The Heavenly Jukebox
Part III
by
Charles C. Mann
They're Paying Our Song
EVERY year Austin, Texas, hosts South by Southwest,
the nation's biggest showcase for independent rock-and-roll. Hundreds of bands
play in the city's scores of enjoyably scruffy bars, which are thronged by young
people with the slightly dazed expression that is a side effect of shouting
over noisy amplifiers. When I attended the festival this spring, I was overwhelmed
by the list of bands -- almost a thousand in all, most of them little-known
hopefuls. I had no idea how to sort through the list for what I would like.
Luckily for me, I ran into some professional music critics who allowed me to
accompany them, which is how I ended up listening to the Ass Ponys late one
night.
Led by a husky singer and guitarist named Chuck Cleaver, the Ponys crunched through a set of songs with whimsical lyrics about robots, astronauts, and rural suicide. At the back of the room, beneath an atmospheric shroud of cigarette smoke, was a card table stacked with copies of their most recent CD, Some Stupid With a Flare Gun. By the bar stood a tight clump of people in sleek black clothing with cell phones the size of credit cards. With their Palm hand-helds they were attempting to beam contact information at one another through the occluded air. They didn't look like local students, so I asked the bartender if he knew who they were. "Dot-commers," he said, setting down my beer with unnecessary force.
Silicon Valley had overwhelmed South by Southwest.
In a festival usually devoted to small, colorfully named record labels with
two-digit bank balances and crudely printed brochures, the slick ranks of the
venture-capitalized were a distinct oddity. It was like a visitation from a
distant, richer planet.
Music, especially popular music, has been a
cultural bellwether since the end of World War II. Swing, bebop, blues, rock,
minimalism, funk, rap: each in its own way has shaped cinema, literature, fashion,
television, advertising, and, it sometimes seems, everything else one encounters.
But the cultural predominance of the music trade is not matched by its financial
import. Last year the worldwide sales of all 600 or so members of the Recording
Industry Association of America totaled $14.5 billion -- a bit less than, say,
the annual revenues of Northwestern Mutual Life Insurance. As for the tiny labels
at South by Southwest, many of the dot-coms in attendance could have bought
them outright for petty cash.
After the show I asked Cleaver if he was concerned
about the fate of the music industry in the Internet age. "You must be
kidding," he said. With some resignation he recounted the sneaky methods
by which three record labels had ripped off the band or consigned its music
to oblivion, a subject to which he has devoted several chapters of an unpublished
autobiography he offered to send me. (He had nicer things to say about his current
label, Checkered Past.) Later I asked one of the music critics if Cleaver's
tales of corporate malfeasance were true. More than true, I was told -- they
were typical. Not only is the total income from music copyright small, but individual
musicians receive even less of the total than one would imagine. "It's
relatively mild," Cleaver said later, "the screwing by Napster compared
with the regular screwing."
Although many musicians resent it when people
download their music free, most of them don't lose much money from the practice,
because they earn so little from copyright. "Clearly, copyright can generate
a huge amount of money for those people who write songs that become mass sellers,"
says Simon Frith, a rock scholar in the film-and-media department at the University
of Stirling, in Scotland, and the editor of Music and Copyright (1993). But
most musicians don't write multimillion-sellers. Last year, according to the
survey firm Soundscan, just eighty-eight recordings -- only .03 percent of the
compact discs on the market-accounted for a quarter of all record sales. For
the remaining 99.97 percent, Frith says, "copyright is really just a way
of earning less than they would if they received a fee from the record company."
Losing copyright would thus have surprisingly little direct financial impact
on musicians. Instead, Frith says, the big loser would be the music industry,
because today it "is entirely structured around contracts that control
intellectual-property rights -- control them rather ruthlessly, in fact."
Like book publishers, record labels give artists
advances on their sales. And like book publishers, record labels officially
lose money on their releases; they make up for the failures with the occasional
huge hit and the steady stream of income from back-catalogue recordings. But
there the similarity ends. The music industry is strikingly unlike book publishing
or, for that matter, any other culture industry. Some Stupid With a Flare Gun,
for example, contains twelve songs, all written and performed by the Ass Ponys.
From this compact disc the band receives, in theory, royalties from three different
sources: sales of the disc as a whole, "performance rights" for performances
of each of the twelve songs (on radio or MTV, for instance), and "mechanical
rights" for copies of each song made on CD, sheet music, and the like.
