It was 1993, and I had just spent $500,000 of a major corporation’s money on songwriter/artist advances. The finance department called a meeting to discuss balances. I was new in Corporate America, and had never been to an actual finance meeting. I was mortified.
It seemed to me that the options were simple: I had screwed up and was fired, or I was to be told I could have more money when I got this balance recouped. Neither was what happened.
Instead, I was asked a rapid-fire list of questions about an artist we’ll call “Jones”:
Finance: “Jones – 57K?”
Me: Justifying my creative decision and explaining how slowly music money comes in, I explained how “Jones” was doing exceptionally well for a new artist, and I thought we should keep at it. I told them about co-writing, producers and opportunities. I blathered on about image and talent and the unseen equity of intellectual property.
Finance: With a blank stare, “Jones – 57K. Are we getting it back this year or not?”
Me: “Probably not this year, but things looked excellent going into next year and beyond.”
You see where this is going.
Finance: “We don’t give a shit. Just tell us what percentage is coming back this year.”
Me: “None.”
Finance: “Fine! Smith – 96K?”
Rinse and repeat.
I had forever been changed by my introduction to the “write down”. I became somewhat addicted to this magical process. And as long as I had a “hit,” the rest was forgiven as a tax loss. How cool is that?
This brings us to a touchy but important topic that was referenced by Aimee Mann and written about on GigaOm. If it wasn’t for middlemen there would be no music business; the business is the middle. But the scruples of such characters have always been suspect.
To be fair and going back to the fifties, the A&R community and the surrounding execs are street smart and savvy. They are paid to hear hits. But as the business became more and more lucrative, the once simple business became complex. Companies were formed, and the corporate music business evolved.
Skip ahead thirty years… a massive financial expansion occurred with CDs. Then the scruples weren’t the problem anymore. It became a problem of actual business acumen. These guys weren’t very good at balancing the books. Almost none of them have been to business school, and fewer had business backgrounds.
At this point, the percentages of the take for record companies escalated at an alarming rate that was masked by the staggering sums of cash that were flowing in. That’s when, gradually, the cost of recording and promoting a record went through the roof and the companies started “charging back” the artist accounts for everything from lunches to private jets.
By charging back the costs of their day to day they could right off their bad creative choices as a tax loss. Clever, but devious. We were all on a complete holiday from responsibility. As long as we had a hit, we could do almost anything we wanted.
Now we have a business that is markedly smaller, but the existing generation of middlemen are still attempting to take the same usury cut that they have become accustomed, if not addicted, to. The business moved the risk back to musicians in the eighties. The musicians just didn’t see it. It was done with smoke and mirrors (or fruit and flowers).
So how do we go forward? Should the manager and agent get the same cut for responding to email that they got for six hours of phone calls? Should record companies get 88% of your gross income? Should PROs get 6-11% of your performance dollars?
Hell if I know. But I know they think they should. After all, it’s harder today than ever to break out and have a hit. When it comes to the contentious new revenue source, streaming, I don’t think any middle men should get a cut. Artists should be able register their work online and collect micropayments directly.
But then the current version of “new” was designed mostly by “old.”
