This from the current LA Weekly. Everything evil you've ever believed about
the record biz is true, according to this, at least. Pretty amazing stuff. --
Neal Weiss
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The Suit
An Anonymous Executive Talks
by Sarah Luck Pearson
"You’re writing about dropping bands, right?" says a major-label president
who randomly answered his phone. "But I can’t do it. And you know why."
Later he agrees to a rare interview if his name is forever guarded in
anonymity and if none of his bands are examined. Arnold, as I’ll call him,
wants the description of a different man, black rectangles to mask his eyes
and an underwater TV gurgle attached to his voice. "I’m only doing it because
when we drop a band it means that we’ve failed them," he whispers. "And
because if I were you, this would be the article I would want to write."
A week later, Arnold’s face is hidden behind an ergonomic throne. Posters of
his victory bands decorate the walls. When he barks into the phone, "Yeah,
I’ll be happy to call the monster and argue with her — I love her," he sounds
momentarily happy, like a dog trying to get a ball out of a tight spot. That
the monster in question is extremely well known doesn’t make him sweat: He is
expert in diva resolutions. But you get the impression that his sleep is
fitful, that his vacations are slightly paranoid.
He has the alluring air of an uncle who has done well for himself but still
takes a moment to bounce you on his knee. It would be hard to hate him, easy
to hold his hand if he were in pain. You get the feeling he always has a long-
winded joke ready to tell and a closet not as spiffy as his title. "Listen,"
he pronounces, "I have a job to do, but my heart and soul are with the
artists." He pauses, allowing a long search in his eyes for sincerity, then
continues matter-of-factly. "Besides, it’s just a matter of time for me."
A phone rings on the other side of the wall, and he freezes, leaning forward
only when the sound stops. "But if I’m identified," he warns, "the stocks
would probably go down an eighth of a point, and they would go fucking
insane."
Above all, Arnold is intent on differentiating himself from other record kings
— he is a benevolent dictator, a personable ruler who gives out his home
number to bands, fights to give a dropped band their master recording back,
even drives elderly Democrats to the polls. "You’re getting a very liberal
account from me," he explains. "You should go to Tommy Mottola at Sony for the
real right-wing corporate point of view. But I almost don’t want to put you
through the misery. You see, if we had all the record-company presidents in
this room," he says, settling onto the couch, "I guarantee you I would be in
the minority."
Such an assembly of record presidents, he says, would be no Michael Moore
picnic: "It would be disgusting. Most of them don’t give a shit about artists.
Most of them spend more time choosing what cigar they’re gonna smoke than in
promoting an artist’s career."
Arnold, and in turn his label, is also in the minority on the pivotal subject
of band turnover: Whereas majors typically sign 20 to 30 new acts annually
with only the budget to market about six of them effectively, Arnold’s company
generally signs fewer bands. "I believe you shouldn’t just throw everything
against the wall and see what sticks, and then choose that. On the one hand,
it doesn’t usually work very well, and on the other hand, it’s very cruel to
the other artists."
He maps a devastating cycle: A&R shark attacks on new talent, he says, create
mammoth bidding wars (making it impossible for artists to later recoup
royalties); too many acts are signed, whittling away at the precious resources
of time, attention and budgets; the labels release too many records on top of
each other, and come fourth quarter, everybody is screwed. The labels haven’t
recouped their band advances, artist development has been snuffed out, and new
talent lands on the corporate chopping block under the mighty budgetary steak
knife ready to trim off the fat, their dream. "Without what we call
prioritization," he cautions, "the artist has almost no chance. Everybody gets
a little, which means that nobody gets enough. Therefore, everybody will
fail."
Arnold’s recommendation that bands sniff out how a label is investing their
time and look for a label that truly believes in them is only partially
helpful: What about the kid straight out of Wichita who hasn’t even broken
eight guitar strings yet— doesn’t it sound to him like they all believe?
Perhaps Arnold hasn’t been privy to the schmooze dinners where every ingenuous
rock fantasy is preyed upon by fast-dancing A&R blokes who were hired by their
stepfathers and live in the perpetual Goodfellas fantasy of "I can make ya or
break ya."
