The Big Steal
It is a while since I have written about the inequities of the music business (Spit! Spit!) which sadly occupy too much of my life – so let me introduce you all to what I shall term the Big Steal.
We are currently involved in an ongoing court case which centres upon how royalties should be calculated on new technologies. This has taken me back to our renegotiations with EMI in 2003. At the time the new technology was downloads, and EMI wanted to pay for downloads at their existing CD royalty – which was 16%, with a 25% packaging deduction on 90% sales. (A royalty rate, which, if we calculate all the deductions and are open and not opaque, is really 10.8%.)
I pointed out at the time that this was a massive profit-grab. On a CD, from their roughly 90% of the income, EMI have to make a CD, make the packaging, warehouse it, distribute it, deal with breakages, returns and overstocks, send out physical promotional copies, and pay publishing to the writers. Conversely, if EMI retained 90% of the income from a download, from their share they would have to…um…pocket it all and call it all profit. To be strictly accurate, in US and Canada they would also have to pay the publishing.
I countered that, as they were simply receiving money from a third party (such as iTunes) who were doing all the work, this should really be treated as third party license – and the correct split was at worst 50/50 between the two parties, but ideally 75/25 in favour of the artist.
So we had two massively different proposals. EMI were effectively proposing that they should retain 90% of the money, while paying 10% to the artist. I was proposing EMI should retain 25% while paying 75% to the artist.
The good news from our perspective was that the negotiation fell apart and we gained control of the King Crimson catalogue. But guess which approach (admittedly with some modest improvements to the royalty rate) became industry standard?! From where I sit, it seems that with each new technology – vinyl to CD, CD to download, download to streams, the big steal goes on with labels seeking to increase their share of the pie while doing less and less.
Rant over. That feels better. Back to work.