No real equivalent of this system exists in the print world, but it's almost
as if the author of a book of short stories received royalties from sales in
bookstores, from reading the stories to audiences, and from printing each story
in the book itself. The triple-royalty scheme is "extraordinarily, ridiculously
complex," says David Nimmer, the author of the standard textbook Nimmer
on Copyright. Attempts to apply the scheme to the digital realm have only further
complicated matters.
As a rule, the royalty on the CD itself --
typically about $1.30 per disc before various deductions -- goes to performers
rather than composers. After paying performers an advance against royalties,
as book publishers pay writers, record labels, unlike publishers, routinely
deduct the costs of production, marketing, and promotion from the performers'
royalties. For important releases these costs may amount to a million dollars
or more. Performers rarely see a penny of CD royalties. Unheralded session musicians
and orchestra members, who are paid flat fees, often do better in the end.
Paying back the record label is even more difficult
than it sounds, because contracts are rife with idiosyncratic legal details
that effectively reduce royalty rates. As a result, many, perhaps most, musicians
on big record labels accumulate a debt that the labels -- unlike book publishers
-- routinely charge against their next projects, should they prove to be successful.
According to Whitney Broussard, the music lawyer, musicians who make a major-label
pop-music compact disc typically must sell a million copies to receive a royalty
check. "A million units is a platinum record," he says. "A platinum
record means you've broken even -- maybe." Meanwhile, he adds, "the
label would have grossed almost eleven million dollars at this point, netting
perhaps four million."
As a standard practice labels demand that musicians
surrender the copyright on the compact disc itself. "When you look at the
legal line on a CD, it says 'Copyright 1976 Atlantic Records' or 'Copyright
1996 RCA Records,'" the singer Courtney Love explained in a speech to a
music convention in May. "When you look at a book, though, it'll say something
like 'Copyright 1999 Susan Faludi' or 'David Foster Wallace.' Authors own their
books and license them to publishers. When the contract runs out, writers get
their books back. But record companies own our copyrights forever."
Strikingly, the companies own the recordings even if the artists have fully compensated the label for production and sales costs. "It's like you pay off the mortgage and the bank still owns the house," says Timothy White, the editor-in-chief of Billboard. "Everything is charged against the musician -- recording expenses, marketing and promotional costs -- and then when it's all paid off, they still own the record." Until last November artists could take back their recordings after thirty-five years. But then, without any hearings, Congress passed a bill with an industry-backed amendment that apparently strips away this right. "It's unconscionable," White says. "It's big companies making a naked grab of intellectual property from small companies and individuals."
The other two kinds of royalties -- performance
and mechanical rights -- go to songwriters and composers. (The Ass Ponys receive
these because they write their own songs; Frank Sinatra did not, because he
sang mostly jazz standards.) Songwriters receive performance-rights payments
when their compositions are played in public -- executed in concert, beamed
over the radio, sprayed over supermarket shoppers from speakers in the ceiling.
Individual payments are calculated through a complex formula that weighs audience
size, time of day, and length of the composition. In the United States the money
is collected primarily by Broadcast Music Incorporated and the American Society
for Composers, Authors, and Publishers, known respectively as BMI and ASCAP.
Mechanical rights derive in this country from the Copyright Act of 1909, which
reversed earlier court rulings that piano rolls and phonograph recordings were
not copies of music. Today the recording industry pays composers 7.55 cents
for every track on every copy of every CD, pre-recorded cassette, and vinyl
record stamped out by the manufacturing plants. The fee is collected by the
Harry Fox Agency, a division of the National Music Publishers' Association,
which represents about 23,000 music publishers. In 1998 performance and mechanical
rights totaled about $2.5 billion.
Because U.S. labels, publishers, and collecting
societies do not break down their cash flow, it is difficult to establish how
much of the $2.5 billion American songwriters actually receive. But in an impressively
thorough study Ruth Towse, an economist at Erasmus University, in Rotterdam,
ascertained that in Britain from 1989 to 1995 the average annual payment to
musicians was $112.50. Musicians in Sweden and Denmark made even less. Although
the system in the United States is different, the figures, as Towse drily observed,
"do not suggest that performers' right considerably improves performers'
earnings."
A few composers -- the members of Metallica,
for instance, who perform their own songs -- do extremely well by copyright.
But even some of the country's most noted performers and composers are not in
this elect group. Among them was Charles Mingus, who wrote and played such now-classic
jazz pieces as "Goodbye Pork Pie Hat" and "Better Git It in Your
Soul." According to Sue Mingus, his widow and legatee, "Charles used
to joke that he wouldn't have recognized a royalty check if it walked in the
door." She meant royalties on record sales; Mingus did receive checks for
performance and mechanical rights. But when I asked what Mingus's life would
have been like without copyright, she said, "It would have been harder.
