is 20%, vinyl 10%, CDs a whopping 25% for packaging materials. With the amount of CDs manufactured in bulk combined with bulk manufacturing savings, this figure is astronomically high. Also there is a "new technology" reduction placed on CDs with a 15% royalty reduction. CDs were invented in the 1970's with the introduction of CDs on the marketplace in 1982. I somehow doubt they can still be classified as "new technology," but according to some record labels they are.

Let's look at the hard figures. Our Artist has a Royalty "All-In "Rate of 14 points, and has to pay 3 points to a producer, leaving the artist with 11 points royalty per product sold.

$16.98 SRLP
x0.90 Breakage
======
$15.28
x0.75 Packaging Deduction
======
$11.46 Royalty Base
x0.85 CD New Technology Reduction
======
$9.74
x.11 Artist Royalty Rate
======

$1.07 Artist Penny Rate

Keep in mind the record label makes about $5 in PURE PROFIT per CD sold. That means that if an artist sells a million CDs, the Label made $5 mil and the artist made 1.07 mil in ACCOUNTABLE Royalties. Do you think the artist gets a check for a cool mil? Heck No! Lets continue.

Some record companies only charge a record store on 85% of all products shipped. This is a concept called "free goods" the record store still PAYS for 100% of the product as the wholesale price is inflated to accomodate the extra 15%. Its an old concept that looks really good on paper, even though its not. However, the record label does not pay royalties on these CDs. There is a 15% free goods deduction. Here comes the numbers again:

$1,070,000 Accountable Royalties
x0.85 Free Goods
=======
$909,500

Hey, 900k aint bad! Is it? Hold on to your pants, you are wading deeper into the accounting bullshit.

Artists are paid advances upon signing a recording contract. This is money for the artist to live and pay bills while writing songs and recording an album. Also, there is a recording budget set aside for the album for studio bills, equipment rental, musician fees, etc. ALL of this money is recoupable from the artist at royalty accounting. Can you believe it? In the end the artist him or herself actually PAYS to record an album the record label will profit from. Math, here we come!

Lets assume this artist was paid a $100,000 advance with a $300,000 recording budget.

$909,500
-$400,000 Advance and Recording Budget
======
$509,500

Just when you thought it was safe to go to the bank! Let's continue.

Artists also are charged for independent promotion and music video costs. Independent promoters are the people who get your album/single played on the radio. Think payola ended after the scandal? Think again! You can get charged a maximum of $50,000 per single for independent promotion up to $75,000 for a full album. This cost can either be 100% recoupable or 50% recoupable depending upon the artist's negotiations. If it is 50% recoupable, you better bet you will be charged for double the amount it actually costs.

Also, there is a music video cost. Most music videos today cost atleast $150,000 for anything of decent quality. If you want to make a really expensive video with special appearances by puffy, it can be upwards of $500,000 to a cool million for the video! The video costs is 50% recoupable from the artist's MUSIC royalties and 50% recoupable from the artists's VIDEO royalties.

Let's assume we had a $150,000 video and paid our promoters the same.

$509,500
-$300,000 Video and promotion fees
=======
$209,500

We're almost done, trust me! Records have a 100% return from the store to the distributor/label. In actuality the record label charges a fee over about 35% of CDs returned from the store. Since royalties are calculated on amount sold to the store and not the public, record companies hold a reserve of 35%. This is money in the pipeline, and will be paid to the artist after a negotiated time period, which is usually two years.

To finish our computations:

$209,500
x0.65 Reserves
======
$136,175 <------ YAY! I can go to the bank now! Forget about the yacht and hummer, I need this to live as royalties are paid only twice a year!

So, on 1 million CDs sold, the record company made $5 million in pure profit and our little artist made $136,175 with $73,325 payable in two years.


Kind of makes ya not feel quite as bad about downloading MP3s eh? Superstar artists like Lil Steven's mentioned Metallica have close to the same reductions although they have a higher royalty rate of 20 points, but usually the producers in that level get 6 points. Also, the videos in that level are closer to the 1 million mark than our measley $150,000.

Just something for you guys to think about when voting on your poll or buying a CD in a store. Electronic Music is probably different as it is more singles based for DJ records than full album based. Also, the mix CDs by DJs have to license the material, which would further reduce the artist. Yeah, we ARE stealing from the artist and it is wrong. But we are stealing a whole HELL of alot less from the artist than we are the record company. That is why Napster was cut off at the knees by the RIAA, and also why there has been tons of legislation passed that adds to the DMCA and the DPRSRA.

There ya have it. If you read this far, thanks! Feel free to discuss!

-Nate