{"id":373,"date":"2003-09-14T06:39:36","date_gmt":"2003-09-14T14:39:36","guid":{"rendered":"http:\/\/www.amptoons.com\/blog\/archives\/2003\/09\/14\/a-bit-more-on-the-music-industry\/"},"modified":"2003-09-14T06:39:36","modified_gmt":"2003-09-14T14:39:36","slug":"a-bit-more-on-the-music-industry","status":"publish","type":"post","link":"https:\/\/amptoons.com\/blog\/?p=373","title":{"rendered":"A bit more on the music industry"},"content":{"rendered":"

Tyler Cowen <\/a>of the Volokh Conspiracy links to the same article I linked to Friday – the one showing that over 99% of the money left over after all expenses and other parties have been paid, goes to the label, and less than 1% of the money goes to the band – and argues that this shows how important copyright is:<\/p>\n

A good argument for copyright in music You’ve just earned a $250,000 advance for your rock band, and you don’t see any real profit from it. Why not? Read this post <\/a>to find out why. The money gets soaked up by managers, agents, recording expenses, marketing costs, lawyers, studios, and so on.<\/div>\n

Plus $750,000 gets soaked up in pure profit for the record label.<\/p>\n

In fact musical artists often end up owing their music companies. The indicated post is an anti-music company screed, but it is (unintentionally) one of the better arguments for copyright I have seen. True, most musical artists never see much copyright income, it gets grabbed by other parties along the way. But without copyright income the artists would be deeply, deeply in debt, or more realistically would never have the chance to record in the first place.<\/div>\n

Say what? In the example given, it’s very unlikely the artists will ever see any <\/i>copyright income. Why? Because they don’t own the copyright to their works – the record label does. Under “work for hire” laws, the label, not the artist, is the legal creator and copyright owner. And decades from now – when the artists might want to make a little pin money rerecording their old songs – they might not be able to, because the copyright owner will still <\/i>be the record label.<\/p>\n

Regarding an industry I’m more familiar with – comics – I can think of several instances in which copyright hurt the interests of creators. Steve Gerber, for instance, ended up being unable to publish works featuring his best creation – Howard the Duck – for years and years, because Howard’s copyright was owned by Marvel Comics. Had Howard the Duck not been copyrighted, Steve Gerber could have done his own version of the comic book – one that would certainly have been a better, more entertaining comic book than Marvel’s version. It seems to me that consumers would have benefited, too.<\/p>\n

My point is not to be anti-copyright – I actually agree with Tyler Cowan, who (if I’m reading him correctly) approves of the general idea of copyright law but disagrees with how they’re currently implemented. My point, rather, is that when two negotiating parties are enormously unequal, then copyright (and all the protections copyright entails) will inevitably wind up in the hands of the stronger party – and that party is usually not the artist.<\/p>\n

Meanwhile, at Crescat Sententia<\/a>, Will Baude responds to me about the “deal memo” bands often sign. Just to review things, here’s how Steven Albini describes the “deal memo”:<\/p>\n

What [the label’s representatives] do is present the band with a letter of intent, or “deal memo,” which loosely states some terms, and affirms that the band will sign with the label once a contract has been agreed on. The spookiest thing about this harmless sounding little memo, is that it is, for all legal purposes, a binding document. That is, once the band signs it, they are under obligation to conclude a deal with the label. If the label presents them with a contract that the band don’t want to sign, all the label has to do is wait. There are a hundred other bands willing to sign the exact same contract, so the label is in a position of strength. These letters never have any terms of expiration, so the band remain bound by the deal memo until a contract is signed, no matter how long that takes. The band cannot sign to another laborer or even put out its own material unless they are released from their agreement, which never happens. Make no mistake about it: once a band has signed a letter of intent, they will either eventually sign a contract that suits the label or they will be destroyed.<\/div>\n

Will doesn’t believe this could be true, unless there’s a secret cartel:<\/p>\n

Now it’s possible that there’s some secret cartel among record labels to keep deal terms shitty. If so, then why I graduate from law school (or at least when I finish first-year contracts) I’ll start my own record label, and I’ll offer big royalties to the bands and non-shitty contracts and steal everybody away from the evil labels. If things are as bad as Ampersand says this shouldn’t be too hard.<\/div>\n

I didn’t realize that you had so much ready money at hand, Will. Since you do, however, may I suggest that you start your own comic book publishing label as well? I’ve got some stuff I can submit to you.<\/p>\n

As for a “secret cartel,” it’s no secret – it’s just capitalism at work. There are a very limited number of labels who can provide access to a national audience (radio play, nationwide distribution of CDs, etc). There is a virtually unlimited number of young bands full of members who are sick of flipping burgers for a living and who are starving for a chance to reach a nationwide audience. Simple supply and demand would suggest that bands will be willing to accept very lousy terms indeed.<\/p>\n

