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Moses Avalon Counter-Comments to Miles Copeland's Claim that Artists Don Henley, et al, Mislead the Government
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Miles, Miles, Miles. I grew up in the record industry learning about you. You are a legend and I have always considered you an expert, but you are talking some serious s**t right now.
I have to ask myself why? Why, when you should know better are you being deliberately naïve? I seriously doubt that A&M (now Universal) would have allowed Sting & The Police to do half the things today that they did back in the day. Times have changed, so have contracts. There is the possibility that due to your reputation you are able to get many of the "standard" clauses thrown out of the deals for your clients. But the average recording artist does live with most of the crap that Don Henley testified to. Or maybe you are trying to advertise the "great deal" that one can get on your label, or how benevolent a label owner you are. I don't know, but your selective amnesia has not escaped my scrutiny, so I must comment, for the edification of all those out there who value your opinion but are presently scratching their heads.
I hope you will not take offense.
There were many points that I agreed with you on. But the key point, that the industry would be adversely effected if the exception to the seven year statute in California was repealed, is groundless. The idea that labels will take issue in signing artists from California is equally so. Labels will sign artists wherever they want to. ALL major labels have nexus in New York as well as California and if they want to override the seven-year statute they would merely insert a clause in the artist's contract stating that the contract will be considered executed in the State of New York. (Many LA labels already do this.) So, your crisis of industry wide chaos is unlikely and easily resolved by clicking a few keys on the word processor. (This, not incidentally, has always been my position when asked if Courtney Love's case will "change the industry." Even if she prevails, her victory will change little. Still, I support her.)
Asserting that this situation about the exception to the statute is "unique" bears some closer examination as well. There are many exceptions in California statutes to accommodate the record industry‘s unique qualities." The RIAA has earned their fees many times over by ensuring that these exceptions are carved out. A list might prove eye opening to you. For example, there is an exception to certain labor laws: in California, in order to collect a commission by gaining employment for an individual, one must be a registered employment agency (which requires putting up a rather substantial bond) --except for record deals.
The Legislature was convinced (by Music Industry lawyers) that, due to the "unique" nature of the recording industry, the gaining of "employment" (i.e. a record deal for an artist) could and should be accessible to anyone. This is so that those who do not wish to go to the trouble or expense of setting up legitimate companies can still broker deals for the people they hang out with. This has not helped the image of the business any as it invites all kinds of low-lifes to call themselves "managers." But it has made it easier for record companies to get artists to sign bad deals, because artists tend to foolishly trust their "connections" in the role of contractual facilitators.
The remaining points have all been commented on below.
I look forward to debating these issues with you further when we sit on the Global Entertainment Network Conference in March in New York and hope there are no hard feelings. I stand by my opinions in the comments below, but I will gladly retract them all and publicly agree with you completely, if you get me front row tickets to Sting. :-)
Avalon's comments are in bold following selected excerps from Copelands article "The Seven Year Statute: The Label's Side with Miles Copeland, CEO of ARK 21 Records" in italics
"I have heard over and over people saying they see nothing wrong with downloading music and not paying for it because the record companies are hugely profitable," [Yes, except that the 7 year statute issue has nothing whatsoever to do with the Napster issue.]
"Believe me, for every criticism that could be leveled fairly or unfairly at a record company - many more could be leveled at individual artists. If it were a contest to see who got screwed the most, I think the record companies would easily come out on top as they lose 9 out of 10 times." [Miles is referring to the urban legend that only 10% of signed artists make money for the label. This is not true. Only 10% of the artists earn money from the contract. The labels "make money" on about 35% of their signings, I'd say, even though they report more losses than they probably should. However, he is correct when he states that the labels operate on narrow profit margins.]
"To clarify this situation in 1987, the legislature added a clause to the 7-year statute recognizing the unique nature of the recording industry and declaring that a record company would be entitled to sue for damages for the undelivered albums. The point is that in all other industries, the "employer" knows when the "employee" is fulfilling the agreement because they show up for work at determined periods of time. In the record industry, an artist may agree to do 5 albums, take a large amount of money up front, secure all sorts of royalty benefits, etc., BECAUSE he or she agreed to 5 albums and then proceed to take 3 years to do every album. Meanwhile, the artist is free to seek other sorts of "employment" such as doing a film, or going on tour, none of which the record company "employer" is involved in." [Untrue. Most labels have the right to approve the artist's other endeavors if they feel, in their "sole discretion," that the artist's extra-contractual activities will interfere with the production of masters for the label. Old record deals had very few stipulations in regard to merchandising, modern ones have many. They also spend pages outlining the labels rights to sue if the artist fails to meet the "delivery schedule"; usually an Album delivered within six months after the beginning of each Option Period is normal. This is in direct contradiction to Mr. Copeland's point above. No artist today can EVER take three years to deliver an Album (unless they are a superstar) without the label having the right to a say so.]
