The Real Cost of Making Music: Why Respect for Copyright Matters

Stephen Carlisle January 28, 2016

It’s becoming clearer that streaming, the supposed “savior” of the music business, is not up to the task. Despite millions of songs being made available at a low cost or even free, music piracy continues to increase. ¹ A recent study found that music piracy increased 16.5% in the second half of 2015 in comparison to the first half of 2015. ² As this article succinctly states, it seems that people love music, they just don’t want to pay for it. ³

“Artists who speak out against streaming services are often dismissed as whiny millionaires upset that they can’t add further to their fortunes. What does not appear to be understood is that the revenue earned from record sales is what allows labels to invest in the next generation of emerging artists.”

Precisely. As well as the fact that a musician who cannot earn a living stops being a working musician. The “progress of the useful arts” designed to be promoted by the Copyright Act, comes to a grinding halt if no one respects the copyright of a musician enough to pay a piddling $1.29 for a download from iTunes.

I spent 26 years in private practice as an entertainment attorney, and my clients were primarily in the music business. So come along and see how the music business actually works, how it’s supposed to work, and how respect for copyright is the foundation on which it all rests.

Meet Charlie Mars. ⁴ Never heard of him? Me, neither. But Wall Street Journal ran a very telling article about him which provides a lot of insight.

He used to be signed to a record label, way back in 2004. The label was V2, founded by Richard Branson, one of the richest men in the world. ⁵ When Charlie signed, he was paid $250,000 and a monthly stipend of $5,000.

Aha! Rich whiny musician! That’s an awful lot of money!

It is a lot of money. But it’s not income to Charlie. This is a loan to Charlie by the record company, which is to be paid back to the label through the sale of records. This is what is known as an “advance against royalties” in the music business, and Charlie must use these funds to write and record the first album, as well as paying the rent.

He made the record. It sold 15,000 copies. A huge flop. The label dumped him. ⁶

So let’s do a little math here. Add his $60,000 a year living expenses stipend plus the $250,000 recording fund, this totals $310,000.

Which is a sum the record company is never going to be repaid. It bet $310,000 on Charlie Mars. And lost.

This is what record companies are supposed to do. Find new talent and invest in them. When music sales are thriving, they can afford a few misses or give the musician time to find and develop his fan base. When music sales are off, and they are down 62% since 1996, ⁷ these investments do not happen because the finances will no longer support it. This is precisely what has happened. As reported by Digital Music News, for the first time in the history of recorded music, in 2015, sales of catalog albums (more than 18 months old) outsold newly released albums. ⁸

“This fact is inescapable: newer artists (and their newer albums) cost a lot more money to produce, and their failure rate is obviously higher. Younger artists also have younger fans, a group that is far less likely to buy albums (or pay anything at all).” ⁹

And don’t get me started on the kid with a $1,200 MacBook Pro and a $50 a month high speed internet connection who thinks that $1.29 is too much to pay for a song.

But you can tour to make back the money! You can sell T-Shirts!

To which I reply: “Do you have any idea how expensive it is to tour?”

I had the good fortune to count Leon Wilkeson of Lynyrd Skynyrd as one of my clients. I learned a lot about the touring business from watching them operate. For a Skynyrd concert to go on, there are seven guys in Lynyrd Skynyrd, plus two lady back-up singers. Then there are these helpful people who help put the show on:

• Tour Manager
• Road Manager
• Assistant Road Manager
• Tour Accountant
• Production Manager/ House Sound Engineer
• Lighting Designer/ Director
• Production Assistant
• Stage Manager
• Wardrobe Personnel (2)
• Guitar Technicians (2)
• Piano Technician
• Drum Technician
• House Sound Technician
• Monitor Mixer
• Lighting Technicians (4)
• Rigger
• Carpenter
• Bus Drivers (4)
• Truck Drivers (4)

That is a total of 39 people. Now consider that every single one of these people must be fed and either housed or transported every day that the tour runs, which for this particular tour, lasted two months. So take your last vacation, figure out what it cost you, then make it last two months, add in 35 extra people, and you’ll begin to see how the expenses mount up. And we haven’t even started to figure in the amount you will have to pay the crew and drivers to actually perform their services.