Add to that the realities of the situation. On one side, there’s a very wealthy record label, run by smart, business-knowledgeable executives, with its own legal team and decades of experience writing contracts. On the other side is a band of folks desperate not to blow their only chance at making a living creating music instead of flipping burgers, none of whom know anything about contract law, none of whom have any real business experience.<\/p>\n

I’m really confused about the legal rule that could cause a “deal memo” to force an artist to sign a particular contract. If it specifies a particular time period or term under which the artist must sign the contract, well that’s a bad memo to sign (and any band thrilled <\/i>to sign a memo that <\/i>bad is asking for trouble).<\/div>\n

No, they’re asking for access to the nationwide networks that puts songs on the radio and CDs on the store shelves. And they have a better grasp of the reality than you do, Will: they realize that if they don’t take that access on the record labels’ terms, then they won’t get access at all.<\/p>\n

And if it doesn’t specify anything at all, then I find it hard to imagine why the band couldn’t insist that they will sign a contract, but just . . . a different contract.<\/div>\n

Why would the label agree to a different contract, Will? The label isn’t losing anything by waiting. There are a hundred other bands willing to sign the label’s preferred contract, after all. And it’s not like the band insisting on “a different contract” can go sign with the competition – the band gave up that right when they signed the deal memo.<\/p>\n

Incidentally, when a band signs a “deal memo” does it also make the label sign a “deal memo?” That is, why can’t the band use its stand-off bargaining power just as well as the label can in this sort of time-limited standoff equilibrium? If record companies really do represent a cartel, then a symmetric “deal memo” would probably be advantageous to the band<\/i>. [This is because absent a deal memo, a contract will be signed whenever either side gets desperate. A band is likely to get desperate first, since it doesn’t have any money yet. This only works if all record companies represent a monolithic face. If they don’t, then a deal memo hurts the band a lot more, but there’s much less explanation for why the bands would sign the deal memo in the first place.]<\/div>\n

With all due respect, Will, this passage suggests to me – more than anything I’ve read lately – the enormous chasm separating libertarians from reality. There is no such thing as a “symmetric deal memo,” and never will be. A symmetric deal memo would not only forbid the band from working with any other labels until a contract is signed, it would forbid the label from working with any other bands until a contract is signed.<\/p>\n

And yes, if that was the case, then certainly signing such a memo would be to the band’s advantage. But that’s not the case and never will be – no record label will ever offer a “symmetric” deal memo. There’s no reason for a record label to agree to terms that bad – only artists are expected to do that.<\/p>\n

You ask “why can’t the band use its stand-off bargaining power just as well as the label can in this sort of time-limited standoff equilibrium?” The answer to your question is, the band has<\/i> no “stand-off bargaining power.” It doesn’t matter to the label if they sign the band or not, because there are a thousand more bands waiting in line.<\/p>\n

That’s what so many libertarians seem incapable of understanding – in the real world, contracts are negotiated from very unequal positions, in which the party with the power sets the terms.<\/p>\n

Will also brings up an argument about the minimum wage. He’s wrong, of course, but that’s a matter for another post.<\/p>\n

Finally, I should point out that Will and I agree on one thing – Napster and similar programs should not be outlawed. They have a perfectly legitimate, legal use – exchanging free music and other files that are either uncopyrighted, or that are intended for free distribution by the copyright owner. The fact that Napster has illegal uses shouldn’t make the existence of Napster illegal. After all, trucks can be used to smuggle – but no one argues that we should therefore outlaw the trucking industry..<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

Tyler Cowen of the Volokh Conspiracy links to the same article I linked to Friday – the one showing that over 99% of the money left over after all expenses and other parties have been paid, goes to the label, … Continue reading →<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[91,62],"tags":[],"class_list":["post-373","post","type-post","status-publish","format-standard","hentry","category-free-speech-censorship-copyright-law-etc","category-popular-and-unpopular-culture"],"_links":{"self":[{"href":"https:\/\/amptoons.com\/blog\/index.php?rest_route=\/wp\/v2\/posts\/373","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/amptoons.com\/blog\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/amptoons.com\/blog\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/amptoons.com\/blog\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/amptoons.com\/blog\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=373"}],"version-history":[{"count":0,"href":"https:\/\/amptoons.com\/blog\/index.php?rest_route=\/wp\/v2\/posts\/373\/revisions"}],"wp:attachment":[{"href":"https:\/\/amptoons.com\/blog\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=373"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/amptoons.com\/blog\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=373"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/amptoons.com\/blog\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=373"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}