Tim Quirk, a senior vice president at the digital music service Rhapsody, used to front a band that was signed to one of the major labels, Warner Bros.
His experiences at Rhapsody taught him firsthand that it's possible to build a big database that accounts for what each copyright holder is owed. However, he and others contend, major labels have no incentive to put such a transparent database in place — quite the opposite: They only stand to benefit by obfuscating the accounting process for middle- and long-tail bands and tracking their digital streams and downloads casually.
Quirk estimated that his band's three out-of-print major-label releases should have earned between two and five times as much digital revenue as its four independently-released albums earned, given that they are "far more popular."
But when he compared IODA's payouts to Warner Bros.' payouts over the same five-year period, he was shocked to discover the reverse to be true.
His band earned about $12,000 from the independent albums distributed digitally through IODA, but only $62.47 from Warner Bros., so $395,214.71 of the band's advance remains unrecouped (meaning that it owes that amount against future royalties earned).
Quirk (right) doesn't think his band will ever recoup that sizable advance, but it's the principle of the thing. By refusing to update their accounting technology for dealing with revenue from digital streams and downloads -- data that digital music services such as Rhapsody and iTunes already deliver to the label anyway -- he claims major labels are letting all sorts of digital revenue slip through the cracks and into their coffers, not to mention absorbing large upfront royalty advances from music start-ups.
"We all know that major labels are supposed to be venal masters of hiding money from artists, but they're also supposed to be good at it, right?" asks Quirk in his post.
The whole saga makes for a fascinating (if somewhat lengthy) read.
Clarification: Although Quirk's post says he "doesn't necessarily subscribe to [the theory] that labels and publishers deliberately avoid creating the transparent accounting systems today's technology enables," it also says, "what's so weird about this, to me: they have the ability to tell the truth, and doing so won't cost them anything."
Update: Warner Music Group issued a statement: "As a matter of policy, we don’t comment on specific terms of artists' agreements. Accurate accounting to our artists is a high priority for WMG. We take these issues seriously and Mr. Quirk’s implications to the contrary are flat-out wrong."
Update: Rhapsody issued a statement: "Tim Quirk's views are his own and do not reflect those of Rhapsody management. Rhapsody and our label partners are focused on ensuring that artists and copyright holders are compensated appropriately. After years of working together with Warner Music, we believe the company has made every effort to provide accurate accounting to its artists and copyright holders. The number of parties involved makes this a very complex problem to solve, but one that we, as an industry, are committed to solving."
See Also:
- Streamlining the Search for Music
- Free Music Equals Net Profits
- Independence Day for Indie Bands
- Report: Beatles' Rock Band Royalties Could Reach $40 Million
- Sony Buys Part of the Long Tail
(Image courtesy of Too Much Joy) Photo of Tim Quirk: Flickr/penmachine