But this is Lynyrd Skynyrd we’re talking about here. They are the biggest selling rock band in the history of MCA Records, (and yes, this includes The Who). They can reliably depend on the fact that thousands of people are going to turn up for their shows. They can also reliably depend on hucksters selling bootleg T-shirts outside their concert venues as well (trust me, I know). And so will you if your band achieves any kind of name recognition, which kind of puts a dent in the whole “you’ll make up the money selling t-shirts” argument.

But what if you’re not Lynyrd Skynyrd? What if you’re… Charlie Mars?

You still tour, because it’s the only way you can make money. And forget two months on tour, Charlie pretty much has to tour constantly. ¹⁰ And forget the roadies. Heck, forget the band. He can’t afford any backing musicians. He performs solo. ¹¹ To make a CD, it costs him $25,000 to $40,000 each. He made a video which cost him $10,000. ¹² These were partially funded through Kickstarter campaigns. Sound like a glamorous, wealthy existence to you?

There used to be an old music business saying that “touring sells records,” and that was why you toured for so long. Now, your record is simply a loss leader for your concerts.

And what if you get sick or hurt, and can’t tour? What happens then?

My client Leon was in the famous Skynyrd plane crash that killed Ronnie Van Zant, Steve Gaines, and several others. He told me he doesn’t remember the crash at all. But he spent months in the hospital and was the most severely injured person in the crash that survived. At least he had his record royalties to fall back on, because this was pre-internet and people didn’t take your songs without paying for them. Besides, being in the hospital for months on end with multiple broken bones and a diaphragmatic hernia (this is where all of your internal organs have been squished into your ribcage) kind of puts a dent in the whole “you’ll make the money back touring” business model.

And let’s not forget Buddy Holly and Ritchie Valens, dead in a plane crash while on tour, or Cliff Burton of Metallica, killed in a bus crash while on tour, or Gloria Estefan, badly injured in a bus crash while on tour.

Or, as this columnist in the New York Times stated:

“Every couple of months, I see another post in my Facebook feed about a band that was cut off by an 18-wheeler or skidded on a patch of black ice and rolled their van into a ditch. Some members are injured, and they’re launching a Kickstarter campaign to pay for medical bills and to get back on their feet.

My heart (and often, money) goes out to them. But if you need to crowdfund your hospital costs, you were never on your feet to begin with.” ¹³

And further:

“Last summer, Foo Fighters’ Dave Grohl was forced to cancel shows when he fell from a stage in Sweden and broke his leg. Other artists with 2015 tour-date cancellations on account of injuries, surgeries and other health issues included Sam Smith, Miranda Lambert, Steve Aoki, Little Big Town, Meghan Trainor, Nickelback, the Black Keys and Kelly Clarkson.” ¹⁴

So it’s “No Play, No Pay.” At least they are successful enough to be able to afford health insurance. Not so for your indie band on tour, trying to make up for lost revenue.

So let’s look at what’s driving this: the lack of sustainable revenue from use of your copyrighted work.

I have written several posts about the incredibly low rates streaming services pay. ¹⁵ Now let’s put these numbers in context. I wrote recently about a client’s song that had been played 642,558 times without any payment by Spotify. ¹⁶ So let’s round it up to 650,000 and do the math.

The fee paid to a songwriter for the right to make a recording of a song is called the “mechanical fee.” The rate I can charge as a songwriter is effectively capped by the U.S. Government who allows anyone to make a recording of my song as long as the “statutory rate” is paid to me. This rate is 9.1 cents per copy sold, and it has not gone up in 10 years. ¹⁷ So if a recording of my song sold 650,000 copies, I would make $59,150. Pretty good money.

If Spotify streams my song 650,000 times, I get paid $279.50.

To be fair, these are streams, and not copies sold. But if a Spotify customer can stream my song any time they want, as many times as they want, why would someone find the need to buy it? At some point, on demand streaming cannibalizes sales. According to Billboard, 64 streams is the equivalent of one paid download. ¹⁸

So, 650,000 divided by 64 = 10,156.25 X 0.091 cents = $924.21. This would be 3.3 times what I would earn from Spotify.

And of course there are the people who download it illegally and pay me nothing.

Why is there such contempt and disrespect for the creative artist who creates music?