"Many artists are naive," he concedes. "They don’t know the difference between
someone who lies and someone who tells the truth. I’ve seen people who weren’t
interested in a band, got a demo, didn’t like it, and as soon as they hear
that three other labels want them, poof, they’ve gotta have them. It’s the
herd mentality. I can think of a couple record presidents who don’t lie, but
under them, that’s an interesting question."
Problem is, most musicians believe they’ve gotten their big break when they
sign. But few greenhorns are aware that only 5 percent of the signed ever
break big. And next to none understand that the sacred contract they’ve just
signed is the equivalent to taking out a loan at an exorbitant interest rate —
up to 66 percent — on something they will never own.
"We disabuse them pretty quickly of the notion that they’ve made it when they
sign," he says, his benevolent veneer wearing thin. "I don’t want to be
someone defending record companies, because they’re the scum of the Earth, but
the truth of the matter is that contracts tend to be very onerous to the
record companies."
And this is one of the good guys? In fact, record contracts tend to be onerous
to everyone except the record companies, which generally give the artist only
8 percent of CD earnings; the artist must pay back their advance out of that 8
percent before they see any profit. So, often years after the label has
recouped its expenses and is well into the black, the band is still trying to
pay its advance back. In the 101 of rockonomics, this means that only 41 cents
of each CD sold can go to paying the label back for the hundreds of thousands
of dollars advanced for the producer, recording, independent promoters, tour
support, living expenses, equipment, CD packaging, album artwork, videos.
(Subtract 15 percent for the manager, 5 percent for an accountant, 5 percent
for the lawyer and a spiffy sum to old Uncle Sam, and that hefty band advance
we read about in Pollstar suddenly shrinks to below the living wage.) Worse,
the goal post is movable: The more money the label spends, the further royalty
earnings are pushed into the future. A band can sell a stellar 1 million
records, grossing $4 million for the label, and against their $300,000 advance
(plus another $200,000 advance spent on promotion), the band ends up still
owing the label roughly $100,000. Not a penny in their pants, and if their
next record does well, they may still have to pay off their old debt.
Arnold’s earlier claim that his heart and soul are with the artists becomes
suspect when he dives deeper into the issue of contracts — the very heart and
soul in the anatomy of artists’ rights: He isn’t aware that the labels charge
a band $3 for a CD that costs a buck to make. He defends not paying the band
royalties for the thousands of CDs they give away as promotional material (all
the while charging them for costs), because he says other aspects of the
contract balance it out. He laughs in disbelief at the standard clause of only
paying artists three-quarters of a royalty on CDs because they are still
considered new technology (forget that CDs surpassed cassette sales back in
’92). He doesn’t even know what the "breakage clause" is — a nasty remnant of
vinyl days that allows a record company to deduct another 10 percent from
artists’ profits because some CDs could get broken in shipping (ever actually
try breaking a CD?). And on the final point of contractual rape — "cutouts,"
or the unsold CDs shipped back to the label from record stores, which are then
unloaded into record clubs, mom-and-pop stores, or recycling plants, without
the artist ever being paid any royalties — our conversation hardens into near
argument.
"So maybe we can sell them by the pound to someone for next to nothing," he
says, his hand waving dramatically in the air. "There’s nothing there —
really, pennies."
But many feel that these very pennies form a lucrative black-market trade.
Moses Avalon, in Confessions of a Record Producer: How To Survive the Scams
and Shams of the Record Business, is among the critics: "Obviously a record
company can’t pay the standard royalty to an artist when they’re selling the
merchandise at below cost," he writes. "However, when cutout sales topple
mainstream sales, it starts to smell fishy. In the 1980s, the major labels
sold an estimated 200 million records a year as cutouts! It makes you wonder
how hard they pushed to sell the record in the initial release."
Arnold may be as good as it gets for a major-label president, but his
benevolent face transforms as he continues to defend label contracts — a bully
negotiator twinkles in his eyes, bottom-line profits suddenly clouding his
compassion, his very face slackening around words like recoupability, royalty,
standard clause. He is gross talking gross profits. He says net and I see him
suspended above, musicians flailing in a free fall below.
"So let’s talk about lifestyle," I interrupt.
