By SisDetroit (68.42.209.170) on Wednesday, April 23, 2003 - 05:58 pm: |
What is " Artists Rights Enforcement Corporation" all about?
I read that Rosalind Ashford & Annette Beard-Sterling have filed a court action against AREC "for refusing to cease collecting 75% of their royalties for life..."
By SisDetroit (68.42.209.170) on Wednesday, April 23, 2003 - 05:59 pm: |
In Wayne County Circuit Court.
By Scratcher (65.132.77.204) on Wednesday, April 23, 2003 - 06:15 pm: |
Most people don't know it but Frank Sinatra's first contract, which he signed with Tommy Dorsey, entitled Dorsey to some outrageous percentage of of his entertainment income, not just record royalties, for life. Sinatra later challenged the contract and won.
Here's a brief Paste about AREC and a link to the entire article. It seems artists contract with AREC to collect their royalties not realizing they're signing over a large chunk to AREC for collecting them.
Begin PASTE
There is one particular outfit, known as Artists Rights Enforcement Corporation, that has gone so far as to force their own clients into bankruptcy and take over all their royalty rights in enforcing its own contracts with them.
http://www.polarity1.com/pcrr36.html
Here's the link to AREC's website:
http://artists-rights.com/
By SisDetroit (68.42.209.170) on Wednesday, April 23, 2003 - 07:08 pm: |
Scatcher - Thank you. Wow! That is deep. I guess some artist are damned if they do, and damned if they don't.
So, when they say collecting (keeping) 75 percent, does it mean that it was initially agreed, or that after expenses, it is a sum total of 75 percent?
Thanks.
By Fred (64.12.97.7) on Wednesday, April 23, 2003 - 08:44 pm: |
I am the author of the comment quoted by Scratcher in his post. That statement was part of my testimony before the California State Senate Entertainment Industry Subcommittee last July (and for reasons I don't know, the text at the site Scratcher provides ends in the middle of a sentence).
To place the comment into context, I was pointing to AREC as an example of how bottom feeders compound the problem caused by lousy royalty accounting by the labels. Because they are not getting paid by the labels, they fall prey to outfits like AREC who, as a fee for recovering royalties for their clients, take 50% of all future royalty income, forever, and even attempt to enforce the agreement against the artists' estates after they die. The point I made by referring to AREC was that if the royalty system is reformed, unscrupulous royalty chasers like them will have nothing to do.
It is an unfortunate aspect of the current industry that lawyers and accountants are necessary parts of the system by which artists get paid, and, in the interest of full disclosure, I do a lot of royalty pursuit myself, and I get paid for it. If I recover something, I take a percentage of the recovery. And that's it; no long term deal, no partnership for life (and thereafter), for the simple reason that I am no longer providing any services for which I should be paid.
It is encouraging to know that someone is now taking the fight to AREC on their agreement, and I wish them good luck.
By SisDetroit (68.42.209.170) on Wednesday, April 23, 2003 - 08:54 pm: |
I read the whole document on the site. It is deep.
By KevGo (64.115.26.80) on Thursday, April 24, 2003 - 03:55 pm: |
Folks:
It's organizations such as Artist's Rights that give the industry such a bad name.
Fred made a point in his original testimony - "I don't like chasing royalties because I shouldn't have to." If the accountants/bookkeepers at each record label got their acts together and kept fair & accurate books in the first place, artists wouldn't have to worry about their earnings from recordings and they wouldn't fall prey to the likes of Rubin & company.
Yet it is still wise for artists and producers to retain their own counsel - accountants and attorneys - who can gain access to this information. I recall reading in Etta James' autobiography how jazz artists such as Ahmad Jamal would bring in his own accountant to examine Leonard Chess' books when royalty-time came around. Stevie Wonder's contract negotiations from 1972 (which granted him co-ownership of his publishing - past, present AND future) is another fine example of an artist taking matters into their own hands.
Kevin Goins - KevGo
By Common (209.2.55.168) on Thursday, April 24, 2003 - 04:09 pm: |
Whew! James Brown was right. IT is a business & nothing else! It's sad that creative people who give so much, yet have to suffer the indignity of not getting paid and/or having people like AREC who are just looking for new ways to scam artists. There is also a good 4-5 pg article in VIBE (w/ 50 cent on the cover) about the fight for artists' rights. People who desire to create music should make sure they educate themselves before they commit to anything.
Peace!
By KevGo (64.115.26.80) on Thursday, April 24, 2003 - 04:26 pm: |
Common:
Amen to your point. I read the Vibe article last week - with Congress now getting involved, it will be interesting to see how certain laws (California's 7-Year Rule, for example) are going to be dealt with. But you're right - no matter what you get involved with, educate yourself.
Kevin Goins - KevGo
By Fred (205.188.209.109) on Thursday, April 24, 2003 - 05:24 pm: |
The problem is that, even with good advice going in to a contract, the way the system works will keep the artists from getting their share, and for 95% of them, they can't afford to start an audit let alone see it through. (It will take upwards of $25,000 to retain the CPA, and he can't work on a contingency basis because the record contract forbids it.) AREC often seems an attractive alternative because they will put up the money for the audit. What many artists don't realize they are getting into with AREC is the fact that it is a lifetime deal. All future royalty income is split with them, not just what the audit discovers.
The people in charge of the system today are not inherently evil. The Morris Levys and Syd Nathans are long gone. However, the people there today are indifferent to the harm the system does, for no greater reason than it would take time and money to fix. The evil is now done by the system itself, and it has been impervious to change at any level until the California and New York legislatures started asking questions about why it couldn't work better. The labels, who had used their financial power to maintain their advantage over the artists, recognized that there was finally some power on the other side of the table and started talking about reform.
And all it is, so far, is talk. No one has seen any real improvement yet.
The seven-year rule is really a false issue. Over 95% of the artists currently under contract will be released by their labels before the seven years or required number of releases are reached. It is strictly a superstar issue, and while it has substantial symbolic value in terms of artist rights, real reform has to reach much deeper into the catalog.
By Scratcher (65.132.79.93) on Thursday, April 24, 2003 - 05:50 pm: |
If the major recording companies acted fair and square with artists there would be no need for organizations like AREC, which only exists as a remedy, albeit a bad one, to artists getting what they have earned from their recordings. It's not about artists educating themselves it's about recording companies being honest in their dealings with recordings artists, constructing fair contracts, and honoring said contracts.
It's also about more recording artists coming out and informing the public that when they buy that CD at Best Buy that nine times out of ten the artists won't see a dime of the monies. Maybe if the public boycott their releases they'll change their ways.
By KevGo (64.115.26.80) on Thursday, April 24, 2003 - 06:10 pm: |
Thank you, Scratcher - that was exactly my point a couple of posts ago on this thread (..If the accountants/bookkeepers at each record label got their acts together and kept fair & accurate books in the first place, artists wouldn't have to worry about their earnings from recordings and they wouldn't fall prey to the likes of Rubin & company..).
As far as the Best Buy thing goes - I used to tell my customers when I was in record retail that if they buy their CDs at Best Buy or Circuit City, they're buying recordings that have been "loss-leadered" and the artists don't see any royalties from CDs that are sold at a "loss" to attract customers to their outlets so they could (hopefully) buy the electronics. Some customers care, others look at the "bottom line" (saving money for themselves - to hell with the artist). What I would like to know is if a CD retails at $18.99, what percentage goes into the artist's pocket.
Kevin Goins - KevGo
By SisDetroit (68.42.209.170) on Thursday, April 24, 2003 - 07:25 pm: |
Everyone looks for sales. Some of us don't have that much money. Unlike the younger generation, who have money because they live with their parents. They can spend their Mcdonald money on nails, hair, gym shoes, cars, expensive concerts, and cd's, we spend our extra money on our grandchildren. :o)
If back in the 60's we had known of a problem with royalites, I doubt that we would have boycott and not purchase the 45's. The music carried me through those rough years. Now-a-days, the artist ride in big limos, stay at expensive hotels, have great clothes, and big milti-million dollar homes. I get sick when I have to get the furnish repaired.
I feel for the artist, and I love certain music, but unless I was in the music field, or an immediate family member was signed to a big deal, I wouldn't put the royalties on my list of worries.
By Scratcher (65.132.76.135) on Thursday, April 24, 2003 - 07:57 pm: |
And the sad part is the recording companies know what Sis just posted is true so they don't have any fear of public backlash whatsoever, which is why they keep on doing what they do.
KevGo is right, when you buy a CD at BestBuy for $11.99 and sometimes cheaper the artists aren't getting a penny. And I dare say neither are the Funk Brothers when their CD is packaged with the Temptations for $15.99--and the BEAT goes on.
By SisDetroit (68.42.209.170) on Thursday, April 24, 2003 - 09:28 pm: |
The Temptations DVD sells for $9.99 at Best Buy, and I believe has seen its day. The customers who really wanted it would pay what ever. You can bid for it on Ebay for less.
For the SITSOM CD, I paid $18.99 because it was worth it to me. I couldn't wait a few days before it hit Best Buy stores. I did not think about royalties.
I did not buy "Awesome" cd by the Tempts because it wasn't worth it to me. But I bid for it on Ebay and got it "sealed" for .99 plus postage. No one else bid on it because they had purchased it apparently for whatever cd's sell for at the record stores.
At the concert, I purchased the DVD SITSOM which cost more on the 18th because I couldn't wait a couple days for it to hit the stores. That's how anxious I was to watch it. Plus, it was purchased in the spirit of the Funk Brothers' concert. Don't forget to add the program and the t-shirt. (Now I have to stay in for a month to make up for the money I spent.) :o)
I do not have the DVD Temptations movie even though it only cost $9.99. But, since they are selling SITSOM DVD for $15.99 and free Tempts DVD, I'm going to get it, give the DVD as a gift, and keep the DVD of the Tempts.
Tickets to a concert cost much more the the cd's. So, it's all about how high you will pay for what you really want, not thinking about royalties. But, I LOVE THE FUNK BROTHERS.
By SisDetroit (68.42.209.170) on Thursday, April 24, 2003 - 09:41 pm: |
Oh, I forgot to say, I hope the Funk Brothers gets paid. :o)
By RD (63.188.32.104) on Thursday, April 24, 2003 - 10:04 pm: |
I've never received a DVD as a gift. I guess people think I wouldn't appreciate one for a birthday or Xmas present. They're wrong cause I would, moreso than those cologne sets with the free duffle bags. I have more duffle bags than I'll ever used. I'm thinking about putting one in my car trunk for emergencies, fill it with pulltab cans of pork and beans, bottled water, plastic forks, a big sweater, gloves and vienna sausages in case I get stranded somewhere.
I've never been successful buying anything off Ebay. Somebody always outbid me by a dollar in the final minutes of the auction, which is more aggravating than losing a game chess to a poor player. This has happened (being outbid) more than once so I swore off Ebay as a shopping option a long time ago.
I don't go on finding the highest price CD or DVD missions either. I buy Bestbuys' loss leaders. But if recording artists came out and told their story and encouraged people not to buy their CDs I would honor their wishes.
By KevGo (64.115.26.80) on Thursday, April 24, 2003 - 10:10 pm: |
Sis & Company:
Artists have had nice clothes, cars/limos and homes ever since the days of popular music began (even our beloved Temptations had these things)so we can't just target the artists of today.
I don't blame folks for wanting value for the dollar - retail CD prices are so outrageous I sometimes hate shopping in CD stores. At the same time, I'm mindful that if I buy a CD or DVD at a Best Buy or Circuit City, the artists would barely see a penny from that sale.
The music industry is now slowly realizing that CD prices are what's keeping sales down yet to only have CDs by "new & developing" artists sold at a low price is not gonna make people come back to the stores.
The record store chain I've been working with for years introduced a 3 for $40 sale - three CDs for forty bucks($13.33 apiece) plus tax. If only one or two of these CDs are purchased, the price is $14.99 each(these CDs normally retail for $18.99 to $19.99). This is the result of DVD distributors offering similar discounts to drive sales. Since the sale started, every major label jumped on board offering discounts without "loss leadering" if we buy a certain amount of CDs in bulk. While this discount may hit the artist in the royalty pocketbook, it's not as lethal as the "loss leadering" ($11.99 and below) done at other stores.
Kevin Goins - KevGo
By SisDetroit (68.42.209.170) on Thursday, April 24, 2003 - 10:27 pm: |
Circuit City has a better varity of soul cd's than does Best Buy. But their sales for the SITSOM is not as good as Best Buy. Being across the street from each other in Dearborn, I went to both stores to pick up the sales papers so I can inform those that I talk to where to find the best sale. But they is only on sale until Saturday. In Dearborn, Best Buy had ran out of the DVD for the Tempts, so you get the rain check.
After Saturday, the regular price for SITSOM DVD will be $19.99.
Now, back to royalties, I don't know how many cd's have to be sold before the FBs will see any royalties. I'm hoping they will see royalties in their life time for this project.
By Fred (205.188.209.109) on Thursday, April 24, 2003 - 10:41 pm: |
"Loss leadering" as described by Kevin, has little or no impact on the calculation of record royalties. The labels have enough trouble keeping track of things in their own house to count how many records are sold at every possible price point by every possible retailer, so they don't even try. The final actual retail price is irrelevant to both the artist and the label.
If an artist has a contract with a royalty based on the retail price of a record, that price is either set within the contract or established by the suggested manufacturer's retail price (SMRP)when the recording is released. Whether you but a CD at Best Buy or at one of the few remaining mom & pop stores, the artist earns the same amount in royalties on each sale. Royalty statements will show the total number of copies of a specific recording shipped during the covered period and multiplies them all by the same royalty rate and the same list price, no matter who they are shipped to and no matter what the actual sale price is. Kevin simply has this wrong.