I spent three years in law school learning how to become an attorney. I spent 12 years learning how to become a musician, including 4 years in music school. Yes, there are occasional prodigies who are seemingly born with the ability to play music at a high level, but for the rest of us, it’s a tough slog. I’ve spent hours and hours and hours in the practice room, honing my craft, trying to get better, and it would probably add up to years if I could go back and tally up my practice time. I wrote bunches of songs, and let me assure you, unless you are Elton John or Paul McCartney, great songs do not just fall out of your sleeve. And if you are lucky enough to catch the public’s fancy enough to actually make a living as a musician, there is no guarantee that you will stay there. Those that do are truly exceptional people.

I was backstage after a concert and Brett Michaels of Poison was there. He was wearing chaps made from rattlesnake skin and there were several circles of fans surrounding him. His band had several multi-platinum albums to their credit. And what no one in that room knew was that it was all over for Poison. Done. Finished. You see, these bands from Seattle had come out with this new sound called “grunge” and it was going to kill “hair metal” deader than a doornail. Poison‘s next album was a flop, and they would end up cancelling most of their tour after it was apparent no one was coming. The same thing happened to Motley Crue.

Then consider this. Do you know who Max Martin is? Here are some of the songs he has written and co-written: ¹⁹

“Can’t Feel My Face,” The Weekend

“Teenage Dream,” Katy Perry

“DJ Got Us Fallin’ in Love,” Usher feat. Pitbull

“Dark Horse,” Katy Perry feat. Juicy J

“Problem,” Ariana Grande feat. Iggy Azalea

“Break Free,” Ariana Grande feat. Zedd

“Shake It Off,” Taylor Swift

“Blank Space,” Taylor Swift

“Daylight,” Maroon 5

“Roar,” Katy Perry

“We Are Never Ever Getting Back Together,” Taylor Swift

“One More Night,” Maroon 5

“I Knew You Were Trouble,” Taylor Swift

“Bad Blood,” Taylor Swift feat. Kendrick Lamar

“California Gurls,” Katy Perry feat. Snoop Dogg

“Dynamite,” Taio Cruz

“Since U Been Gone,” Kelly Clarkson

“Hot N Cold,” Katy Perry

“I Kissed a Girl,” Katy Perry

“So What,” P!nk

“Quit Playing Games (With My Heart),” Backstreet Boys

“Everybody [Backstreet’s Back],” Backstreet Boys

“…Baby One More Time,” Britney Spears

“I Want It That Way,” Backstreet Boy

“That’s the Way It Is,” Celine Dion

“Show Me the Meaning of Being Lonely,” Backstreet Boys

“Oops!…I Did It Again,” Britney Spears

“It’s Gonna Be Me,” ‘N Sync
He lives in Sweden. He does not tour. Ever.

This is obviously a very talented man who deserves our respect. Is he supposed to be content with taking less because people can’t be bothered to obey the law?

Then consider this. The Yellowjackets are one of the most successful modern jazz groups. Their bass player, the renowned Jimmy Haslip, ceded his bass chair in 2012 to Felix Pastorius, son of jazz legend Jaco Pastorius. ²⁰ The reason?

“’The primary reason is so that I can spend more quality time with my family,’ says Haslip. ‘I spent 10 months on the road last year. The break will give me an opportunity to spend more time at home as well as work on other artistic endeavors.’” ²¹

Think about this. Ten months on the road. Away from your family while you are trying to earn a living to support them. Wouldn’t it be nice if there was another income source he could depend on, you know, like actual royalties from people making copies of his recordings?

“You have a failed business model!”… says the internet.

I say: What’s so hard about simply obeying the law?

What’s so outdated about the concept of paying for something that has value?

How about respecting the artist, respecting their hard work and respecting their copyrights?

There’s a further connection to be made here. Felix Pastorius’ father died when he was five years old, leaving Felix’s mother and twin brother Julius, to fend for themselves. Fortunately for them, this was pre-internet, and royalties from the sale of recordings and fees from licensing musical compositions still existed. Because, being dead, you know, puts a big dent in that whole “you’ll make the money back touring” business model.

And of my client Leon Wilkeson? He died in 2001. He died in a hotel in Ponte Vedra, Florida, between, you guessed it, legs of a Lynyrd Skynyrd concert tour. He was 49 years old. ²² And that, my friends, is the real cost of the music business.