The fat-cat jukebox
A spat over a Deep Purple live CD is a potent reminder of record companies' priorities
Tom Robinson
Saturday March 3, 2007
The Guardian
The jibe by Deep Purple vocalist Ian Gillan about "opportunistic fat cats" seems to have had the desired effect. This week Sony BMG recalled their recording of his band's "worst gig ever", while issuing a handsome apology for ever releasing it. So that's all right then.
This money-for-old-rope episode is a useful reminder of exactly whose interests record companies - and their trade association, the British Phonographic Industry - exist to serve. Obviously not the consumer's. Even in the internet age, albums are still more expensive in Britain than almost anywhere.
Three years ago the BPI invoked copyright law to prevent online retailer CD-Wow selling perfectly legitimate albums they'd imported from Hong Kong - forcing them to hike album prices by £2. Last month they took the company to court again for flouting this injunction.
"Contrary to some reports," said BPI lawyer Roz Groome, "this case is nothing to do with price." Or indeed with blatant protectionism. Her team singled out the trader's offence of "selling the Live Aid DVD at half price". A canny choice - to remind us of the record companies' charitable nature, as the heartless CD-Wow steals food from the mouths of African babies.
It just won't do. Take iTunes - where a download costs you and me 79p compared with 50p for US residents. Tax is cited as one reason, but the other, as we all know, is that 79p is the smallest amount UK record companies would settle for. Nor is it to protect the interests of British musicians and composers. Out of that 79p, the person who actually wrote the song gets just 6p to share with their publisher. Even the credit card company sees 7p per individual download, while Apple takes about 12p for administration costs.
The remaining 54p goes to the record company, which assigns a share to the recording artist, typically 6p-12p. This may seem stingy, but wait, it gets better. Almost all recording and promotion costs are recouped from the artist's modest share of the earnings.
What's left (about half the retail price) is pure gravy for the big institutions which own today's major labels. With iTunes there are no pressing, storage or distribution costs - even the accounting is done by Apple. Record execs claim that fat margins are needed to cover the risk of investing in new artists. But do the sums. Say a label risks advancing you £100,000 to record and promote your new album. Let's say (for simplicity) it's sold only on iTunes, at a cost of £7.90, and that your royalty rate is 10% of that price. Result: for each album sold, the label receives £5.40 and knocks just 79p off your £100,000 debt.
At 20,000 sales the label has broken into profit and made £8,000. You still owe them £84,200. At 50,000 the label has made £170,000 while you owe them £60,500. At 100,000 the label's profit is £440,000. You still owe £21,000. Only at 130,000 do you finally recoup and earn £2,700 in royalties. The record company has meanwhile made nearly £600,000.
The example is simplified and all sums quoted include VAT. Actual figures will vary, yet the picture is broadly accurate. Very few artists ever see a penny in record royalties - most of their income comes from touring, merchandise, publishing and radio play.
You might imagine that, having paid for their recordings while under contract, artists would at least own them afterwards. Not a bit of it. Recordings made during the contract period almost always belong to the record company, to do with as they please. If Ian Gillan and Deep Purple hadn't been famous enough to kick up a stink, no copyright laws or high court injunction would have prevented Sony BMG from flogging that awful album without their consent.
· Tom Robinson is a songwriter, broadcaster and teacher
Tomrobinson.com/stand
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