"Loss leadering" does occur at discounters like Best Buys which hopes you will come into the store for the cheap CD and leave with an expensive dishwasher as well, but the loss on the CD sale is strictly the store's, not the label's and not the artists'.
Later in the specific CD's economic lifecycle, there will be a reduction in the list price, as recording contracts normally allow for the label to issue the CD as a "mid-price" or "budget line" release, and it is not uncommon for royalty statements to include sales at more than one level for any given reporting period, which might be as long as six months. Even here, however, the prices on these categories as shown on the statements come either from express recitation in the contract or are set by the MSRP in the catalog. The actual price paid by the consumer remains irrelevant in terms of calculating the royalties earned from these sales.
By KevGo (64.115.26.80) on Thursday, April 24, 2003 - 11:01 pm: |
Fred:
Thank you for the clarification regarding "loss leadering" yet it is not only electronic stores who are taking the hit.
I know of artists who have it specified in their contracts that if a recording of theirs is offered as part of a discount program, their royalty share is decreased (as well as the label absorbing some costs)in the hopes of a bulk amount of their releases can sell. It is not as hard-fast as you descibe it.
This is not to quarrel with what you said - I have no problem admitting when I'm mistaken. But, being in this business for this long and seeing my share of contracts - good & bad - I've seen where this "loss leadering" issue is one that hurts more than helps.
Kevin Goins - KevGo
By RD (63.188.32.104) on Thursday, April 24, 2003 - 11:03 pm: |
Fred, I know you know your stuff, all I'm asking is that you check this one out more thoroughly. I can remember seeing a clause in a artist's contract that was worded something to the effect that if the work was discounted or sold below a certain price the artist's royalties would either be reduced or not accounted for at all. Similar to the Record Club clause.
Selling two DVDs for $15.99 you're talking about eight bucks a piece, which the distributor takes half and sometimes more leaving the recording company with about four dollars, providing the retail outlet is selling it a complete loss to attract people to big ticket items. Now if that DVD sold for $19.99 you're talking twice as much for the recording company. Don't most contracts state that the artist royalty is based on net receipts and not the list or sale price? The lower the price of the DVD the lower the net receipt, right?
By stephanie (66.54.1.38) on Thursday, April 24, 2003 - 11:55 pm: |
To be honest with you I never thought much about buying the CD and how much the artist got (unless its a recent hit) because I thought they made their money on touring only ...unless they have a
licensing agreement..
Steph
By SisDetroit (68.42.209.170) on Friday, April 25, 2003 - 12:23 am: |
Hahahaha Stephanie, it was that way until some artist began to wake up and question. Then they started getting back royalties. (LOL)
By Fred (205.188.209.109) on Friday, April 25, 2003 - 02:12 am: |
The provisions that Kevin and RD refer to are common, especially in older contracts, but have nothing to do with the low prices available at retail stores. Bulk sales of records at discounts were usually done as promotions outside the usual outlets; if Goodyear (or any type of store that normally didn't sell records) wanted to give away an LP with a set of tires, this is the kind of deal that was made with the label. It would violate anti-trust laws to have preferential pricing for competitive retail outlets, but this kind of deal, outside the usual purchaser, is legitimate.
Where the volume retail outlets get their break from the list price is based on entirely different contract term; the free goods provision. An artist agrees to a reduction (usually 10-15%) in his royalty rate in acknowledgement that a substantial number of copies of the recording are going to be given away by the label. Some of these go to reviewers and radio stations, but the great bulk of them are added to the orders placed by the regular distributors and retail outlets. Order 500 copies of a new title and the label will add 50 to 100 more at no charge. If these extra copies go directly to a store, the store gets to sell them and pocket the entire price. Those free goods allow the store to lower the retail price on all 550 copies and still make a profit.
A second way that labels are able to reduce costs to retailers is through cooperative advertising campaigns; the labels pick up a part of the cost of newspaper and radio ads. They can't tie this cooperative money to the store maintaining the Suggested Retail Price anymore, but they can still defray the advertising costs for the retailer.
I have never seen or heard of a royalty contract based on net receipts. I don't think they exist. Record wholesale prices are about 50% of retail, and I think the markup of DVDs is about the same. There may be reductions in the wholesale price later on in the economic lifecycle of the release, but the initial price usually holds for at least six months. If you see two DVDs for sale for a price less than the full price of one, the chances are good that at least one of the two is an older title, and the retailer is taking a loss in the hope of getting you into the store. As I said before, there is absolutely no corrolation between the actual retail price, or the net proceeds, and the basis of royalty calculation.
Record Club deals are a completely different animal. Usually the contractual royalty rate is cut in half for Club sales, but they are still counted (in the rare cases where they actually are counted) on the basis of the retail price.
By RD (63.188.33.251) on Friday, April 25, 2003 - 08:52 am: |
Fred, I admit that I've never saw a recording artist royalty statement because I've never known a recording artist who received one. But I've seen royalty statements for book authors. And all include a breakdown of the royalty the author receive according to the sales price (net receipts was the wrong term) the book sold at. The royalty per book was higher if the book sold at list price than if it was discounted, etc. Hence, a lower sales price means a lower royalty for the recording artist.
I can't see how lumping two DVD's together and selling 'em both for $15.99 can be a good thing for the artists or actors involved in SITSOM unless the sales price is solely credited to SITSOM and the Temptations' DVD is simply being given away to clear warehouse space. If the sales price is divided equally between the two DVDs you're talking paying a royalty on an item with a eight dollar sales price. Too low a sales price and royalties become miniscule.
Distributors have always required free copies of records from record companies. If a distributor
ordered 500 records he usually got 100 or some number free. And pay is a dubious term because distributors could always return records they didn't sell and wouldn't be charged for them, as could retail outlets to distributors because the records were ordered on consignment. This is one reason some small record company owners like Joe Evans (Carnival Records) never had a national distributor; he didn't want to play their game.
By Fred (205.188.209.109) on Friday, April 25, 2003 - 11:44 am: |
RD, book contracts are completely different from record contracts. If an author has a 10% royalty, it is not based on the list price of the book as it is for recording artists, it is normally based on the publisher�s net receipts, or what is left over after the publisher�s costs (figured on a per copy basis) are deducted. (Only the heavyweights like Grisham, King or Clancy can demand a royalty based on the gross, but the publisher is happy to give them that because they know they are going to sell millions of copies.) If a book lists for $20, the author with a 10% rate doesn�t get $2 per copy sold. If the publisher�s price to the retailer is $10 a copy, and the publisher�s costs are $7 per copy, the author gets 10% of the $3 left over, or 30 cents. This is an entirely different calculation than standard in the record industry, where the royalty is based on the list price (or the standard wholesale price) and the label recovers its costs from its portion of the revenue, even though the end results might look the same.
If the retailer sells the book for $12 instead of $20, the author still gets his or her 30 cents, because the sale to the customer is irrelevant to the author. Think about the reverse situation, where a retailer raises the price above list because there is sufficient demand for the product, or where there is no local retail competition. If this happens, the retailer doesn�t share the premium with the label or the publisher, that just becomes additional profit for the retailer. The publisher still gets whatever the list price is, and that�s all.
The publisher or label (and by extension the author or recording artist) has no financial interest in the actual retail price because they have already been paid what they asked for. The deal between the publisher and the retailer is based on the list price set by the publisher and paid by the retailer, not the actual price paid by the end consumer to the retailer. The royalties paid to the author or artist are calculated on what the publisher or label gets from the retailer, not what the retailer gets from the customer. As far as the artist or label is concerned, the retailer can give away the CD for free, because they have already been paid all they are going to be paid. This is why the 2-for-1 DVD deal is irrelevant to artist royalties. The ultimate sale price has nothing to do with the way royalties are calculated or paid.
You touched on the only important transaction for royalty calculations in your post when you noted that both book and record contracts normally include a reserve for returns. In a practical sense, the CD or the book is counted as sold when it is shipped, which can be days, weeks, or months before it is actually sold, so there is no way to even guess what the ultimate sale price will be. The royalties are paid based on shipments that likewise may occur long before the product is actually sold. The reserve is there to cover the situation where the shipment was based on an overly optimistic projection of the number of copies that will sell. If there is an adjustment later on, it is based on the number of copies returned, not on what the ultimate retail sales revenue was.
When you put an independent wholesaler or distributor into the calculation, it just adds a step but doesn�t change the fundamentals. The label still only gets what is paid by the middleman, regardless of what the wholesaler charges the retailer, or what the retailer ultimately gets from the end consumer.
By stephanie (66.54.1.38) on Friday, April 25, 2003 - 12:46 pm: |
Fred and all I have a question.
People like say an oldies artist like Little Anthony or someone like that if they have a licensing agreement and lets say (Well I will take a group or person like Michael Jackson although he is not an oldies artist.) If they have a back catalog that does well is it safe to say they would get at least 100,000 per year or a group like the Rolling Stones? Im sure these groups get more but if an artist like Little Eva (may she rest in peace) if she had a licensing agreement (for those oldies artists who do) do any of them make at least an extra 5000 a year.
Im sure they are not getting in the six digits but what would you say the average oldies artist who has a good back catalog would make?
Stephanie
PS I talked to one producer who will remain nameless out of courtesy who has licensing all over the world who told me he gets 100,000 a year on his back catalog. I talked to one artist who told me she gets about 500.00 a month on back royalties. I dont think thats bad considering 10 years ago she was getting nothing until her lawyers looked into it.
I realize the songwriters people like Ellie Greenwich and Carole King and HDH must get tons because their stuff is used all over the world in commercials and movie soundtracks and TONS of compilations but I wonder about people like Little Eva and Gene Chandler (who is a good businessman if you have ever read anything about him) and The Skyliners and groups like that who were big in the fifties who has CD's that although they dont sell in the millions still sell somewhat after someone sees them on an oldies concert or on TV..I KNOW that Phoenix Rising by the Temps sold well but Im sure a lot of that had to do with the movie that aired on television. Im sure these artists cant live off of these back royalties unless they get a huge sum. I read in one book that after Little Eva did the Locomotion she got 30,000 and that was it.
Im sure Miss King and Mr Goffin are getting way more than that but would you say that oldies artists who have licensing agreements might get about 3,000 a year or so? Can you give an example without naming names or an average. Just curious..
Steph
By Fred (205.188.209.109) on Friday, April 25, 2003 - 05:09 pm: |
First of all, we need to get some terminology straight.
Recording artists don't have "licensing agreements" unless they actually own something to license. By and large, unless they re-recorded their original hits and managed to hold on to ownership of the "new" masters, they do not hold the legal ownership to any recordings, so they cannot "license" them to anyone.
What the artists have, rather, is a right to receive royalties earned from the "commercial exploitation" of the recordings they appeared on, if (and it is a big if) they had a contract granting them royalties.
To explain this, a little history is necessary.
Prior to the late 1940s, royalty contracts were rare, and pretty much limited to the very top stars. Most recordings (and nearly all blues, folk and country from that era) were done as "works-for-hire", a legal term meaning that the artist got paid for the recording session and had no residual rights to share in the revenue generated by the sale of copies. By the early 1950s, the trend had completely reversed, and nearly all recordings were done under royalty contracts.
The earliest royalty contracts stipulated a rate as low as two or three percent of the sales price of the recording. Please also keep in mind that the only recordings for sale at this time were singles. With a retail price of about a dollar, the artist was therefore entitled to about 2 or 3 cents per copy sold.
Record contracts were also much shorter in duration. In the early 50s, the contract usually covered no more that two or four songs (two complete single releases), which were usually all recorded on the same day. Only a handful of artists got a longer term contract. Sizable advances were also very rare, and an artist might usually only receive $50 or less for doing the session, counting on royalties from the subsequent sale of the recordings to bring in more income.
As certain artists began to establish steady sales, it was in the label's interest to tie them to longer term contracts. Longer contracts and competition among labels for the top selling acts combined to push royalty rates upward, but only to 4 or 5 percent by the early sixties.
At the same time that royalty rates were increasing, the labels started including standardized deductions against royalties in the contract. A 10% reduction for "breakage" was probably the first one commonly seen. When picture sleeves for 45s became popular, a "packaging" deduction of another 25% was subtracted. Another 10% was usually taken off for "free goods" as I described in an earlier post. The cumulative effect of the standard deductions was to reduce the "real" royalty rate to 50-60% of the basic rate set in the contract, which meant that the artist was still seeing between two and three cents a copy.
Of greater importance to the artist's bottom line, however was the development of the industry practice of charging the artist's royalty account with recording costs. Even in the days when a $3,000 recording budget was extravagant, a record would have to sell 50-60,000 copies before the label had recouped its costs and would start owing the artist royalties.
Royalty rates continued to escalate. The upper end of the scale was usually pushed when a current superstar renegotiated, and the rising tide lifted all artist rates. The "standard" five percent became eight, which became ten, then twelve, to the point now where a brand new act will be looking for a rate of between 15 and 20% for their first recording, and a superstar can ask for (and often get) as much as a 30% rate.
Of course, as the rates have gone up, so have the deductions. A $300,000 recording budget (recoupable) is not unusual, even for a "baby band." Throw in a music video budget, tour support money, and independent promotion costs on top of all the standardized deductions carried down from the early days (although no one actually imposes breakage deductions any more, they didn't disappear entirely until well into the CD era), and an act can find itself having to sell several hundred thousand copies to break even. If they have received anything by way of an advance, the hole is even deeper, but at least they have received that money (which, of course, has been shared with their manager, agent, attorney and accountant).
The RIAA estimates that currently, nine out of ten CDs released never earn back the costs, and it is the one out of ten that does that keeps the industry afloat. I don't trust any numbers that come from the RIAA, but I am certain that the great majority of releases start out in red ink and stay that way for a long time.
And all of that brings us to your original question about what artists from the 50s and 60s are currently making from sales of their records.
The best answer I can give you is, "that depends."