"This will result in (1) hesitation on the part of the labels to take on California artists with the same risks they were prepared to in the past, i.e., they will spend less money and pay lower royalties, and 2) they will sign fewer California artists. Any common sense historical and economic analysis would state that that would have to be the obvious result. I do not believe that can be good for California artists yet to climb on the ladder of success." [Untrue. Many contracts are executed in California but governed by New York law. This is a no brainer. The conclusion made above, that labels would truncate the signing of California artists plays less like speculation and more like a veiled threat by the cartel for Henley and Co. to back off.]
"If you were renting a house and knew you would almost certainly be asked to leave in 7 years, how much of your money would you use to make improvements and generally make it a better place to live?" [Answer: All of my money. Most young people do not live in the same house for even three years. If they knew they had seven they would probably spend their life savings to fix it up.]
"or that they only have a few albums so they should be careful what they spend. In a sense, I WANT to foster the view that they CAN afford to lose on this album (i.e., spend more than they should) and even the next ones BECAUSE they will eventually make it back on later albums." [Try applying the seven album example here. When was the last time any artist had seven albums on the same label? It was the late 1980's]
"Jay Cooper, a respected music business lawyer, couldn't bring himself to admit that record companies actually give money (advances) to artists." [He couldn't bring himself to "admit" it because it's not so. They never "give" money. It's "advanced" against future earnings.]
"Anyone who has tried to raise money for a new record company will tell you how incredibly hard it is for the precise reason that record company profits are not considered attractive enough to the investment community." [true, but there are plenty of rich kids out there with trust funds who want to own labels instead of going into the boring family business. Few are successful, Rick Ruben not withstanding]
"Don also stated that record companies had minimal risk as they cross-collateralize the albums of an artist and charged "everything" back to the artist. That had us gasping in shock and amazement! Wow! I had visions of artists actually whipping out checkbooks and paying for their videos, recordings, indies, etc. Wearing my record company hat I thought, 'Wouldn't that be great? if it were only true!" As an artist manager, I was horrified at the vision - the artist and, most probably, manager actually having to whip out their checkbooks and take financial risk for failure? Ouch!" [Sorry Miles, it does happen. Not standard and not to big stars, but it does happen that companies try to sell back masters that were "unsuccessful" to artists. And artists are often asked to support the overflow of budgets in their videos and recording budgets. It's specifically outlined that way in ALL five boiler plates of the five majors.]
"The artist gets dropped and is free to start again, clean and debt-free from the previous label." [Wow, is that ever untrue. If the artist is dropped- sure. But most are merely "suspended" indefinitely till they try to quit. Every group on a Big Five contract who has a single member who tries to leave or quit is dubbed a "leaving member" by the label and is still bound by the contract as a solo artist. That's recording contracts 101, and Miles should know it (i.e.: The Police – A&M, v. Sting -- A&M). Solo artists don't have it so easy either if they want off just because the label has decided not to release their CD. It can takes years to be totally free of the deal, after which the artist is not the spring chicken they were when they first signed.]
"I can then find a new label, make a better deal, because the artist is better known having had the benefit of promotion paid for by the previous record company." [Jees, I want Miles to manage me. Can he show us some examples of this theory in action. In 90 cases out of 100 if an artist is "dropped" (whatever that really means) no other major wants them. Sure they can get a deal on an indi, but that's not the same type of money or distribution.]
"This brings me to the chief subject of debate and the chief area of trying to knowingly or unknowingly obscure the truth. Hearing the Henley camp speaking, one would imagine there was one standard recording contract of multiple albums (7 or more) that artists had to agree to - even though it was unlikely artists would deliver this quantity in 7 years (the time personal services contracts are enforceable in California)." [Yes, that's Don's point, that a seven album deal usually takes ten years to fulfill]
"The truth is that there is no standard recording contract and the record companies would most certainly be pliable and open to fewer albums committed in a contract, if a corresponding reduction in risk was offered." [I have no idea what Miles is talking about here. There is a standard laundry list of common deal points: 12-14% of SRLP/130% of wholesale royalty , _ Statutory Rate, 10-14X Statuary controlled composition clauses, and--say it with me--7 albums/option periods. He must have hit his head this morning when he wrote this.]
