“Gifting” Music: A Victimless Crime? By: Moses Avalon

January 25, 2012 by Dagan White

WHO REALLY PAYS TO SAY THANKS FOR THE MEMORIES?

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Last week I was at a bar mitzvah for cousin number 612; it was the usual bad food and geeky Hava Nagila dancing, but since I was going to be speaking to a packed room of DJs in the near future at the annual Mobile Beat conference in Las Vegas, I decided to pay closer attention to that person behind the laptop. After countless toasts the party was dying down and I noticed something that made me want to upchuck my matzo ball soup. The DJ handed the honoree’s dad (who is fronting the bill for this $10,000 rite of passage) a CD. And what do you think was on that CD? The music played at the party. I moved closer, about to whip out my artists’ rights advocate card and lay a speech on him, but as I neared I overheard what the DJ was telling the Dad: “I’ll have the video done in a week and send you the DVD.”
A DVD? You mean a DVD with video of the people dancing to MUSIC? Music that is not licensed for CD distribution? Know, it’s done every day, and always with a good intent: to give the client that special sense memory of the event, to teleport them back via the music-of-the-moment, any time they want. But is giving a client a mix CD of the event they in fact paid for, legal? And if it’s not legal, is it victimless? Or are DJs’ the greatest lovers of music I can think of? By engaging in this practice, actually helping to destroy the very art form that permits their existence?
Bottom line: When you gift a mix-tape to a client do you think yourself a thief? Probably not.

WHO CARES?
So I approached the DJ after the dad walked away with the contraband and asked him if he felt that this was ethical. You can guess what he said: “All those artists make so much money, what’s the big deal if I steal a couple of their songs?”
Well, aside from the obvious holes in this philosophy (that it’s not wrong to steal from the rich because they won’t miss the money), what if the theory were based entirely on a false assumption? What if DJs were, in fact, stealing from people who, in many cases, make less than themselves?

REALITY CHECK
I supplied a few charts for this article. One shows where the money goes for each album sale. As you can see in chart 1, the artist makes about 70 cents for legal purchases of a full album, and that is presuming that the album sells for the full clip of $13 to $15. Most sell for far less, and of course for the albums that are sold through used outlets, like Amoeba Records, artists get zero.
The average “successful” artist these days sells about 300,000 units a year. The “all-in” royalty (which includes the producer?s cut) is about $3.00. After the producer is payed their share, the artist is left with about $2.00 a unit. So in this scenario the artist grosses roughly $600,000 for a hot record that yielded millions for the label.
But that’s the just the beginning of the bad news. About 30% goes to various team members, like managers, lawyers, etc., leaving about, $420,000?pre tax. After your silent partner, the IRS, takes its 40% cut, you’re looking at about $252,000. Then you have to chop that with the members of the band, leaving about $63,000 per player if you have four members in the group.
And these are the success stories. I did a piece on the Vegas odds of ever getting paid on a major label that can be read here: http://www.mosesavalon.com/mosesblog/ 2511/uncategorized/what-are-theCHART 1
Are DJs, by engaging in this practice, actually helping to destroy the very art form that permits their existence?

Before you start saying things like, “What about touring and publishing?” In the interest of page space, suffice to say that most tours lose money or break even at best and publishing may be a lot more money (if the song is a radio hit and assuming the artist wrote the song) but you?d be surprised how many more splits with middlemen and co-writers find their way into the songwriter mix. (I give complete breakdowns of all revenue my book Confessions of a Record Producer.)
All-in-all, for the recording itself, the average pro DJ sees more cash, carts less gear around and takes far fewer risks for their fame & fortune than even the average professional recording artist. Why?

STATE OF THE BUSINESS
Since 2005 sales of albums have steadily deteriorated from something just shy of 1 billion units a year, to about 350 million, in 2010. (An all-time decade low.) And while it’s true that a good deal of the lost revenue has been made up by new digital licensing, the justification for
six and seven-figure salaries these days has come from cutting costs; in essence, firing half the outmoded, nepotism-induced lower management
who have traditionally worked at major labels. The reality is also that labels execs have been very adept at keeping the artist’s royalty at extremely suppressed rates, especially when compared to the music biz boom of the late 1980s. Back then, Top 40 artists made about the same as they do today
(adjusted for inflation) but today that same category of artist is selling way less product. Look at the other charts (2 and 3) I provided. It shows that since 1985 (almost 30 years ago) salaries at major labels have stayed constant for just about every category, from entry level to senior vice president.
One category stands out as having seen exponential increases way beyond inflation: the CEOs. They have managed to triple their take-home.
I suppose if you’re a “job creator” you could easily argue that you deserve your bump. After all, a CEO’s paycheck is valued at how much they improve the bottom line by either making, or saving, the company money, not if they make great music, or even how many hours they work, shows they play, or records they sell Unfortunately, for a creative business, this can be short sighted. If you keep gutting your company’s coffers and avoid reinvesting it in development, one day you find that you have nothing new to sell.
So, while declining CD sales have hurt artists, it has not really hurt the executives who finance and market the music and who control the copyrights. In other words when a DJ gives away music he or she is not hurting the label fat-cat, but is literally taking money out the pocket of those who are already not seeing what they deserve for the distribution of their work.
“Gifting” music has real victims. You cannot see them in most cases, but if a DJ doesn’t start respecting the cost for making and marketing what they use to build a livelihood, someday, soon there will only be old, free music to spin; which means no new hits backed by the major marketing machine that makes a tune worth spinning in the first place.
There are several ways DJs can protect themselves and their clients when giving away the DVD freebies. Who wants an RIAA lawsuit, right? I?m out of page space here, but in my keynote in February, I’ll show you what they are. But, as for the so-called “mix tape,” that has the isolated music…giving that away is pure piracy. Think it over. I’ll see you in February.
Vegas, baby! Mo out. MB

Moses Avalon is one of the top music business experts in the country. During 30 years in the business, he has focused on helping artists protect their rights. His top-selling books, Million Dollar Mistakes and Confessions of a Record Producer are required reading in over 50 music business courses, including those at UCLA and NYU. His latest book is 100 Answers to 50 Questions on the Music Business. A wealth of music industry info, resources and commentary can be found at www.MosesAvalon.com and his blog, Moses Supposes.

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Dagan White (27 Posts)


Filed Under: Issue #140