In most cases, the royalties they are going to be paid now on CD releases will be at the original contract royalty rate; 3 or 4% rather than the current average rate. (Universal has adjusted the rate to 10% for artists who recorded for Chess, but has not extended the same treatment to artists who originally recorded for other labels they have acquired. Few other labels have followed even that thin lead. Atlantic has done it for a handful of their veterans.)
Making the prospect of payment more dubious is the long history of strange royalty accounting practices within the industry. There are a great number of cases in which the labels claim the artists still have not recouped their advances and/or recording costs 30, 40 or even 50 years after the recording was initially released. In 1989, Atlantic Records took the position that Ruth Brown and Lavern Baker were still unrecouped, until they were publicly embarrassed by the story leaking out.
It is also not uncommon for a label intending to re-release older records to charge the artist with the costs related to remastering the recordings for digital playback. In one case, an 60s artist (with a couple hits to his credit)was earning about a $1,000 a year in royalties from the use of his hits on compilation CDs. At the end of one reporting period, he received a statement showing that he was now nearly $20,000 in the hole because of remastering charges associated with a planned "Greatest Hits" CD. That new CD never came out, but it took nearly five years to get the label to admit that the remastering charges should be eliminated from the statement, during which time the artist received no royalties at all.
If an artist can avoid these pitfalls, what they can expect from current sales also depends on how their older recordings are used. A "Greatest Hits" CD obviously can mean a lot more income than the use of a single track on a multi-artist compilation. Use of the recording in a commercial can mean thousands or tens of thousands to the artist depending on the nature of the commercial (national or local, duration of the campaign, etc.) It's a fair bet that Iggy Pop has made more from Carnival Cruise Lines than he ever made in straight record royalties.
For those artists not lucky enough to hit on this kind of lottery, I can only offer the roughest estimates of current income, but I think it would be fair to say that a "one hit wonder" can count on no more than (and quite often a lot less than) $500 a year in royalties from the use of his or her hit on compilation CDs alone. Although I have no personal knowledge of Little Eva's case, I would think she falls into this general range. To the greater public, there is only one song associated with her, and this is the one that gets used on CDs.
I recently engaged in a project which involved locating and paying royalties to nearly 200 artists who had recorded for labels subsequently acquired by one of the majors, but for whom the major had no addresses. Frankly they didn't look real hard, as I was able to find almost 80% of the list within a couple months. The accrued royalties represented earnings from the licensing by the major label of hundreds of individual recordings over nearly ten years. For a good number of those artists, the check they got from the major was the first royalty payment they had ever received. The individual royalty accounts ranged from about $10,000 down to less than $50.
Because of that experience, you can see it is hard to make a generalization about what any specific artist or group of artists can earn today from CD sales of their older recordings.
For an act that has a longer recording history, and a longer list of hits, the expectation of current income can be substantially more, as not only the hits, but entire LPs and "Best ofs" and "Greatest Hits" variations can be put out repeatedly on CD.
The great rush to replace our LP collections with CDs is now just about over, and so are the good days for royalty earnings for artists from those replacement sales. While someone like a James Brown or Curtis Mayfield (just as examples of someone with an extensive catalog) can expect steady annual income of $50,000 or more (and I am willing to bet that Mayfield and Brown are even much higher than that), I have seen royalty earnings for clients of mine slowly (and not so slowly) decline over the past three or four years. In a couple cases, artists who had careers that spanned three or four good selling LPs in the 60s have seen royalties dwindle from $8-10,000 a year to half of that or less.
The one certainty I can provide is that there are very few who can comfortably live off their royalty income alone.
By SisDetroit (68.42.209.170) on Friday, April 25, 2003 - 05:45 pm: |
Fred - This is so interesting. I hope you are not charging me for all this relevant information. :o) It's good to know what happens on the other side of my favorite recording industry.
I know a young lady who went to Best Buy, and informed them that Circuit City was selling the SITSOM DVD for $13.99. Not only did they give the young lady the DVD at $13.99, she still received the free Tempts DVD. Now, that was smart.
What area do you live? I know relatives of deceased artist who need to know this information, and may want to contact you.
By douglasm (68.113.13.31) on Friday, April 25, 2003 - 06:47 pm: |
A curve, sorta....
....I know the last thing you want to say to an author is "...good book. I picked it up off a remainder table at Hastings...".
Where do "cut-outs" fit into this mess? A good hunk of my record collection comes from cut-out bins at Wollworths, and a chunk of my CD's (mostly oldies compulations) come from the same type of source.
By Fred (205.188.209.109) on Friday, April 25, 2003 - 07:03 pm: |
Doug - As to cutouts, most artist contracts contain a provision that roughly means sales below a certain price do not generate royalties. This frees up cutout sales from royalty obligations. If an artist has enough clout, he or she can usually get the label to offer their product scheduled for cutout to them (the artist) at the same price before selling to anyone else. Some contracts are even stronger and require the label to destroy overstock rather than consign it to cutout. Frankly, if they have the power to negotiate destruction, those artists are least likely to have stuff in the cutout bins because their catalog is still selling, at least as long as they remain with the label.
Sue - email me.
By douglasm (68.113.13.31) on Friday, April 25, 2003 - 07:42 pm: |
Thank you, Fred.
This has been one of the most interesting discussions about the business of music I have seen in a l o n g time. Thank you, all.
By Fred (205.188.209.109) on Friday, April 25, 2003 - 08:32 pm: |
I need to correct my last post.
Sis (not Sue) - email me.
By SisDetroit (68.42.209.170) on Friday, April 25, 2003 - 09:51 pm: |
OK, Fred.
By stephanie (66.54.1.38) on Saturday, April 26, 2003 - 12:00 am: |
Thank you so much Fred you answered all of my questions. When I was a little girl (im 40 now) I thought all of my fave artists were making big money on royalties but it all goes to the record companies...
Its been stated in some books that Mary Wilson of the Supremes receives 80-100,000 a year in royalties each year (that was in a book not me and no one told me this) if that is true and she is a Supreme you can imagine lesser groups get way less like you said.....I guess only groups who wrote their own material and got their masters and things back like the Beatles and the Stones are the only ones who get big money on their back catalogs. When all is said and done I guess the writers providing they have good legal counsel make the money. I once heard Tone Loc say he got so much money from Wild Thing and Funky Cold Medina that he didnt have to work another day in his life if he didnt want to, with everything you have said I can see why these people either have to keep touring or take nine to five jobs that is the only way they will get a consistent income. I wish I had written Bridge Over Troubled Water. I remember Dolly Parton saying on TV she was so happy that Whitney did "I Will Always Love You" she said it brought her a million plus..
Stephanie
By KevGo (64.115.26.80) on Monday, April 28, 2003 - 01:28 pm: |
Stephanie:
And to think, folks like Dolly Parton & Paul Simon have written hundreds of songs for years yet it's the "biggies" that bring in the big money.
Eugene Record wrote several songs but it's three classics - "Have You Seen Her", "Oh Girl" and "Soulful Strut" - that pay the bills.
And geez, let's not get started on Neil Diamond (from "I'm A Believer" to "Song Sung Blue" and beyond - probably enough to fill a phone book).
Smokey, Berry, Norman Whitfield, HDH, Clay McMurray, Stevie Wonder, Marvin Gaye, Ashford & Simpson, Sylvia Moy, Frank Wilson, Clay McMurray, Gamble & Huff, Thom Bell/Linda Creed, our own Bobby Eli & his partners - 'nuff said.
This is why I've always encouraged singers to write their own material and/or collaborate with others.
Kevin Goins - KevGo
By Davie Gordon (193.122.21.42) on Monday, April 28, 2003 - 02:42 pm: |
Fred,
Thanks you so much for taking the time to explain
so much of the background to the issue of royalties. I thought I had a fair grasp of what was involved but underestimated just how devious
record companies can be.
Another important point that most people don't
appreciate is the sheer number of releases competing for shelf space in record stores.
The last figures I saw for the UK were for the
year 2000 during which over 15,600 different CDs
were isssued over here. The figure for the US is
bound to be much higher. Is it any wonder that
it's not always easy to find releases even by what
I regard as "major" acts. In the case of Jerry
Butler's "Philadelphia Years" CD I've only seen it
in one store in Glasgow and that's probably the only copy they have in stock. Apart from the
"super league" artists like Marvin Gaye I'd
imagine the sales levels for many back catalogue
releases would dismay a lot of people.
It's obviously profitable enough for the labels
to issue back catalogue on CD but it's becoming
increasingly apparent that it's at the expense
of the artist. I didn't realise, although I should
have foreseen it, that the costs of remastering a
analog tapes to digital media would end up being charged to the artists account.
One thing that's always puzzled me - I'm not an
accountant but these thirty year old charges that
are still being used as deductions from royalty
accounts. Wouldn't those costs have written off
years ago by the labels - I'm damned sure they
do it that way when it comes to filing their corporate tax returns. I used to work for the
UK tax authorities and seem to remember that for
tax purposes companies only had to keep the
accounting records for the preceding seven years.
It looks like record companies, well at least
the huge multinationals, have an even longer
grasp.
Thanks again for your time - it's very much
appreciated.
Davie
By Fred (152.163.188.68) on Tuesday, April 29, 2003 - 01:37 am: |
Davie, as far as maintaining financial records for tax purposes, seven years is the minimum here in the US as well, but there really is no connection between the requirement of the tax codes and internal accounting on royalties.
Record companies rarely write off the debit balances in royalty accounts where they retain ownership of the masters, which for tax purposes are treated as income-producing property (anyone out there still reading?). A debit balance in a royalty account really has only a very thin relationship to whether the master itself makes money. A lot of masters are legitimately profitable before the artist recoups his or her advance.
For many years master recordings were permitted favorable tax treatment as the owners were permitted to accellerate depreciation and take losses over five years rather than the usuable "life" of the property, which was much longer. This allowed the owners to take tax deductions for the masters larger than those that were actually incurred, and master recordings became a very popular tax shelter as the losses from ownership could be applied against other income (I know I am alone here now). TV and movie stars started picking up master recordings on the advice of their accountants, but lost tons of money in the late 70s when the IRS denied the deductions. Since that time, the IRS looks very closely at finances involving master recordings and the writing off of royalty debits is just not worth it to the labels. There are plenty of other ways for them to shave the tax bill legitimately without going out on to this patch of thin ice.
By MikieG (65.115.44.110) on Wednesday, April 30, 2003 - 07:51 pm: |
I am very disturbed by some the messages that I have seen attributed to "Fred" on this site. Not only do many of Fred's comments seem wrong both factually and legally, Fred has been less than candid about his own dealings.
Perhaps Fred should make his identity know.
Fred was an AFTRA trustee. During his tenure at AFTRA, AFTRA did not pay death benefits or health benefits to a single widow, widower, or next of kin, for the recording artists from the 1950s and 1960s.
Think about that.
Hundreds of artists that probably paid more in union dues than they ever received in royalties. They died poor. Their widows and next of kin wanted to get the death benefits (life insurance policies, etc.) that they were entitled to. And these policies were far less than what AFTRA was paid for each artist.
Not one single widow or next of kin got death benefits.
Fred joked about this. Fred found it funny that he and other trustees were being sued by the artists.
Fred was responsible for this policy. What a guy.
But then something happened. Fred was fired by AFTRA. Who knows, maybe AFTRA also thought it was wrong not to pay any of the artists.
Nonetheless, Fred now claims to champion the rights of the underpaid artists. What a joke. And his preaching only makes the old saying more true - nothing is worse than a reformed whore.
In this instance, the facts are actually comical. Fred's sole claim to legitimacy with recording artists is the fight against AFTRA.
But what really happened? Fred widely advocated a settlement with AFTRA which he claimed was "fair". Oh, really? So, his client, Joyce McRae gets $100,000.00 while the families of other artists get pennies. The settlement was great for Ms. Mcrae and other 10 or 15 named plaitniffs. They got hundreds of times more than they ever should have received. For well known artists with lots of hits, the settlement amounted to pennies on the dollar. For the poor artists, and their widows and next of kin, the settlement was worthless.
Good job Fred. Help the rich get richer and hurt the poor.
Whether he was at AFTRA or after he left, Fred has made his living by keeping the money away from the widows and children of artists.
And by the way, Fred, why not read a book or two before saying that certain deductions are not taken against the artist. Many recent rappers who were credited with millions in their royalty accounts are still bankrupt. It is not because of accounting errors, it is because of charges that are incurred.
Finally let's not forget to mention that Fred's "fee" for services is an ongoing royalty interest. I know that he has quoted this as a fee for his service. Of course, there is no guarantee that he will ever monitor any of the ongoing statements - nor does he promise to do so. Everyone has the right to make a living, and no one can begrudge Fred for what he does. But, it is important to realize that his history is blemished to say the least, and his present practice is exactly what he criticizes.
By stephanie (66.54.1.38) on Wednesday, April 30, 2003 - 08:23 pm: |
Well MickieG you and Fred BOTH sound like you know what you are talking about I think the best way for us to solve this mystery is to let the artists speak for themselves or for Fred to now defend himself against what you said if he chooses to do so.
Stephanie
By Ralph (209.240.198.62) on Wednesday, April 30, 2003 - 08:32 pm: |
MikieG,
You may or may not be skating on thin ice here. In all honesty I can't really say. I am ignorant of the facts in this situation and I'm certainly no attorney. However, your presentation was reasonable and civil so I will allow this to continue only if it remains a reasonable conversation between you and Fred. That is if Fred wishes to discuss this with you.
By George C (162.84.213.112) on Thursday, May 01, 2003 - 10:05 am: |
Mikie G:
Just read your note. I think your insight as to
Fred's comments are very enlightening. Also, I think that Fred's comments don't tell the full story about that company in NY - Artists Rights.