He took copyright very seriously. But what kept him going financially was that
he toured constantly." Few rock performers have this alternative: their
equipment is so bulky and expensive that their shows can lose money even if
every seat is sold.
Musicians, who are owed many small checks from
diverse sources, cannot readily collect their royalty payments themselves. Similarly,
it would be difficult for radio stations to seek out and pay every label and
publisher whose music they broadcast. In consequence, there are powerful incentives
to concentrate the task into a small number of hands. Further driving consolidation
is the cost of marketing and advertising. Promotion is expensive for book publishers
and movie studios, too, but they aren't trying to place their wares on the shrinking
playlists of radio-station chains and MTV. Because singles effectively no longer
exist, playlists are not based on their sales; songs on the radio function chiefly
as promotional samples for CDs. Instead playlists are based on criteria that
people in the trade find difficult to explain to outsiders, but that include
the expenditure of large sums for what is carefully called "independent
promotion" -- a system, as Courtney Love explained, "where the record
companies use middlemen so they can pretend not to know that radio stations
... are getting paid to play their records." Although Love didn't use the
word, the technical term for paying people to play music is payola.
Payola wasn't always illegal, and similar schemes
still aren't in many industries: consumer-products firms, for example, pay supermarkets
"slotting allowances" to stock their wares. According to the author
and historian Kerry Segrave, one early payola enthusiast was Sir Arthur Sullivan,
who in 1875 paid a prominent singer to perform one of his compositions before
music-hall audiences. Until his death Sullivan sent a share of his sheet-music
royalties to the singer.
Although the payola market thrived in the vaudeville
era, it did not become truly rapacious until the birth of rock-and-roll. Chuck
Berry divided the royalties from his hit "Maybelline" with two DJs.
Dick Clark, the host of American Bandstand, had links to a record company and
several music publishers. After a chest-thumping congressional investigation,
highlighted by appalled evocations of the evils of rock-and-roll, anti-payola
legislation was passed in 1960. The labels outsourced the practice to "independent
promoters," a loose network of volatile individuals with big bodyguards
and special relationships with radio stations. Millions of dollars went for
payola -- much of it recouped from artists' royalties. A second wave of investigations,
in the 1980s, did not end the practice.
At present the music industry is dominated
by what are called the five majors: Warner, Sony, EMI, BMG, and Universal. (Warner
and EMI have announced plans to combine; the joint label will become part of
the merged America Online and Time Warner.) The majors control about 85 percent
of the market for recorded music in this country. They do this by routinely
performing the paradoxical task of discovering and marketing musicians with
whom a worldwide body of consumers can form relationships that feel individual
and genuine. "You want to fill up stadiums with people who think that Bruce
Springsteen, the voice of working-class America, is speaking only to them,"
says David Sanjek, the archives director at BMI and a co-author, with his late
father, of American Popular Music Business in the 20th Century (1991). "The
labels are often incredibly good at doing this."
Music critics frequently sneer at the practice
of manufacturing pop concoctions like Britney Spears and the Backstreet Boys.
But in this way the labels helped to create Elvis, the Beatles, and the Supremes
-- musicians who embodied entire eras in three-minute tunes. As Moshe Adler,
an economist at Columbia University, has argued, even listeners who grumble
about the major-label music forced on them are probably better off than if they
had to sort through the world's thousands of aspiring musicians on their own.
But this benefit to consumers comes at a cost to musicians. Records that are
hits around the world inevitably draw listeners' attention from music by local
artists that might be equally pleasing. "The money is made by reducing
diversity," Adler says.
For better or worse, the star-maker machinery
behind the popular song, as Joni Mitchell called it, is the aspect of the music
industry that would be most imperiled by the effective loss of copyright to
the Net. If the majors can't reap the benefits of their marketing muscle, says
Hal Varian, an economist and the dean of the School of Information Management
and Systems, at Berkeley, "their current business model won't survive."
The impact on their profits could be devastating. Musicians have much less to
lose, and much less to fear.
Continued...
(The online version of this article appears
in four parts. Click here to go to part one, part two, or part four.)
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Charles C. Mann is a correspondent for The Atlantic. His article about copyright
in the Internet age, "Who Will Own Your Next Good Idea?" (September,
1998, Atlantic), was a finalist for a National Magazine Award.
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Copyright © 2000 by The Atlantic Monthly Company. All rights reserved.
The Atlantic Monthly; September 2000; The Heavenly Jukebox - 00.09 (Part Three);
Volume 286, No. 3; page 39-59.