November 14, 2013

Music Royalty Lessons from the TLC Biopic CrazySexyCool

"This is how a group can sell 10 million albums and be broke. Everyone get ready to do your math."
This is a line from one of the most telling moment's of VH1's recent TLC biopic, CrazySexyCool. This movie was well done overall and worth watching for anyone who has an interest in learning more about what goes on behind the scenes in a band's career, in this case a band that was stuck with some seriously bad contracts. After multi-platinum albums, sold out tours, and what should seem like extraordinary success, the band found themselves without a penny and they came forward after winning GRAMMY Awards, as it shows in the film, to tell the world what was really going on. Later in the film though, the girls are doing an on-air radio interview with callers who believe they must have just gone broke because they spent all of their money and Left Eye decided to break it down for everyone to help them understand just how they could be so successful and yet still be starving artists:

"Y'all 100 points on an album
TLC has 7 points
Each point is worth eight cents
7×8 is 56
Got it?
10 million albums, $5.6 million
Now we owe the label 3 million for travel, production and videos, right?
Okay, that leaves us with 2.6 million which puts us in a 48% tax bracket
Which now leaves us with 1.3 million to split three ways
And on top of that we gotta pay managers, lawyers, and did I forget that Pebbles [their manager] is suing us for damages so we in the red for a couple hundred grand that we don't have"
 - Left Eye in the CrazySexyCool  biopic

So what exactly does that mean and what does it tell you about how artists get paid? Let's take a closer look.
So, 100 points refers to the number of percentage points. A whole of anything is 100% so one album has 100 percentage points. This means that each sale of a record is worth 100 points; these points are used to determine who gets paid what. The usual range for an artist on a major label is 10-15 points. So if, for instance, an artist had 10 points they would earn 10% of each record sale.  So, if a record sells for $9.99 on iTunes, 9.99 = 100 points and 10% of that would be $.99 (this is a bit simplified because the figure used to calculate this is based on the suggested retail price, not what the record is actually selling for).

In this case, TLC was getting $.56 per record sold and earning $5.6 million on 10 million albums sold. However, a record label is, in a way, like a bank that invests in musicians. Releasing music is a costly and risky endeavor because you never really can tell for sure what will be a hit and what will barely be noticed. So, while a record label will front the money to pay for things like touring, recording the record, and marketing, they need to make that money back (this is called recouping) before an artists sees any profits. Of course, the trouble here is that some contracts will attempt to take advantage of an artist by adding in extraneous charges that aren't customary.

Lastly, the artist is responsible for paying their accountants, lawyers, and managers from their income- like a company would pay for an employee. A good lawyer or manager can be worth far more than their fees but a not-so-nice one can take advantage of naive artists and charge exorbitant amounts.

So, what's the lesson here? Well, for one thing it's a good example of how money flows through the music industry from record sales. More importantly though is a pretty big life lesson for anyone who is interested in being or representing an artist: a good lawyer that will make sure your contracts aren't costing you money you rightfully should be earning is essential. Always have a qualified entertainment attorney review your contracts and do their best to help you not sign your life away. On that note, it seems like a good idea to end this discussion with a list of ways to find free or reduced price legal help: How to Get Free or Affordable Legal Help
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