I just saw a press release regarding Billy Paul's
victory. It seems as though Artists Rights
represented Billy and assisted Billy's attorney at the trial.
Several older artists have also told me that Artists Rights has been representing the Ronettes throughout their 15 year battle with Phil Spector.
Finally, I read that Artists Rights even paid for Hank Ballard's funeral service and burial and has paid similar expenses for other of their artists that have unfortunately passed away. These are the very same artists who had not been paid royalties for years.
I think that Fred is entitled to speak his mind but he should paint the whole picture of that company before saying some disparaging things about them.
By Oren (65.115.44.110) on Thursday, May 01, 2003 - 10:49 am: |
I was belatedly directed to this web-site and the original discussion, and write to defend Artists Rights Enforcement Corporation ("AREC"). I typically "lurk" and have never before contributed to any discussions on this web-site.
I am a music industry attorney that represents a variety of artists, including some whose works are often praised on these pages. However, I am far from disinterested or unbiased with regard to this topic. I do some work with AREC and I have some clients in common with AREC.
As some of the contributors to this forum can verify, my time is in high demand, and I am in the fortunate position of being able to choose who I will represent and work with. I would like to explain why I work with AREC, and why I believe AREC is getting unfair treatment on this web-site. Please note that I am not making this statement on behalf of AREC, nor has the following been approved by AREC.
In the few years that I have worked with AREC, I have witnessed and participated in the recovery of royalties and intellectual property for artists and songwriters.
There are other companies and attorneys that claim to do what AREC does that routinely seek my assitance on matters. These requests have been unequivocally refused by me. The following distinctions explain my decisions.
1. Unlike ANY of the other companies, AREC fights hard for clients whether they are owed $1 or $1 million. AREC employs attorneys and accountants. AREC covers the costs of all disbursements. Thus, there are plenty of lawsuits that cost far more than AREC will recover, especially where the fight is solely for the recovery of intellectual property. Other attorneys and companies will not take up or fund these fights. AREC will.
2. Unlike the other companies and attorneys, AREC does not make a business out of exoploiting intellectual property - meaning that there is no conflict of interest.
3. AREC continues to monitor the compositions or recordings after the big money comes in. This point is of paramount importantance. There are many attorneys that take a contingency fee of anywhere from 33% to 45% of the recovery in perpetuity. In the south, I have seen attorneys that take 50% or more. Yet, what the artist/songwriter gets in return pales by comparison. For example, take the case of an artist that has not been paid for 10 years. He or she might be entitled to $100,000.00, and maybe will receive that amount at the end of a lawsuit, regardless of who is representing him or her (this is a statement that I actually do not believe, but is used solely to explain my reasoning). A $100,000.00 verdict may be a nice victory in court, depending on the time and amounts paid. In a typical case, after experts and disbursements are considered, maybe $60,000.00 of "profit" is leftm - usually less. The attorney fee - even if coningency is only at 33% - brings the artist recovery to $40,000.00. That is still not a bad recovery, but it is less than 50% of the sum due. There are several cases where the amount of "profit" and the fee are both significantly higher. The real issue comes with what happens after the lawsuit. When the next statement is $7,000.00 instead of $10,000.00, is the other attorney or company really going to fight for it? Make no mistake, the attorney and other companies still take their ongoing fees of 33% to 50%. But, despite taking the fees, I have not seen any instances outside of AREC where this money is sought. Yet, AREC has full time employees to scour the market and media and challenge each statement. Despite the fact that it will lose money, AREC will still fight for proper payment. This may not seem like that big of a deal until one considers that the composition or recordings will continue to generate income for dozens of years. Thus, AREC's monitoring and accounting (for which no fee is paid) saves more than the original recovery.
4. With the ongoing royalties, AREC does not charge an administration fee. Thus, not only is each account monitored, there is no fee. Once again, consider $100.00 is due. In cases without AREC, that number, after administration fees, drops to anywhere between $85 and $75 depending on the amount of work that needs to be done. And each statement is verified through accountings. Thus, artists and songwriters that earn under $2,000.00 or so per statement, are getting FREE services that may be greater than the amount of their entire royalty check.
5. Unlike EVERYBODY else, AREC makes sure that every atrist gets paid the exact amount that they are owed.
6. AREC funds actions for which there is no recovery. I know of a case that was brought in 1990 for the estates of various artists. AREC funded that lawsuit for thirteen years, even though AREC refused to take a penny for any recovery.
7. AREC funds actions that would not otherwise be maintained. I know of another case where AREC has fought on behalf of a well known artist for more than 15 years in one lawsuit. Without AREC, there is no way that the lawsuit would have ever proceeded as far as it has.
8. AREC only takes a fee based on the amount it receives. Where a songwriter is getting paid from one source but not another, AREC will only take a fee based on what it recovers. Again, by way of example, if a songwriter is entitled to $100 per year and is only getting paid $50 per year, if AREC is successful at getting the payment to $100, it will only take a fee based on the "uplifted" $50.
I understand that people have problems with AREC's fee arangement. I do not. For every one artist that feels that he/she is overpaying for services, there are ten that could never make enough money to repay AREC (if they were required to, which they are not). In essence, the bigger artists fund the smaller ones.
I have seen the above statement that was made to the California legislature. I disagree with it. But, rather than have a philisophical debate, I would like to know what solution the declarant would proffer. Should AREC only take cases where it loses money? How could AREC help small revenue clients if it did not get paid from big revenue clients? What happens to the artists that are owed $1,000.00 per year if there is no AREC? The answer to the last question is simple. Either he or she will get nothing, or, he or she will sell his/her rights to another company for a one time sale of no more $500.00.
While it does make sense to begrduge an unfair system where record companies fail to pay artists, it seems unreasonable, to me, to complain that the system gives rise to companies like AREC. That AREC is the most successful, and has the most loyal client base, and represents hundreds of smaller artists and their families that would otherwise be left unrepresented should bring it praise, not ire.
By Ralph (209.240.198.62) on Thursday, May 01, 2003 - 11:00 am: |
Oren,
Thank you for posting your position on this most interesting and important topic. Also, welcome to Soulful Detroit. I encourage you to continue posting as I'm sure this is a debate that will continue for a while.
By Randy Russi (169.139.180.100) on Thursday, May 01, 2003 - 11:18 am: |
Doesn't Artists Rights get 50% of the proceeds/
winnings, if any are awarded? Therefore, there
is no charge to the artists for representation,
as was the case with the Ronettes.
By Chad (64.12.97.7) on Thursday, May 01, 2003 - 11:27 am: |
Just asking, but if Artists Rights are so righteous why are Rosalind and Annette sueing them?
By bontempsroulle (209.205.177.229) on Thursday, May 01, 2003 - 01:07 pm: |
Oren,
Why don't you tell the Forum how AREC now "owns" Huey "Piano" Smith's works. There's a guy in Baton Rouge writing a book about Smith, and he's got a lot of stories to tell about AREC's misuse of Smith.
Closer to Soulful Detroit, apart from the Vandellas, AREC also has Katharine Schaffner from the Marvelettes tied up and in great distress. How does it feel to represent a company that takes advantage of veteran artists at a vulnerable time -- when they're older and need money? Katharine apparently tried to put her relationship with AREC in the past, but received a sharply-worded letter from an attorney and she's tied to them for life.
Great company.
By George C (162.84.213.112) on Thursday, May 01, 2003 - 02:03 pm: |
Bontempsroulle:
I think there are two sides to every story.
I am not taking sides here but with respect to Huey "Piano" Smith, I have also read the news stories out of Louisiana and the Court documents with the United States District Court and Bankruptcy Court in research I have done. The two separate judgments against Mr. Smith state that he tried to get out of paying any fee to AREC for the work they did for him even though he praised AREC during his trial testimony. According to the court documents, it was with the efforts of AREC that Mr. Smith was able to pay all of his debts out of bankruptcy and still have income for himself.
Also, I think everyone must start with the premise that these acts -- Huey Smith, The Marvellettes, etc. were not receiving any royalties or receiving a small fraction of what they should have from their respective record companies. If it weren't for groups like AREC, the artists would still be receiving virtually nothing.
I think the problem which many people don't realize is that the true issue is not AREC, but record companies such as Motown, etc. who started these problems in the first instance. If the record companies did not try to hide income or under-report income, artists would not be in the shape they are in now.
I don't understand why people are criticizing AREC so much. In the music industry today artists have managers, publicists, lawyers, accountants, etc. -- these people take a combined larger share of an artist's fee and then they dump the artist when he/she is no longer popular.
The difference between AREC and these "professionals" is that AREC devotes all of its resources to continue to monitor to ensure that the artist, whether popular or not, is paid 10, 20 or 30 years down the road.
If you don't agree with AREC's fees, then the artist doesn't have to hire them. That is the nature of the business world.
By Oren (65.115.44.110) on Thursday, May 01, 2003 - 02:35 pm: |
I see that I have certainly hit a chord. Again, I am not speaking on behalf of AREC, even though I do work with them. But I will try to respond here nonetheless. Also, please note that the examples given are matters that I am not involved with, and artists that I do not know. Nonetheless, the same principle should apply.
Chad, I have seen the comments here and elsewhere about that litigation. The reason for the suit is quite simple - these ladies no longer want to pay AREC. But instead of going through what the parties' contentions are, let's take an unbiased look at the facts and see where we end up.
Chances are, when these ladies approached AREC 20 or so years ago, they were not being paid (or at least properly paid) by Motown. Otherwise, of course, there is no reason for them to ever engage AREC.
Let's say, for instance, that Motown had its standard 1960's artist agreement (which I am quite familiar with due to my representation of various Motown artists) where the artist was paid based on a 3% royalty. In the 1980s and 1990s, record companies decided to increase the royalty rates for the issuance of third party licenses. This is because third party licenses don't "cost" the record companies any money.
The analysis in looking at the claim, therefore, is what did AREC accomplish, and at what cost. Let's say, for instance, that AREC increased the royalty rate from 3% to 30% for licenses, and from 3% to 10% for direct manufacture. What would be proper compensation? Let's take this a step further. If AREC's expenses are $30,000.00, and the increased royalties amounts to a total of $10,000.00 per year thereafter, what should AREC receive?
AREC, by policy and contract, would not touch the original 3%. What is a fair amount for AREC to be paid, given that it took all of the risk, and have ongoing responsibilities? Attorneys who do this on contingency will not take less than 33% going forward.
And it is interesting that Huey Smith and Katharine Schaffner have similar concerns, because they represent exactly the nature of the problem. The following is my understanding, based on conversations I have had with non-AREC people and articles I have read. To be clear, none of the following comes from AREC - meaning that the facts as I understand them (at least in these instances) are not biased.
Starting with Huey Smith. I have read a variety of articles regarding Mr. Smith, and am friendly with three different attorneys that have represented him over the last 10 years or so.
By all accounts, Mr. Smith was not collecting anything beyond performance royalties when he joined up with AREC. AREC does not touch those royalties.
By all accounts Mr. Smith was penniless before he met AREC. No one disputes that he made more than $1 million after his involvement with AREC.
But, at least two separate times, Mr. Smith tried to get out of his contract with AREC. Why? Because he did not like the fact that AREC was prospering with him.
Not because he was cheated.
Not because he was wronged in any other way.
Not because he did not understand the contract.
Not because AREC did not perform its duties under the contract - Mr. Smith has never denied that without AREC's involvement he might still be penniless.
The reason Mr. Smith wanted to get out of the contract was simply that he did not want to share with the company that made him money. But Mr. Smith signed a contract. It is a one page contract that is simple to read. Again, as asked above, if AREC's policy is wrong, how much should AREC get paid?
Interestingly, and as some people may know, even though he could not get out of his contract with AREC, Mr. Smith apparently entered into contracts with other companies. Those companies paid Mr. Smith money, but got nothing in return. And the money they paid was never returned.
So, in theory, with Mr. Smith, AREC should be doing quite well. But now let's turn to Ms. Schaffner - one of the Marvalletes that had various lineups over their career. Unlike Huey Smith, Ms. Schaffner was not a songwriter, so she is receiving only an artist royalty. Unlike Mr. Smith, Ms. Schaffner is one member of a group, meaning that the royalties get split three ways no matter what. There are only three songs by the Marvalletes that get licensed regularly. If the same $50,000.00 was spent by AREC to get her back her share of the income, would that money ever be recouped by AREC? Maybe - maybe not. Of course, you have all chosen well known artists, with well known songs. What happens with the one hit wonders?
I understand that people have issues with an ongoing relationship. But, inasmuch as it is a one page contract, there is nothing about the relationship that is hidden.
The real question comes down to this: if somebody told you that they knew of a way to make $1 million in your name, but that if they made that money for you they would get to keep a portion, would you do it? The problem people seem to have is that here, AREC is saying that they know a way to make you money - but they have no idea how much it will come to. Whether it is $100.00 or $1 million, they will do the same work and keep the same portion.
The artists know this going in. The artists only have a problem many years later - when both sides get to enjoy the fruits of their mutual labor (the artist's creation, and AREC's opening income channels).
Would anybody say that AREC had the right to stop working for a client if they did not like all of the costs? Of course not, because they entered a contract - and made a promise to work hard in exchange for a share of the income. The same has to apply both ways, though.
I was talking to an AREC client that I also do work for a few weeks ago. She mentioned the lawsuit by Ms. Ashford. After expressing her surprise, she said "How can [Ms. Ashford] say that 100% of zero is better than 50% of something?"
So, these are the questions I will leave you with: is there any way that the artists in question are not better off with AREC than without? And if so, how?
By bontempsroulle (205.188.209.109) on Friday, May 02, 2003 - 06:39 pm: |
Gee Oren,
For someone who only works "with" AREC... you sure sounds like someone who IS AREC. We seem to have struck a chord with you, judging by your defensiveness.
Reputable lawyers who help artists get the royalties coming to them STOP taking a cut once the situation is resolved. Period.
