How to make it to the top (and still end up in debt...)

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The Dues cannot reveal Robbie's real name for two reasons. One is that recording and distribution companies are known to be vengeful, and Robbie's contract, like most recording contracts, includes options to keep him "on the books". It is not in Robbie's interests to incur the ire of people who remain complete strangers to ordinary business ethics. They can simply refuse to invest in him while still holding him to his contract, thus ending his career.

The second reason is Australia's libel laws, which are unusually onerous. It is hard for musicians to speak out, even though appalling abuses are common. In Australia, someone suing a musician only has to prove that their reputation has been damaged (which is easy). Then the onus shifts to the defence to prove it is true - and even that may not be enough in most states.
 
Compare this with libel law in the United States, where the person suing has to prove three things: the claim has harmed his or her reputation, that it was false, and that it was deliberate. This makes it far easier to speak out (also, Americans protect free speech in their constitution.

What The Dues can do is describe what is in the contract (without naming the company involved). The most amazing clause is about "reasonable reserves" of records and videos. The following, seemingly innocuous sentence, is included:
"The company shall be permitted to ... report negatives if returns exceed sales in any accounting period."

Extract of Robbie's contract with the record company
What the company is doing is charging Robbie for royalties on CDs that had not been sold! That is, they were making him pay for failing to earn money on their behalf. Not content with taking the lion's share of the net sales, they are also charging him extra because they over-produced the CDs. Despite having only a $5,000 advance, a series of successful hits and an album, Robbie found himself down by $200,000.

It is not as if the record company had missed already taking as much as it could. The contract says that 84% of the net sales went to the record company, only 16% to the artist. In a display of "generosity", the contract adds that an extra 0.5% will be awarded to Robbie if the album goes gold, and an extra 1% if it goes platinum. That there is such an imbalance between what is received by musicians and what is received by the record companies, explains why record companies can make money and the artist can end up in debt. To put it in some kind of context, the "normal" ratio in business is about 50-50: an employee or contractor is expected to generate about twice the sales value that they cost in wages.

It does not end there. If the record company decided to undertake an advertising campaign then, needless to say, much of the cost would be born by the artist. The contract says that any sales that occur in the period extending from four weeks before the commencement of the TV advertising campaign to four weeks after, will only return 8% to the artist. In other words, if the company promotes the artist, then the artist should be grateful and give up half the royalty.

Royalties halved during TV campaign

"I know of so many people who have been treated like this," says Robbie. "There are a whole group of us who have been done over by this manager. I love doing music, and it is what I do, but something should be done about this kind of thing. I see all these record executives, middle aged men, with young girls hanging off them willing to do anything to get a chance. It really is exploitation. I reckon I will be alright. You get negotiating power by selling records and that is just the game. But it is bloody appalling. It needs to become more widely known."

With such restrictive deals being commonplace, it would seem reasonable to conclude that the record industry is highly profitable. It is not. Because of a combination of factors, the most notable of which is on-line piracy - another is simple accretion of product and saturation and over-supply of existing markets - the industry is entering what looks suspiciously like a death spiral. It is common for musicians to regard this with dismay. If it is so hard to get fair treatment now from record companies, how much worse will it be when CDs can be pirated for free?

Yet as we can see from Robbie's experience, there is not a lot to lose. If his CDs had been pirated for free, instead of oversupplied to retail outlets and sent back as returns, then he would be in a better financial position. The grubby little secret of the industry is that it has been based on exploitation of musicians for decades, and there is not a lot to lose, at least in financial terms.

The critical problem, which the changes triggered by on-line piracy are bringing home, is that the market has long been poorly understood by record companies (not musicians). To be sure, it is not an easy set of consumers to read. Pop music is a fashion industry, and hard to predict. Yet the fashion industry is a lot better at understanding and anticipating its market than record companies. The fashion industry also has a much better sense of the underlying technical and aesthetic skills that all successful people in the business must have. Record companies have instead tended to go on their "gut feel", usually succeeding only in giving themselves indigestion.

In recent testimony in California, Senator Kevin Murray, chair of the select committee on the entertainment industry, said that musicians see themselves as "victims of an indentured servitude system designed to keep them perpetually indebted to the companies who also own the product of their labour." That would seem to be a pretty good description of Robbie's predicament.

Record companies, for their part, feel sorry for themselves. "The record companies are generally appalled at the accusations and feel that they are the victims," Murray said. "They are insulted that after making multi-million investments in artists, few of which actually pay off, that they are then held hostage by the successful few. They claim that they are forced to pay large advances and otherwise accede to whims of spoiled, pampered artists."

No doubt this is how many record executives feel, but it is both childish and nothing to do with business. The core problem is that their success rate is too low, and they do not have a good enough understanding of their own product. This does not help the musician, who is usually required to recoup the money advanced, and, increasingly it is threatening to send record companies to the wall. The emphasis has shifted from making money by exploiting musicians and so reducing investment risk, to really understanding the new forms of consumer behaviour and how to add value on the internet, and price music files so that people will pay for them.

Meanwhile, Robbie, sitting in a Melbourne pub, is putting together plans to produce a documentary on the music industry. "Someone has to know about this. 1 am not worried for myself. 1 am a survivor. But this is an appalling way to treat young kids. It really is child exploitation."

David James is an eccentric millionaire who writes for BRW as a hobby. He gets a kick out of fully financing albums and tours for young artists with big egos - if you are interested, call him on...now what was that number again?...just a minute, it will come to me...

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JJJ takin' bacon

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Glen Waverly calling!
Whispers of a new venue in the heart of the eastern suburban dormitory belt could signal gig growth from an unexpected quarter. Word is that the Glen Waverly located effort is to focus on live bands. Looks like someone finally realised that enticing punters with money away from their DVD's and computer games is more feasible if they don't have to drive all the way to the city.

Thus chokes the ravin'?
We hear word that the last Rave held by Earthcore attracted a mere 200 people. Compare this with reported attendance figures of 10,000 for previous efforts and it looks like the techno swell is in trouble. Contrast this with the increasing popularity of live bands such as the John Butler Trio and maybe more work for musos other than turntablists is on the cards.

Gold at the Rainbow but not the end
After years of running up legal bills and spending a fortune on soundproofing trying to stay alive, icon status live music venue The Rainbow Hotel in Fitzroy recently held a very successful benefit. Musos from all over donated their services. We hear that normally gruff publican Chick Ratten was nearly in tears with the generosity from all quarters.

Panda pounces
Strong rumour that state gaming minister John Pandazopolous wants a review of all gaming licences within 12 months and wants to crack down on problem gambling and other negatives fed by the pokie industry. The pokie crowd seems to be feeling the pinch. Does he also want to do something about the army of musos thrown out of work??

Springtime for pit players
Rumours about a potential long run for new musical The Producers reported in last issue seem to have firmed up. Latest word is that the run will go to at least the end of the year. It's a similar story in Sydney with Disney's "Lion King". The new whisper is that when the Melbourne and Sydney runs of these shows finish, they will swap. Good news for both Melbourne and Sydney pit musos.

Bachelors from TAFE
Victorian Education minister Kosky has introduced the concept of Bachelor Degrees from TAFE institutions. We hear that at least two Melbourne TAFES are developing music degrees. Might give musos another path to qualifications and post graduate study.

Intelligence is gathered by Major-General Richard Dunbier, RN, QC, VC, FRS (not his real name).

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