"You mean how much more Bono makes than me?" he laughs.
I remind him that only 5 percent of recording artists live well, then ask him
the real question. There’s a long pause, the kind where you feel someone
switching mental CDs on you. "I make a seven-figure salary," he finally says.
"And I’ll tell ya, when I was starting out, I used to think you should take
these record executives with these big salaries and line them up against the
wall and shoot them. I was making no money in the beginning, and suddenly I
came here and was in the money economy — more than I ever thought I would make
in my life I was making in one year. I was in shock. But I was working for
people that made more, billions of dollars a year. And they were complaining
how poor they were, and I thought to myself, my God, if I ever fall into this,
just kill me. Is there any reason to make your life this? You have to buy
$2,000 suits and live in palatial mansions because, God forbid, someone under
you lives in a nicer place than you. And that mentality permeates the upper
echelon of the record business."
"So would you shave a zero off your salary to give health care to every artist
you sign?"
There’s a long pause. "I’ve never thought about it, but probably not. In fact,
I absolutely wouldn’t. If I were making eight figures," he giggles, "I might."
In the lower echelon of the record business — the land of Three-Day Notices To
Quit the Premises and hocked guitars — $2,000 suits could be mirrored against
the $2,000 doctor bill of a local musician who hit black ice outside of Grand
Rapids and lost control of the tour van. His $20 tour per-diem from the label
wouldn’t cover the months he spent on his back. And suddenly the talent
they’re relying on — the very Product — is broken.
"No, the talent we’re relying on has health care," he counters. "The others
just have an opportunity, and if it’s accepted by the public, they’ll have
their retirement, their health care, and become fabulously wealthy beyond
belief."
How can his liberal conscience justify a system where only the wealthy are
rewarded with basic social services? "Listen," he whispers, looking furtively
to the shut door, "the only thing that’s allowed me to forgive myself is that
no artist has come to me asking for health care and I’ve said no." He eyes the
reeling tape recorder, sighs, then takes the plunge: "I’m fucking dead if this
ever gets out that it’s me," he breathes, "but if an artist asks for health
care in his contract and we want him badly enough, we give it to him. I don’t
think lawyers are going to push for it, because they don’t get a commission.
But after artists see this article, believe me, they’ll ask for it. And it
will make the corporate heads go crazy."
Then he gets mad: "You have to understand that the entire record business is
now run by minds that are not pioneers, but minds of accountants. We are all
now responsible to people that do not have innovative, artistic values, minds
and spirits, but spend most of their time working on projections, budgets! The
best talents in the record business are just basically working for Wall
Street! And they try to bribe us to go along with the whole corporate thing by
giving us stock options. It doesn’t matter that you have a salary, ’cause this
is worth much more. You walk around record companies and look into the major
executives’ offices, and they’ve all got CNBC on their TV or on their
computer. That’s all they’re thinking about all day — their share price and
their option! It’s the scariest, most horrifying thing that is so antithetical
to anything having to do with art. It’s just plain sickening . . . sickening."
He has sunk back into the couch now, exhausted. His voice swollen with defeat,
he’s gazing over my shoulder, saying that it wasn’t like this before, it was
about music. "It’s impossible to fight," he says. "You know, at one time I was
interested in changing things, but not anymore. It’s just disillusion now."
Before his life got palatial, before stocks and cigars became music’s fiscal
accessories, Arnold did have the strength for battle. But now it comes out
like a dying wish he whispers into the ear of a trusted aide: "If I did have
the fire of when I was younger," he says slowly, "I would try to hasten the
demise of this corporatization. Because it will happen — sooner or later the
most interesting and most powerful artists will realize that this isn’t the
place for them, and they will create their own environment. The Internet will
be an amazing way for artists to directly distribute their music. When I look
into the future, there will be less and less power for us middlemen. We will
be extinct."
The secretary slips in with a mound of papers to sign. "Arnold," I say
quickly, "when you meet a young musician with such great talent that you know
is going to be chewed up alive, why not just tell them what you know?"
He looks up, his hand signing without him. "I do tell them, honey."
"Then you feel less guilty if they fail?"
"When they fail."