By Ralph (209.240.198.62) on Friday, May 02, 2003 - 08:07 pm: |
Actually it looks like a pretty good deal all around to me. Look at it as a long term agreement where the artist collects monies owed for a fair fee and then has any long term royalties protected by established agreement. Seems to me like everybody wins.
It was my intention to remain out of this debate. However, having been under a few contractual obligations in my past ( including Motown ) I thought I should express my gut reaction in this. I think this is a very good debate and thanks every one for keeping it civil.
By bontempsroulle (205.188.209.109) on Friday, May 02, 2003 - 08:24 pm: |
Gee Ralph,
Your vote of confidence for AREC based on a "gut reaction" -- very scientific -- is great; funny thing is, the people who signed the contract with AREC, who really have a stake in this, don't agree with you.
Thank goodness the Vandellas have taken the bull by the horn and are suing.
By Ralph (209.240.198.62) on Friday, May 02, 2003 - 08:29 pm: |
Well pal, you gotta understand. I speak from experience. I'm assuming you have never been in this unique situaton so therefore I don't think you are seeing the validity of this arrangement. But like I said, I'm staying out of this for the most part.
By Ralph (209.240.198.62) on Friday, May 02, 2003 - 08:32 pm: |
PS: Don't be dissing my gut reactions. I've been advising people successfuly for many years on the basis of how I might " feel " about something. I've got a pretty good batting average.
By bontempsroulle (205.188.209.109) on Friday, May 02, 2003 - 08:40 pm: |
Nonetheless, the people who have a stake in it, who have found themselves bound to this corporation for life, don't agree.
And music business lawyers like Fred Wilhelms, who do stand-up work for veteran artists and don't like to see exploitation, don't agree.
But I'm sure you know better.
By Fred (64.12.97.7) on Friday, May 02, 2003 - 09:27 pm: |
Apologies to Ralph starting out, because I am going to quote Mikie�s post at length. Because it appears somewhere up the thread from this response, it will be easier for me to answer and for everyone to follow if I do it this. I also apologize for the use of CAPS to set apart my responses. Mikie�s original statements appear in quotes.
�I am very disturbed by some the messages that I have seen attributed to "Fred" on this site. Not only do many of Fred's comments seem wrong both factually and legally, Fred has been less than candid about his own dealings.
Perhaps Fred should make his identity know.
Fred was an AFTRA trustee. During his tenure at AFTRA, AFTRA did not pay death benefits or health benefits to a single widow, widower, or next of kin, for the recording artists from the 1950s and 1960s.
Think about that. �
THIS IS INCORRECT. I WAS DIRECTOR OF THE AFTRA HEALTH & RETIREMENT FUNDS. I WAS NOT A TRUSTEE. I WAS AN EMPLOYEE OF THE FUNDS.
�Hundreds of artists that probably paid more in union dues than they ever received in royalties. They died poor. Their widows and next of kin wanted to get the death benefits (life insurance policies, etc.) that they were entitled to. And these policies were far less than what AFTRA was paid for each artist.�
THERE IS NO CONNECTION BETWEEN UNION DUES AND BENEFITS. THIS IS JUST INCORRECT.
�Not one single widow or next of kin got death benefits. �
THIS IS PATENTLY INCORRECT. THE FUNDS PAID OUT NEARLY 100 DEATH BENEFITS DURING MY TENURE. THE ACTUAL AMOUNT PAID OUT IS AVAILABLE FROM THE INFORMATIONAL TAX RETURNS FILED BY THE FUNDS. CHECK THEM OUT, MIKIE.
�Fred joked about this. Fred found it funny that he and other trustees were being sued by the artists. �
SAYS WHO, MIKIE? BESIDES THE FACT THAT I WASN�T A TRUSTEE, WHO SAYS I LAUGHED?
�Fred was responsible for this policy. What a guy.�
I AM NOT SURE WHAT POLICY YOU ARE REFERRING TO. IF I PRESUME YOU MEAN THE POLICY OF �NOT PAYING DEATH BENEFITS.� THERE WAS NO SUCH POLICY. SOMEONE HAS FED YOU A LOAD OF BULL, MIKIE.
FURTHERMORE, I WAS NOT RESPONSIBLE FOR FUND POLICY. THE ACTUAL BOARD OF TRUSTEES SET THE POLICY. IT WAS MY JOB TO CARRY IT OUT.
�But then something happened. Fred was fired by AFTRA. Who knows, maybe AFTRA also thought it was wrong not to pay any of the artists.�
UNFORTUNATELY, MIKIE, YOU HAVE IT BACKWARDS. I WAS FIRED BY THE FUNDS BECAUSE I BROUGHT TO LIGHT THE SITUATION CONCERNING THE FUNDS� 40 YEARS OF POOR PERFORMANCE ON BEHALF OF RECORDING ARTISTS, AND WOULD NOT LET THE ISSUE REST. THE ILL TREATMENT OF ARTISTS EXISTED LONG BEFORE I GOT THERE, AND ONCE I PUT IT IN FRONT OF THEM, THE TRUSTEES EITHER HAD TO DEAL WITH IT OR GET RID OF ME. THEY CHOSE THE LATTER.
�Nonetheless, Fred now claims to champion the rights of the underpaid artists. What a joke. And his preaching only makes the old saying more true - nothing is worse than a reformed whore.�
PERHAPS THERE IS ONE THING WORSE. A PUPPET PUT UP TO SAYING THINGS HE (OR SHE) HAS NO PERSONAL KNOWLEDGE OF. YOU�VE BEEN DUPED, MIKIE, AND IT MAKES YOU LOOK LIKE A FOOL.
�In this instance, the facts are actually comical. Fred's sole claim to legitimacy with recording artists is the fight against AFTRA.
But what really happened? Fred widely advocated a settlement with AFTRA which he claimed was "fair". Oh, really? So, his client, Joyce McRae gets $100,000.00 while the families of other artists get pennies. The settlement was great for Ms. Mcrae and other 10 or 15 named plaitniffs. They got hundreds of times more than they ever should have received. For well known artists with lots of hits, the settlement amounted to pennies on the dollar. For the poor artists, and their widows and next of kin, the settlement was worthless.�
�Good job Fred. Help the rich get richer and hurt the poor.�
INTERESTING TAKE ON THINGS MIKIE, BUT COMPLETELY FALSE. IT IS FASCINATING THAT YOU KNOW SO MUCH ABOUT THE CASE BUT HAVE NEARLY EVERYTHING WRONG.
HERE ARE THE ACTUAL FACTS, SUPPORTED BY THE COURT RECORD:
FOR THOSE OF YOU NOT FAMILIAR WITH THE AFTRA CASE, IT WAS A CLASS ACTION BROUGHT ON BEHALF OF ALL RECORDING ARTISTS WHO RECORDED BETWEEN 1959 AND 1993 (WHEN THE SUIT WAS BROUGHT). IT CLAIMED THE AFTRA FUNDS HAD VIOLATED ITS DUTY TO THE ARTISTS BY FAILING TO COLLECT BENEFIT CONTRIBUTIONS ON THEIR BEHALF FROM THE RECORD COMPANIES. IT ALSO ALLEGED RACKETEERING BY THE LABELS IN WILFULLY REFUSING TO MAKE THE CONTRIBUTIONS.
THERE WERE 15 ORIGINAL PLAINTIFFS.
THE FACTUAL ALLEGATIONS ON WHICH THE COMPLAINT WERE BASED CAME DIRECTLY AND COMPLETELY FROM MY EXPERIENCE AT THE FUNDS (IF I WAS LAUGHING SO HARD, WHY DID I DO THAT, MIKIE? IF THE FUNDS WERE TIRED OF ME NOT PAYING BENEFITS, WHY WAS THE SUIT NECESSARY AFTER I LEFT?). I WAS A WITNESS FOR THE PLAINTIFFS, NOT ONE OF THE LAWYERS ON THE CASE.
NINE YEARS LATER, THERE WAS A SETTLEMENT PROPOSED ON THE ALLEGATIONS CONCERNING THE FUNDS (THE RECORD COMPANY ISSUES REMAIN OPEN). THE INITIAL SETTLEMENT PROPOSED IN MARCH, 2002 WOULD HAVE PAID EACH OF THE FIFTEEN PLAINTIFFS $100,000, BUT ONLY IF THEY AGREED TO GIVE UP ANY CLAIM FOR CORRECTION OF THEIR BENEFITS. IT WOULD ALSO HAVE PAID THE LAWYERS NEARLY $3 MILLION DOLLARS. THE REMAINDER OF THE $8.5 MILLON SETTLEMENT (PROBABLY ABOUT $5 MILLI0N) WOULD HAVE GONE INTO A FUND AND ALL ARTISTS WHO RECORDED BETWEEN 1959 AND 1994 COULD HAVE MADE A CLAIM AGAINST THAT FUND.
AS THERE ARE NEARLY 20,000 INDIVIDUALS WHO WOULD QUALIFY, THE AVERAGE PAYMENT COULD HAVE BEEN ABOUT $250. IF THIS SETTLEMENT HAD BEEN APPROVED, EVERY ONE OF THE 20,000 RECORDING ARTISTS WOULD HAVE BEEN PREVENTED FROM EVER GETTING THEIR RETIREMENT BENEFIT ACCOUNTS STRAIGHTENED OUT. THEIR CLAIMS WOULD BE CLOSED OUT BY THE SETTLEMENT. UNDER THIS SETTLEMENT, DAMON HARRIS WOULD HAVE GOTTEN $100,000, AND THE REST OF THE TEMPTATIONS WOULD HAVE GOTTEN $250 EACH. MARSHALL THOMPSON WOULD HAVE GOTTEN $100,000 AND THE REST OF THE CHI-LITES $250 EACH. CURTIS MAYFIELD WOULD HAVE GOTTEN $100,000 AND THE IMPRESSIONS $250 EACH.
TO ME, THIS WAS NOT FAIR, AND I WAS NOT ALONE IN FEELING THIS WAY. THIS PROPOSAL WAS OBJECTED TO BY FOUR OF THE PLAINTIFFS; SAM MOORE, BRIAN HYLAND, BRENTON WOOD AND THE CHILDREN OF MARY WELLS. THROUGH THEIR EFFORTS, THE RECORDING ARTIST COALITION ENTERED THE SUIT TO OBJECT TO THE SETTLEMENT AND, AT THE VIRTUAL 11TH HOUR, AFTRA (THE UNION, NOT THE FUNDS, WHICH IS A SEPARATE ORGANIZATION) ALSO OBJECTED.
MY PERSONAL OBJECTION TO THE SETTLEMENT THAT YOU CLAIM I SUPPORTED IS WELL DOCUMENTED. I SENT HUNDREDS OF PERSONAL LETTERS TO ARTISTS ASKING THEM TO OBJECT, AND THE LETTER ENDED UP CIRCULATING ON THE NET. IT CAN STILL BE FOUND HERE (BOTTOM OF THE PAGE):
http://www.nothinbutdablues.com/BluesNews/2002/Page22.html
THE OBJECTORS WERE VICTORIOUS. THE JUDGE REFUSED TO APPROVE THAT SETTLEMENT PROPOSAL AND SENT EVERYONE BACK TO NEGOTIATE A NEW ONE. THE FOUR OBJECTORS REMAINED OPPOSED TO ANY OF THE NAMED PLAINTIFFS GETTING ANY PREFERENTIAL TREATMENT OR ADDITIONAL MONEY AND WANTED ALL THE AVAILABLE SETTLEMENT MONEY TO BE USED AS WAS INITIALLY INTENDED AT THE BEGINNING OF THE CASE: TO FIX THE AFTRA FUNDS AND PROVIDE BENEFITS FOR RECORDING ARTISTS.
AS A RESULT OF THE SECOND ROUND OF NEGOTIATIONS, A NEW SETTLEMENT PROPOSAL WAS REACHED IN OCTOBER, 2002. THE LAWYERS STILL GOT THEIR MONEY, AND THE NAMED PLAINTIFFS WERE EACH AWARDED $25,000 FOR THEIR INDIVIDUAL CONTRIBUTIONS TO THE PROSECUTION OF THE CASE. IF THEY SO ELECTED, THEY WOULD GET AN ADDITIONAL $50,000 IN RETURN FOR A WAIVER OF THEIR INDIVIDUAL BENEFIT CLAIMS. SEVERAL OF THE PLAINTIFFS HAVE ACCEPTED THAT MONEY. THE FOUR OBJECTORS HAVE NOT. JOYCE MOORE (AND IT IS FUNNY HOW HER NAME COMES UP IN THIS THREAD, ISN�T IT, MIKIE?) RECEIVED $25,000 FOR SERVICES PROVIDED TO THE LAWYERS. I KNOW PERSONALLY THAT OVER THE TEN YEARS, SHE AND SAM SPENT OVER TEN TIMES THAT MUCH TO KEEP THE CASE ALIVE. SHE AND SAM COULD HAVE USED THE $100,000 YOU SAID SHE GOT, SO COULD HAVE MARY WELL�S KIDS AND THE OTHER OBJECTORS, BUT THEY DIDN�T THINK IT WAS RIGHT TO PERSONALLY PROFIT AT THE DISADVANTAGE TO EVERY OTHER SINGER OVER THE PAST 40 YEARS. I WISH SOME OF THE OTHER NAMED PLAINTIFFS HAD THE SAME GUTS.
THE REMAINDER OF THE SETTLEMENT MONEY WILL BE USED TO PAY FOR CHANGES IN THE AFTRA FUNDS AND PROVIDE ARBITRATION AT NO COST TO ANY ARTIST WISHING TO PURSUE A BENEFIT CLAIM THAT IS NOT RESOLVED INTERNALLY. THE BIGGEST DIFFERENCE BETWEEN THE FIRST PROPOSAL AND THE SECOND IS THAT ALL THE OTHER ARTISTS DIDN�T HAVE TO GIVE UP THEIR BENEFIT CLAIMS. FRANKLY, I WAS DISAPPOINTED IN THE SETTLEMENT BECAUSE IT COULD HAVE DONE MORE, BUT, ALL IN ALL, IT IS A FAIR START ON FIXING THINGS.