"The theory from the artist's perspective (coming from the manager and/or lawyer) is that most artists fail early on, so term is irrelevant, and those artists who do succeed will have adequate opportunity to renegotiate anyway. [It is an undeniable fact that these days a successful artist almost always prefers to renegotiate his contract as soon as possible with large financial increases, in preference to sitting out the deal in hopes of a big payday in the future. Labels almost always cater to this artist desire, once they feel secure in an artist's success (hence reduced risk), as it is in their interests to have a happy artist." [Poppycock. Prefers? Yes. But that doesn't not mean that he is successful at it. These days the squat and renegotiate tactic is a fossil, particularly on Universal, who would rather suspend an artist in most cases than renegotiate, ala Courtney Love, Garbage, and others.]
"It is also true that labels need longer term (i.e., more albums) from their successful artists to help cover the losses from unsuccessful ones." [Is that why you can't name more than a small handful of artists singed in the last decade (i.e. since the major consolidation) who have actually released 7 albums to a single label? Labels clearly do not NEED seven albums to see a return. If they did they would make more artists deliver seven albums, instead of dropping them after an average of two albums.]
"This is why we have the graduated income tax in America." [I could write a book of libertarian philosophy to dispute that last comment. But I won't waste your time.]
"they too hate the practice and would like nothing better than to see it ended and NOBODY have to pay it." [untrue. The high cost has a benefit to the Big Five. It means their competition is prohibited from using the same service. This was outlined in Fredric Dannon's book "Hit Men." If Big Five labels wanted to get rid of these guys then they would only have to boycott them for about a year and they would radically adjust their prices.]
"It's costly if borne entirely by the label and radio play also benefits the other artist business (concerts, publishing, sponsorships, merchandising), which the label doesn't participate in, so some artist contribution would seem fair." [half-true. The label now governs ALL merchandising offers for the artist, including their right to own their virtual identify on the Net, and websites.]
"The whole issue of how many albums an artist should agree to depends as much on the artist and their representation as the record company." [Yes, but this misses the point. The issue is not about number of Albums, but the length of the deal.]
"Of course, the hotter the artist, the more the bargaining power. But there are other very potent bargaining chips. Reduce the up-front advance, the need for tour support, the need for an expensive video, for expensive recording costs and producers and you will see the royalty go up and the term decreased." [untrue. Royalties are usually between 12-17% of SRLP (before deductions) regardless of these factors. And royalties are not material to this issue anyway. Since the Advance is the only money most artists will ever see it's not worth sacrificing for back end bargaining power that they will likely never see.]
"At ARK 21, I have done one-offs with reversions when the artist delivers a finished album and asks for no up-front advance. Why? Because the artist bears much of the risk if the album fails, not just ARK 21. Fair is fair." [True, that is fair. I try to encourage the same in my negotiations. But most majors labels won't go for it.]
"There is no question that the rewards for artists now, compared to 20 years ago and even more, 30 years ago, are substantially greater and accounting practices now remarkably clean." [Relatively clean, not "markedly. Artists have faired better in royalties but have given up much ground in merchandising and branding. I'd say, when all things are considered, it's a bit better for artists now.]
"It was precisely Courtney's point that leads me to the view that, to some degree, the Henley camp DO understand that the inevitable result of their initiative is the decreased opportunities that will be available to new and as yet unsuccessful talent. In that regard, the initiative is anti-artist in a very real way, especially if you are the one deprived." [Sophistry. Courtney was talking about the fact that many artists are signed as favors and have no business being singed to majors in the first place. However, Miles makes a few good points here that should have been made clearer.]
"I could not agree with much else. Resorting to xenophobia" [big word that means "dislike of foreigners']
"that 4 of the 5 majors are foreigners, seemed strange as these "foreign" companies are, for the most part, staffed from top to bottom with American citizens and some have significant American shareholders anyway. Suggesting that they are "bleeding U.S. citizens" though colorful, is quite absurd." [Half a point for Miles on this one. They are staffed with Americans, but the money does go into foreign pockets.]
"xenophobia aside, international recording contracts, particularly French ones, would be far more to his liking in that recording costs, video costs and tour support, in addition to marketing, are ENTIRELY borne by the record companies and are NON-RECOUPABLE from the artist." [mostly true. South American labels as well. Two points for Miles]
"All print advertising, co-op advertising, in-store promotion, including listening booths and billboards, publicity, basic radio promotion, radio time buys and a host of other costs, are borne by the record company and not charged back." [untrue. It depends on the contract. I'd say in half the ones I've seen the costs are charged back. If they end up not being that way in the final draft it's only because the artist's lawyer or consultant has had the ingenuity to get it out of the deal.] Related MusicDish e-Journal Articles:
» The Seven Year Statute: The Label's Side with Miles Copeland, CEO of ARK 21 Records (2001-11-08)
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