Thursday, December 20, 2007

The True Impact of Piracy

I was once again reminded this week of the dreadful impact of piracy on the music industry. The most common justification given by most who steal music online via Pirate Bay, et al, is that doing so is a sort of rebellion, sticking it to the man, if you will. Let's face it, screwing the majors out of a few bucks is quite empowering and with it comes a sense of righteousness.

But the bitter truth is that the majors are still in control and are the ones who are calling the shots. They are trying their best to let others (read: artists) absorb the losses from file sharing. Almost no artist has true bargaining power with a major and once the labels start incorporating certain terms into their recording contracts, it becomes almost impossible to remove those terms.

This week I was reviewing a contract for a fairly successful producer and songwriter, who was offered a record deal. My first pass was striking a mountain of language. The calculations on master royalties were atrocious (for those who know, they were basically using retail calculations on a wholesale basis, which effectively cuts the royalty in half, if not worse). However, they were also asking to reduce mechanical royalties (for his songwriting work) in the same manner as the master royalties. In this particular deal, it meant that his mechanical rate, already a 3/4 rate (75% of the statutory minimum) would be reduced even further for so-called "mid-line" and "budget" records, those sold at prices lower than the highest retail price. Other reductions/deductions would push the mechanical even lower.

Then there was what the attorney described as their "standard 360 language." First, 360 deals are only a recent creation and NOBODY has a "standard" yet. Second, 360 clauses should be the exception, not the rule. These provisions basically give the label a share of touring, merchandise, and name-and-likeness rights.

There are a plethora of issues to address when 360 language is incorporated, perhaps most importantly is that revenues from these other activities should not be cross-collateralized, i.e., the label should not be allowed to recoup recording costs, etc, from this money. The label should also be required to earn its share and its share should be commensurate to the label's role.

Despite my and other artist advocates' protest, these terms are becoming increasingly common. The more common they become, the more "standard" they become. The more standard they become, the more impossible it will be to have them removed.

Just like "new media deductions" became standard 20-25 years ago with CDs in order to offset the cost of developing the new medium and packaging, 360 clauses will start off as well intentioned but will become a new home for labels to chisel away artists' rights and income.

And it is all happening because people who obviously enjoy music have opted to get it for free from illegitimate sources. They think they are getting "the man" but the man is too powerful and too greedy to be cheated so easily. For every penny lost by a major due piracy, they take three more from the artists.

Artists were already squeezed dry on the recording side (my producer-client's manager, who represents some of the biggest names in the industry, told me that it's been years since he's seen a royalty check from a label). Therefore, mechanicals and other song royalties were a great way to earn a living for recording artists who wrote their own music. So the labels are sliding in creative language to greatly diminish these income streams. Now they are also grabbing for all of the artists other income, from areas that were once very far from the label's grasp. While many of the deals may look harmless now, the labels will no doubt find ways to reduce the artists' share in these arenas as well.

I know that it will be impossible to change the general public's view, to cause them to rethink the impact of their actions. It just saddens me to no end.