AND MIKIE, BEFORE YOU ACCUSE ME OF PERSONAL PROFIT, I DIDN�T MAKE A DIME FOR THE THOUSANDS OF HOURS I CONTRIBUTED TO THE CASE, NOR WAS I REIMBURSED A PENNY FOR THE SUBSTANTIAL EXPENSES I INCURRED OVER THE PAST TEN YEARS. PUSHING THE CASE WAS SIMPLY THE RIGHT THING TO DO.
�Whether he was at AFTRA or after he left, Fred has made his living by keeping the money away from the widows and children of artists.�
BULL.
�And by the way, Fred, why not read a book or two before saying that certain deductions are not taken against the artist. Many recent rappers who were credited with millions in their royalty accounts are still bankrupt. It is not because of accounting errors, it is because of charges that are incurred.�
MIKIE, I DON�T KNOW WHAT RAPPERS YOU ARE REFERRING TO, OR WHAT KIND OF CHARGES, BUT I ASSURE YOU THAT RECORD LABEL ACCOUNTING STINKS.
Finally let's not forget to mention that Fred's "fee" for services is an ongoing royalty interest. I know that he has quoted this as a fee for his service.
THIS IS SIMPLY A LIE. I NEVER HAVE, AND I NEVER WILL. WHEN THE RECOVERY CHECK COMES IN, MY WORK STOPS, AND MY PAY STOPS, TOO. PUT UP OR SHUT UP, MIKIE, TELL US THE SOURCE OF THIS INFORMATION. I WANT TO CALL THEM LIARS TO THEIR FACES, IF THEY HAVE THE NERVE TO SHOW THEM.
Of course, there is no guarantee that he will ever monitor any of the ongoing statements - nor does he promise to do so. Everyone has the right to make a living, and no one can begrudge Fred for what he does. But, it is important to realize that his history is blemished to say the least, and his present practice is exactly what he criticizes
AS A MATTER OF FACT, MIKIE, I DO MONITOR STATEMENTS FOR CLIENTS WHEN THEY ASK ME TO. I JUST DON�T CHARGE FOR IT. IF I THINK THERE IS A DISCREPANCY OR AN ERROR, I BRING IT TO MY CLIENT�S ATTENTION. IF THEY ASK ME TO PURSUE IT, I DO, AND IF ALL IT TAKES IS A COUPLE PHONE CALLS OR LETTERS, THERE IS NO CHARGE. THERE ARE SOME ARTISTS WHO POST HERE WHO CAN VERIFY THIS.
MIKIE, I THINK YOU�VE BEEN HAD. SOMEBODY PUT YOU UP TO THIS POST. THEY DIDN�T HAVE THE NERVE TO DO IT THEMSELVES BECAUSE THEY KNEW THEY WERE LYING TO YOU. TELL THEM TO COME OUT AND REPEAT THESE THINGS FOR THEMSELVES, AND STOP BEING THEIR FOOL.
By Ralph (209.240.198.62) on Friday, May 02, 2003 - 09:38 pm: |
Fred,
Thanks for your post. It's plain to see that this debate is far from settled. I would like to see more arguments here but let's keep it cool. I've already been accused of " knowing better " and I certainly don't want to give that impression.
By Fred (64.12.97.7) on Friday, May 02, 2003 - 09:58 pm: |
I know and respect Oren as an attorney and an artist advocate. He and I are going to disagree forever about AREC, and this is probably not the proper forum for us to carry on the debate. I will also state unequivocally that AREC rarely fails to get the artist the absolute best professional representation by attorneys and accountants. Oren is truly one of the good guys.
There are several statements he makes in his posts, however, that need some clarification.
�2. Unlike the other companies and attorneys, AREC does not make a business out of exoploiting intellectual property - meaning that there is no conflict of interest.�
Oren paints everyone with a broad brush here. Not all attorneys take a cut of intellectual property income as part of a fee arrangement. Secondly, in at least one case with which I am familiar, AREC did end up with an artists� publishing rights.
�The real issue comes with what happens after the lawsuit. When the next statement is $7,000.00 instead of $10,000.00, is the other attorney or company really going to fight for it? Make no mistake, the attorney and other companies still take their ongoing fees of 33% to 50%. But, despite taking the fees, I have not seen any instances outside of AREC where this money is sought.�
Keep looking Oren, we�re out here.
�6. AREC funds actions for which there is no recovery. I know of a case that was brought in 1990 for the estates of various artists. AREC funded that lawsuit for thirteen years, even though AREC refused to take a penny for any recovery.�
I was actually a named defendant in that lawsuit because it was brought against the AFTRA Funds while I was Director. AREC didn�t �refuse� to take a penny for any recovery, there WASN�T any recovery, AREC lost the suit because it was found to be without merit. To be absolutely blunt, the suit was brought for death benefits from the AFTRA Funds because that was all AREC was interested in. Although AREC was aware prior to the suit (because I told them) that some of the surviving widows and heirs might be eligible for pension and health benefits if we could perfect the earnings histories of the deceased artists, they never pursued these claims and simply filed suit for the death benefit lump sums. The only reason why I can think of is that AREC couldn�t figure out how to get a share of those other benefits, so it wasn�t worth the effort for them to try.
In his next post, Oren says:
(In regard to Huey Smith)
�By all accounts, Mr. Smith was not collecting anything beyond performance royalties when he joined up with AREC. AREC does not touch those royalties.�
For the simple reason, which Oren doesn�t explain, that they can�t. BMI won�t assign them to anyone. Furthermore, there was no dispute about the amounts paid by BMI to Mr. Smith, so there was nothing for AREC to do in that regard. What Oren makes sound highminded really is outside the scope of AREC�s work.
Oren later says: �I was talking to an AREC client that I also do work for a few weeks ago. She mentioned the lawsuit by Ms. Ashford. After expressing her surprise, she said "How can [Ms. Ashford] say that 100% of zero is better than 50% of something?"
I will admit that I have heard the same thing from clients of mine, some of whom are satisfied with AREC, some of whom are not.
I do have one question for Oren that might be best answered in this forum to clear up some misconceptions. It is my understanding that once AREC takes on the representation of the artist, all royalty payments are subsequently send by the labels directly to AREC. AREC then deducts its fee and sends the balance to the artist. If this is so, how does AREC end up in litigation with its own clients over its fees, which Oren must admit happens?
By Ralph (209.240.198.62) on Friday, May 02, 2003 - 10:30 pm: |
Thanks again Fred. I suppose the fair thing to do now will be to allow Oren to post his thoughts. I must say though that I did not take Oren's statement regarding the waiver of BMI royalties as some sort accolade for the merits of AREC. I think he was just clarifying a situation. Very interesting guys. Please continue.
By stephanie (66.54.1.38) on Saturday, May 03, 2003 - 03:19 pm: |
You all are so intelligent it seems like both sides have good arguments but from what I have seen AREC does seem to get something for the artists that they would not have gotten in the first place. Im glad both of these guys Fred and Oren are able to debate in a civil manner that is a testament to the professionalism of both. Thank you gentlemen for your intelligent discourse. Ralph is right this is very eye opening and interesting its good to see both sides of the coin for the artist and the record company..
Stephanie
A Stubass and sometimes a Terrana Twin Angel..forget Charlie he has nothing on you two!!
By Matthews (68.129.149.123) on Saturday, May 03, 2003 - 03:26 pm: |
George C and Oren:
It's a myth that Huey "Piano" Smith was penniless when AREC solicited him -- and probably hundreds of other classic soul and rhythm-and-blues artists -- by mail and phone in 1982. Actually, Mr. Smith had just paid cash for a house thanks to his "Rockin' Pneumonia" publishing royalties.
Furthermore, Mr. Smith has never objected to AREC's 50 percent fee. And Mr. Smith never received royalties for his record sales before or after his involvement in AREC.
But after 12 years of legal actions brought against him by AREC, Mr. Smith's four biggest hits, "Sea Cruise," "Rockin' Pneumonia," "Don't You Just Know It" and "High Blood Pressure," were sold by his bankruptcy trustee for $1 million, less $390,00 in unrecouped royalties. AREC, Mr. Smith's only significant creditor besides the tax man, got $501,000 of the Smith bankruptcy estate distribution, plus a direct $179,000 payment from Warner/Chappell for its purported 50 percent ownership of his songs.
It's also a myth that AREC has some special talent for obtaining royalties. A music business friend of a member of one classic New Orleans singing group, for instance, told him who to contact at EMI about royalties. He simply wrote a letter to EMI and got the check in the mail.
AREC is not "the white knight of rock" as The New York Times called them. It's not a traditional artists rights organization, such as the non-profit BMI or ASCAP.
By R&B (138.238.41.118) on Saturday, May 03, 2003 - 03:32 pm: |
WHAT,MORE OF THEM NOGOOD CARPETBAGGERS?WHARS MY DYNAMITE?
By Ralph (209.240.198.62) on Saturday, May 03, 2003 - 06:14 pm: |
Steph,
What a nice thing to say. Thank you.
By David Meikle (62.252.128.6) on Saturday, May 03, 2003 - 06:55 pm: |
I echo those sentiments.
David
By matthews (209.215.117.4) on Saturday, May 03, 2003 - 07:12 pm: |
Regarding Huey "Piano" Smith's "Rockin' Pneumonia" royalties: I meant to write "BMI performance" royalties. Of course, there's much more to the story.
By Oren (172.136.42.23) on Sunday, May 04, 2003 - 03:07 pm: |
Sorry for the delayed response to both Fred and Mathhews.
Fred, you are absoultely right that I have proceeded with relatively broad strokes. But, as I think that you will agree, the majority of the unpaid and/or underpaid artists and songwriters are not represented by the best available talent because they cannot afford it or gain access to those who would accept a case on a reduced rate or for a contingency. The follow up point I raised is with regard to ongoing policing. Regardless of who the attorney or business representative is, unless the royalties due are over a few thousand dollars, it costs more to undertake further representation than any recovery would yield.
Further, as I am sure you would agree, there are, quite litteraly, hundreds of attorneys, agents, and other companies, that all look for a quick deal (i.e. not necessarily an outcome that is in the client's best interest), and then take an ongoing piece of the royalty interest without doing any policing.
In this regard, I should be quite clear - other than a pro bono organization, or charity, no one is in the position of giving away their time and money for free. The people involved in representation of artists are in a service industry, which means that their time is their sole source of income. At the end of the day, I need to put food on the table for my kids, as does Fred, as do AREC employees and others. I will not diagree that we are all in business - although we get to try to choose our business as best as possible to fight for the side that we believe is right.
Fred, there is one error in your post, however. Although AREC paid for the lawsuit against AFTRA Fund, it did NOT have an interest in the outcome. As I think I mentioned to you last fall, I advised on the appeal in that case on a pro bono basis. I am fully aware of fee arrangements, etc. I will tell you, unequivocally, that even if there was a huge recovery (as you correctly point out, there was none), AREC had no financial interest. Furthermore, I know clients that AREC represents for the purpose of raising health and death benefits to AFTRA Fund as well as the funds maintained by other unions. AREC REFUSES to take any portion of any monies recovered.
Fred makes an excellent point regarding Huey Smith's performance royalties, and, frankly, I did not really define the issue as well as I could have. As a practical matter, I have seen a variety of situations where writer income from BMI has been assigned to a different party. Nonetheless, as Fred accurately points out, BMI has a policy that it will only pay the writer. I was really responding to an article I recently read wherein a New Orleans based attorney named Justin Zitler stated that AREC was taking Mr. Smith's share of BMI income. Thus, I was trying to both: (1) refute Mr. Zitler's statement and (2) use this as an example for my overall point. Obviously, this was a case where I should not have done both. Therefore, let me return to the issue so that it I can be clear. In all cases, AREC does not take any portion of any income that the artist realized prior to joining up with AREC. For instance, if the artist receives a 3% royalty and AREC bumps it up to 10%, AREC takes a piece of the 7%. AREC does not take any portion of any money or portion of an income stream that the artist previously realized.
In answer to Fred's last question, the relationship relative to accountings, as you have explained it, comports with my understanding. This deserves one caveat, as I have tried to be very clear here, I do not work for AREC, nor have I either sought or been authorized to speak on its behalf. However, I can categorically state that in all cases that I have been involve with, this is precisely the manner that I have seen AREC proceed (i.e. to receive the statements and then pass the same to the client).
It is not uncommon for someone to be unhappy after they entered into a contract - however, that really is not the fair way to evaluate the contract. The way to evaluate it is, in addition to understanding the contract, was it reasonable and provident for the party to enter the contract at the time that it entered into the contract. If someone is not making money, and AREC can open up an income stream, would anybody really argue that the artist is not better off for AREC's involvement? And, I pose the question I initially asked: how can anybody ensure that they are taking care of the small clients unless they are getting income from the larger clients? Furthermore, and in light of the responses, why is the same contract that IS acceptable for an artist for which AREC will never realize a profit NOT acceptable for an artist for which it profits greatly?
Matthews, I have no idea of the facts involved in the bankruptcy, and therefore cannot really provide much of a comment - bankruptcy is a specialty where the concepts and language is different from every other portion of our (or at least my) everyday life. My firm has a bankruptcy department - I have asked them to handle matters for my clients. I do not understand the issues at the beginning, and, other than money paid or received, do not really understand the result.
So, after my huge disclaimer about bankruptcy law, I will state that, if the facts are as you have portrayed, clearly, the Louisiana Bankruptcy court in Baton Rouge ruled in favor of AREC. As far as I know, in each instance (I think that there have been 2 or 3) where AREC has had a fight with a former client, AREC has won. Thus, at the very least, the Court has deemed that AREC is acting properly and abiding by its contract in each case.
I am sure the last statement will come back to haunt me, so let me also state that 2 or 3 lawsuits for a company representing 600+ artists for decades is a very high approval rating.
Matthews, I cannot really comment on your last statement, because I am not sure I understand the allegation. Is it the artist's contention that he/she told AREC to please contact EMI, and thereafter AREC stated that it would take a fee because it parroted the artist's prior demand? This seems unusual. First, the record companies and publishing companies would much rather deal with the artists than AREC, because the artists will take pennies on the dollar. Second, I have been involved in a variety of situations where AREC has engaged me to help artists in matters for which they do not charge the artist. I am also familiar with a very famous New Orleans based singing group that AREC had me help with the transferring of files in a real estate matter. It involved four or five letters, and engaging another attorney in Louisiana. No fee was taken - nor was it even considered. I think I would need to understand the situation a little better, however, to respond.
I do not know how to respond to the last statement - I am not sure how any business, that exists to make money, can be called a "white knight". However, I do know that AREC has helped hundreds of artists that could nto turn anywhere else for help. BMI and ASCAP are non-profit organizations. It is not fair to say that a restaurant is bad because a soup kitchen provides free food. In this case, the comparison is even less fair, because neither BMI nor ASCAP nor any other party will help with royalty recovery for free.
Fred, I do have a question in closing, however, which I am not sure that you can answer. I have seen a variety of attorneys that claim to administer their clients' royalties, etc., on an ongoing basis. Have you ever seen an attorney do a good job at this? And if the answer is yes, then I have these follow up questions: (1) how large are the accounts for the clienst, and (2) how can she/he stay in business? It's a loaded question, I know.
By matthews (209.215.117.4) on Sunday, May 04, 2003 - 05:37 pm: |
Oren:
AREC has sued more than two or three of its clients. AREC has also been sued by its clients, but only a very few artists have been able to severe their relationship with AREC. Sam Moore is one of the few. I don't know the details.
Regarding my statement about a New Orleans artist writing a letter to EMI, AREC was not involved in that. The situation was EMI released a CD of this artist's recordings. The artist then, acting upon advice and info from a friend, wrote EMI to inform the company that he was entitled to royalties generated by the CD's sale. EMI responded and the singer is clearly pleased with that response.
By matthews (68.129.149.251) on Sunday, May 04, 2003 - 07:59 pm: |
Oren:
Regarding my previous comment about AREC, BMI and ASCAP, anyone in the music business knows that BMI and ASCAP are collection agencies that distribute those collections to their member songwriters. AREC also is a collection agency that distributes royalties to its clients.
You also said BMI is not an enforcer. Anyone in the music business knows that if an establishment that uses music does not pay a BMI license fee, BMI will work to convince that establishment to obtain a BMI license. If letters and phone calls don't work, however, BMI will take the establishment to court.
By Fred (205.188.209.109) on Sunday, May 04, 2003 - 10:28 pm: |
Oren said:
�Fred, you are absoultely right that I have proceeded with relatively broad strokes. But, as I think that you will agree, the majority of the unpaid and/or underpaid artists and songwriters are not represented by the best available talent because they cannot afford it or gain access to those who would accept a case on a reduced rate or for a contingency.�
I agree fully, and appreciate the fact that you have stepped back from your absolutist standpoint that AREC is the only one who provides this service.
�Further, as I am sure you would agree, there are, quite litteraly, hundreds of attorneys, agents, and other companies, that all look for a quick deal (i.e. not necessarily an outcome that is in the client's best interest), and then take an ongoing piece of the royalty interest without doing any policing.�
There are, and they are wrong to do so. I will agree that taking the quick deal is common, however, I believe that has more to do with either the lack of expertise on behalf of the artist representative or the existence of a too-close relationship between the artist rep and the label. I have often commented that the reason why artist lawyers don�t have a tennis tournament is because few of them stay on one side of the net long enough to finish a game.
The �quick deal� was, as a matter of fact, the basis of my criticism about AREC in the handling of the case they brought against the AFTRA Funds on behalf of the estates. The death benefits were the the �quick hits� that would have paid lump sums quickly (had the Funds caved in as AREC expected, as Rubin told me himself).
I dealt with AREC numerous times during my tenure at AFTRA, and repeatedly asked them to provide records of past royalty recoveries on behalf of both deceased and living clients so that I could correct the earnings records for those artists. They never did so.
In the one case where a living AREC client got health benefits, it was because I instituted an earnings inquiry without AREC�s assistance and was able to find sufficient earnings for eligibility. Several similar inquiries were ongoing at the time the suit was filed and I was directed by Fund counsel to suspend them pending the resolution of the case. I was gone from the Funds long before the case ended. I do know that, as of four years ago, AREC hadn�t sought earnings adjustments for several living clients I know.
�Fred, there is one error in your post, however. Although AREC paid for the lawsuit against AFTRA Fund, it did NOT have an interest in the outcome. As I think I mentioned to you last fall, I advised on the appeal in that case on a pro bono basis. I am fully aware of fee arrangements, etc. I will tell you, unequivocally, that even if there was a huge recovery (as you correctly point out, there was none), AREC had no financial interest. Furthermore, I know clients that AREC represents for the purpose of raising health and death benefits to AFTRA Fund as well as the funds maintained by other unions. AREC REFUSES to take any portion of any monies recovered.�
I was advised by one former plaintiff in the suit that there was in fact a 50% fee deal on the recovery. That former plaintiff had an ongoing history of problems with AREC (and I am sure Oren knows who I am talking about), and I never found that person particularly trustworthy, so I will defer to your better information. You should be aware however, that it wasn't until I pointed out that payment had to be made directly to the beneficiaries that Rubin was aware of that.
I have to note again, however, Oren that AREC�s �refusal� to take a share of benefit money is less a virtue than you insist. The fact remains that they cannot reach those payments directly.
�And, I pose the question I initially asked: how can anybody ensure that they are taking care of the small clients unless they are getting income from the larger clients? Furthermore, and in light of the responses, why is the same contract that IS acceptable for an artist for which AREC will never realize a profit NOT acceptable for an artist for which it profits greatly?�
I am not entirely sure I understand what you are saying here, Oren, as it doesn�t seem to really be in response to my question. Taking care of one client never, under any circumstances, is proof that you are taking care of all clients. Not all attorneys who get disbarred have screwed over everyone on their client list. And as to the second question, to my mind, a 50% lifetime income participation is not acceptable under any circumstances, no matter how many pro bono cases you do.
My objection to AREC is not with what they do for artists. I spend a lot of time doing the same thing. My objection is to their perpetual compensation arrangement. There are certain things that could justify a 50% one time fee. Off the top of my head, chasing a bootlegger is one of them, simply because there is no guarantee there is going to be anything in the pot at the end of a long and complicated paper chase. If there isn't, and you do your job right, the bootlegger will be out of business when you�re done, but that may be all you accomplish. My clients know, from the start, that chasing a bootlegger is a big gamble, and 50% is not unreasonable under the circumstances.
I can also justify a high contingency one time fee in a case where you know the defendant is going to use a �catch me if you can� legal defense strategy, which is going to take time, energy, expense and a good bit of luck to defeat. I would count going up against an outfit like Gusto (as AREC has done, successfully) or Charly Records as that kind of case. If you catch guys like these, and beat them, the odds are pretty good you are going to have to chase them all the way to court again sooner or later, but probably not for the same amount of money as the first time.
However, I do have an issue with the practice of taking a perpetual share of any increase I may negotiate for a client. I realize this is not an unusual arrangement in the entertainment world, but nearly unknown outside it. The way I deal with this is the same way I did it �back in the real world,� when, for instance, I negotiated long term leases. My retainer agreement sets out that my client and I will establish the reasonable value of my work once the initial settlement has been reached. Usually it is a percentage of the value expected by my client from the settlement over a period of years (usually from three to seven, depending on the specifics of the case, but all set out before hand). The total of that calculation becomes my fee. If my client can pay it all at once, they do. If they would rather defer payment, they can spread it out over time. Do I intercept their royalty checks like AREC to ensure I get paid? No. Do I continue to take a cut after the total agreed fee is paid? No. Have I ever had an artist stiff me on a bill under these arrangements? No. I've had slow pays, but never a deadbeat.
If, as we both understand it, royalty statements are rendered to AREC who then passes on the income (net of AREC�s fee) to the artists, how does AREC end up suing it clients for fees, since they have already deducted their share? I know of four instances where this has occurred (as I have seen filings in the cases) and have anecdotal information on several more. I don�t understand how this happens if AREC is only taking a portion of the income for which they claim responsibility.
�I am sure the last statement will come back to haunt me, so let me also state that 2 or 3 lawsuits for a company representing 600+ artists for decades is a very high approval rating.�
A cynic might say that many of the others can afford to sue because they don�t have the money to hire a lawyer because AREC already has it. Someone familiar with royalty chasing might also say, for the great majority of those 600 clients, the amounts involved don�t justify litigation. The lack of litigiation is the same reason the RIAA claims nearly every artist is �happy� with the terms of their recording contracts.
�Fred, I do have a question in closing, however, which I am not sure that you can answer. I have seen a variety of attorneys that claim to administer their clients' royalties, etc., on an ongoing basis. Have you ever seen an attorney do a good job at this? And if the answer is yes, then I have these follow up questions: (1) how large are the accounts for the clienst, and (2) how can she/he stay in business? It's a loaded question, I know.�
I do it, and my clients seem to think I do a good job of it because they ask me to continue doing it.
Frankly, the time and effort to monitor royalties is apparently overrated by AREC. 95% of my time and energy goes into creating the database for the first fight I pick with the label. After that, it is simply a case of keeping it up to date. AREC says they constantly review �the media.� Guess what? If you are in this business, you are going to do that anyway: reading Billboard for new releases, and information on synch licenses, label catalogs, websites and independent information on worldwide releases like from CDInternational. I get a disk from CDI a couple times a year. It costs me a couple hundred bucks a year and lists every CD released anywhere in the world. If I find something new relating to a current client of mine, it goes into my own database as an entry to check on the next statement. It takes a couple hours a month to stay on top of my entire client list. I think I spend more time a month working my way through WEA's voicemail system.
Extrapolating my work to AREC�s 600+, this updating might take one person one week a month at the most, which I hardly think is worth 50% of the income from all their clients. I go so far as to offer my clients a copy of the current database if they want to shop for other representation. Two have taken the offer but came back to me for the next statement anyway.
The annual royalty income for my clients roughly ranges from $2,000 to $75,000. The median is probably under $10,000 for 2001 and probably the same for last year. (These numbers have dropped steadily for three years, by the way). The average discrepancy found in my first work for a new client, because it covers a number of years and a lot of repeated errors, is often a multiple of the annual payment, from about 2.5 up to 10 (although the 10x case involved two large unreported synch licenses on foreign commercials that boosted the total way up), with most being in the 3-4x range. Follow up work only leads to a big payoff if there is a special circumstance like a wayward synch license within that one year. Without that circumstance, the usual discrepancy found is between 10-30% of the amount actually paid. I stay in business because I keep the overhead low. I run a small shop and I don't don't do this to get rich. I do it because my clients need it.
I hate this work because it shouldn�t be necessary. I don�t buy into the �50% of something,� and when I hear it, I offer an analogy. You are terribly nearsighted. You need glasses. You go to an optometrist and he offers you a pair of glasses �for free.� All you have to do is give him one of your eyes. It isn�t doing you much good as it is, and after all, he says, 50% of good vision is better than 100% of bad vision. Do you take the deal?
By stephanie (66.54.1.38) on Monday, May 05, 2003 - 08:19 am: |
This is one of the best debates I have seen on this board we need more people on here like you are ..Ralph you should be proud..
Stephanie
By Ralph (209.240.198.62) on Monday, May 05, 2003 - 09:13 am: |
Thanks Steph. I feel the same. We're obviously in the company of a couple of very good lawyers.
By douglasm (68.113.13.31) on Monday, May 05, 2003 - 10:14 am: |
Ralph....
....who don't speak legaleese. One thing I liked is that I was able to follow a complicated issue with reletive ease. Thank you, gentlemen.
By KevGo (64.115.26.80) on Monday, May 05, 2003 - 10:59 am: |
Ralph & Company:
This dialogue between two lawyers is a fine example how we can present two sides to an issue without rancor and with respect to each other. I commend both Fred & Oren for making this happen and providing information that we all can learn from.
Kevin Goins - KevGo
By Ralph (209.240.198.62) on Monday, May 05, 2003 - 11:15 am: |
Doug and Kevin,
Thanks for the positive input on this most interesting debate. I agree. Fred and Oren are definitely first class guys.
By George C (162.84.213.112) on Monday, May 05, 2003 - 11:28 am: |
Matthews & Fred:
What stikes me the most with your posts, and especially Fred's, is the manner in which you express your dissatisfaction with AREC. Any person has the right to state their feelings about individuals and/or organizations -- but do it in a professional manner.
After reading Fred's original posts, I had a large amount of respect for Fred for the work he performs for artists. I still have much respect for Fred because I believe, unlike others in this industry -- that he has a great heart for the artist who has been screwed for many years by record companies. I also agree that AREC has that same heart.
So I then went back to re-read his comments and read that Fred believes that AREC is a "bottom feeder" and an "unscrupulous royalty chaser." These comments are unprofessional. If "Oren" can withdraw from some of his comments, then Fred should as well.
It's clear Fred has an agenda with AREC -- and that is his problem. Competitors in the same business never see eye to eye. I'm sure that Fred, as an attorney, should realize that not all clients are truly happy with their attorneys and fire them and sue them on occassion. The same way that people go to different accountants, doctors, financial planners, etc.
What bothered me the most is Fred's denegration of what AREC's employees may or may not do for a client. Fred, is it fair to disparage these people without truly knowing what they do? I don't thnk so.
Fred makes it sound that he is the only one out there who is fair with his/her clients and can do the job for the lowest possible price at the least amount of work required. There are many people out there who don't agree with Fred, nor do they agree with AREC. That is the nature of a free economic society.
With respect to Matthews, BMI and ASCAP, as well as SESAC are pefromance rights societies and do not not represent artists in the collection of artist, song writer or publisher royalties from record companies, film companies, ad agencies, etc. I think your comparison of said societies to AREC is a little off.
I just believe that in an open forum like this, people should be professional and fair in their comments.
By Fred (64.12.97.7) on Monday, May 05, 2003 - 02:21 pm: |
George,
I stand by my characterization of AREC. I think it is a terrible thing to take advantage of an individual in desperate financial condition. Anyone who does that is reprehensible. AREC does good work for which they are entitled to be paid, but I find their fee arrangements deplorable.
I do royalty pursuit for my clients. This hardly makes me a "competitor" of AREC. There is certainly enough work of this kind to go around, but I do not actively pursue new clients for this kind of work. All of the new work I take on in this regard is on the basis of referrals.
I would ask you to point out my "denegration of what AREC's employees may or may not do for a client." As I do many of the same things, and in the same way, I hardly have an issue with what they do. I simply have a serious issue with how, and what, they get paid for doing it. That is the full extent of my "agenda." If you read anything else into my comments, you are mistaken.
If you are referring to my comments about the time and effort it takes to monitor new releases and uses between statements, Oren made the claim that this was an important part of the service that AREC provides and justifies the continual fees. I responded from my own experience that the maintainence of the database is really not that onerous a task, especially now that the Internet has made vast amounts of data available at our fingertips. This hardly disparages the work, it just questions it as a rationale for the perpetual fee.
I do not believe, as you assert, I am the only one who can do this kind of work, and I really don't think I made that claim. I am in regular contact with a couple dozen people who perform this kind of function and I am aware of a good number of others. There were over 100 people at the last panel on royalty accounting and auditing I served on, and most of them were engaged in the process in one way or another. On the other hand, Oren made statements to the effect that AREC is unique in providing those services, and they are not. My remarks were intended to correct Oren's misapprehension.
An artist doesn't need AREC, or me, to recover royalties. There are plenty of other providers out there. As far as I know, AREC is the only one that actively solicits work (and they can do this because they are not attorneys themselves), and you only know that I do this work because I have mentioned it here on the forum. We are not the only choices, and I never claimed otherwise.
By Oren (65.115.44.110) on Monday, May 05, 2003 - 02:24 pm: |
Thanks to everyone who puts up with and/or enjoys this philisophical debate.
Fred - unfortunately I cannot respond to some of the points you raise, as they are somewhat fact specific and focus on the inner machinations at AREC, of which I have only some knowledge.
As to the AFTRA lawsuit, I actually did not have much client contact, as I was only helping on the legal issues relative to appeal. However, as stated, AREC had no interest in that action. AREC did fund the action, which, I think should be a point in its favor.
I do take issue with the following statement, however. You state: "I have to note again, however, Oren that AREC�s �refusal� to take a share of benefit money is less a virtue than you insist. The fact remains that they cannot reach those payments directly."
I understand that AFTRA will not pay AREC in the normal course of business. However, after the institution of the lawsuit, any recovery could be made into a fund. Furthermore, the reality is that AREC paid for a lawsuit that it did not want or intend to recover from - whether it could or could not.
However, as I read through most of Fred's post, it seems to me that the real issue is the ongoing fifty percent (50%) fee.
I do not know if this fee is an across the board fee. However, for purposes of continuing I will assume that it is.
Let's take a look at this fee more closely. I was involved in a case where I helped one of AREC's clients. My billed time was in excess of $300,000.00. The suit was a slam dunk win. However, we did not receive $300,000.00. To avoid confusion, however, let's say that the total intake was $300,000.00 after disbursements, etc.
With a $300,000.00 judgment (after disbursements) the artist would receive $150,000.00. That leaves $150,000.00 for AREC. Yet, if AREC is responsible for paying the attorney, AREC is actually running at a loss.
The 50% fee is part of a risk-reward system.
By the way, and to be clear for the entire message board, my comments are not directed at Fred's parctice. In no way do I suggest that Fred or some others may not be able to stay on top of certain items. However, as I am relatively certain Fred would agree, the majority of attorneys that handle these items DO let matters slip. Indeed, about 25% of artists that come through my door show me documents that were signed, or statements that were sent to prior attorneys -- and the work of these attorneys are the root of the problem(s).
One point which was not addressed is this, though. Fred, I am aware of various other companies that do this type of work. I have been approached by many. I do not think any of them do any where near as good of a job as AREC.
I understand your concern with the 50% fee. I do not agree with your concern, but I understand it. However, I would be happy to one day share with you plenty of agreements that I have seen artists enter into with attorneys (several without any specialties in this area) where 40% to 50% of the property on an ongoing basis is at issue. If you look at some of the agreements coming out of Louisiana (an area replete with musicians) you will see that the percentage of ownership or royalty interest includes the entire property - it is not limited by potential recovery. By way of example, I stated yesterday that if an Artists is receiving 3% and AREC gets the royalty up to 10%, then AREC's fee is based on the uplifted 7%. I have had to fight contracts with attorneys where, under the same circumstances, their fee begins with a portion of the initial 3%. By way of comparison, if the 50% fee is correct, AREC receives 3.5% when the uplift is from 3% to 10%. The contracts I have seen, the attorney gets 1.5% even if there is no uplift - 3.5% once the uplift is 7% and 5% once the uplift is 10%.
In my opinion, these are the contracts that should be focussed on. In these instances, the attorney gets a fee even if the artist is not helped (which, of course, means the artist is never really helped).
I also want to address the statement: "Frankly, the time and effort to monitor royalties is apparently overrated." I am not sure I agree. Accountants in this industry (at least in New York) typically charge about $450.00 for this work. As you would probably agree, the reason for the problems is an overall tendancy to avoid reporting and/or paying for exploitations of music. The more unchecked a company is, the more liberties it typically takes. I agree that it is easy to read BillBoard. However, BillBoard, and the other trade magazines, do not mention the use of a song in a minor foreign commercial or a video game, etc. These are uses that can generate six figures of income - but may (and do) go wholly unreported if there is no monitoring.
Fred, I think your analogy is an unfair one. Of course, I think that any time that you are comparing money to the human body you already do a disservice, as most people would be reluctant to remove any body part, even for a fee. However, to persist in the macabre, the analogy should be for a blind person (not a nearsighted one), without chance of recovering sight, being offered a lifetime of surgery, glasses and/or anything else he or she might need for sight.
Let's do an analogy that is a little more fair, though. A man is starving in the street. He is approached and told that he has a way to get food for the rest of his life. However, to be provided with that means, he must give up one half of all the food he gets. This means that if there is a great deal of food available, he will do just fine. If there are some lean years, he may eat less than he wants. But, each year, he gets to eat. And even where the company that has the food is trying not to give up any, he will have someone fighting for his share. Most important, though, when he walks in the door: (1) he has no food, or any way to get food; and (2) no one knows how much food he might be entitled to.
As I mentioned above, I think that our real difference is in the fee arrangement. As you have indicated above (I do not believe that I am paraphrasing incorrectly): (1) you think AREC hires excellent consultants; and (2) you think they do a good job at recovery. Therefore, the only real issue of contention is what fee is appropriate.
I have no problem with a 50% fee. Music publishers take that amount. Record companies take far more. In many cases the 50% fee may not cover the initial costs. There is no question about the contract between AREC and the artist(s). The artist is free to go somewhere else. What I can say, unequivocally, is that the artist is very unlikely to see the same result. I do not think that you will find anybody that gets better results. This goes back to the earlier point and the analogy.
Given the foregoing, it seems unfair that AREC has been made a target. It's contract has been upheld by a few courts, and the contract is one page, written in plain English. Therefore I will say that I agree with George C in that the "Bottom Feeder" comment (which I guess I did not see) is not fair, or accurate.
On a completely different topic, and one which I am sure that Fred and KevGo will agree, I suggest that you all see "Only the Strong Survive". Both Fred and I have clients in this film. The performances are terrific. I made this comment on a different string, but I want to be sure to spread the word.
By Sue (63.85.105.20) on Monday, May 05, 2003 - 02:59 pm: |
Oren,
Do you have any perpetual fee arrangements, with artists?
By Oren (65.115.44.110) on Monday, May 05, 2003 - 03:07 pm: |
Matthews - I missed your comment. Sorry. You are absolutely correct - however, there are people with the misapprehension that BMI and ASCAP will handle other claims or take an active role in issues other than enforcing performance royalties. The notion of compulsory licenses and performance fees are relatively unique to music, and there are people (including several artists and songwriters) that often confuse the role of these agencies.
Anyhow, I was really focussing on the fact that it is not fair to compare BMI and ASCAP (and, as George C points out, Sesac) to other companies - the former are non-profit companies fulfilling a Congressional mandate. In most of their actions for enforcement, there is no need for legal interpretations, etc., of particular contracts and the laws of different states, etc. Rather, there is usually a club, radio station, etc., that argues that the reporting method is incorrect or that the statute does not rightly apply. Unfortunately, the same is not true of most fights with record companies.
By matthews (209.215.117.4) on Monday, May 05, 2003 - 03:25 pm: |
I'd like to hear from SisDetroit again. She started this lengthy stream of debate. I'd also like to hear from Detroit's Donald "Cool Jerk" Storball, Sam the Sham, Bill Pinkney of the Drifters, the family of Chris "Land of 1000 Dances" Kenner, the Dixie Cups, Shirley Goodman of Shirley and Lee, or some of the hundreds of others who've signed with AREC. In the context of this message board, apparently, they can post annonymously, if they so wish.
By Oren (65.115.44.110) on Monday, May 05, 2003 - 03:38 pm: |
Sue -
I am not in the same business as AREC and Fred - nor do I claim to be. I am a litigator for artists and record companies and work at a large law firm (about 175 attorneys) located in New York and New Jersey (I am in New York). Thus, those are issues that I do not face. I would not know how to handle administration of that property, and think that there are very few companies that handle it well.
Let me be clear that, although I am not in their business, I do think that an ongoing fee is appropriate, for the reasons that I outlined.
Let me also be clear that this is NOT something that occurrs only in music. My non-music work focuses on intellectual property (patents, trademark and copyrights). During the internet boom, lots of internet based companies wanted patents, which are expensive to obtain. Many companies would offer me stock ownership in exchange for work. My firm did not allow compensation to be based that way for reasons related to conflicts of interest, etc. But, I see nothing wrong with people who did take compensation in that manner.
That is only an example, but I am sure you can imagine how this type of arrangement can go across various industries, and many types of legal work.
No one is concerned with the ethical obligations in those instances. In fact, many people see it as being fair. At the beginning, no one knows whether the stock will be worthwhile or not -- afterwards, it is possible that the company that the attorney got ownership in was AOL - or it could have been one of the companies that went out of business. There is a risk related to compensation which might work out exceedingly well, exceedingly poorly, or somewhere in between.
I do have ongoing relationships with my clients, as most attorneys do. I get compensated for my work accordingly.
Maybe I should also be clear about one major difference with music. There are cases where the work is ALL prospective. I have given the example of an artist that has the royalty rate increased from 3% to 10%. There may not be ANY money going backwards. There are times that I have to counsel clients to take an arrangement whereby they will get a high rate going forward without any income for the past - because within a few years it will become a great deal.
It is precisely because of the possibility for these type of cases that I think that an ongoing relationship is more fair. It is unfortunate but true that many attorneys and companies working on a percentage of the initial outcome want to counsel a client to settle for more money up front. There is a real conflict and a dilemma here. Let's say an attorney or company is working on 50% of the initial verdict, and nothing after that. Consider what happens if based on past performance, an increase in royalty rate from 3% to 10% would amount to $20,000.00 per year, but, as an alternative to an increased rate, the record company offers a one time deal for $50,000.00 but for the artist to remain at 3%. We all know what should happen. But as I am sure Fred will agree, because of a one time relationship, we know that there may be a decision to take the $50,000.00.
With an ongoing relationship, this dilemma does not arise.
Let me make one other point. Fred has stated that his future work with monitoring does not warrant an "ongoing fee." I do not know how he charges his clients, though, for reviewing statements, etc. If he does bill the client, then, at the end of the day, I am not sure that this is any different than an ongoing fee.
By George C (162.84.213.112) on Monday, May 05, 2003 - 04:37 pm: |
Fred:
Thanks for your response.
Let me ask you a few questions. You state in your post that AREC "take[s] advantage of an individual in desperate financial condition." If that were the case, wouldn't the artist have the opportunity to get out of the contract by arguing some type of pressure or duress? An artist doesn't have to sign with AREC. He/she can sign up with any other lawyer, like you or Oren.
I also think to some extent you have mis-stated what a person does with respect to monitoring royalties. To be honest, does the average artist really know how to read the intracacies of a royalty report. Would they know how to read product percentages, royalty rates (domestic and foreign), synch licensing report income, third-party licensing reports, etc. The artist is usually the creative individual -- not an expert in the royalty accounting field. The average artist needs someone like AREC or a royalty accountant to determine if they are being under-reported. It's not just a simple "is the record company accounting for all releases." I think you would agree it goes much further.
With respect to this monitoring, you clearly state:
"Extrapolating my work to AREC�s 600+, this updating might take one person one week a month at the most, which I hardly think is worth 50% of the income from all their clients."
It's not just updating. I can understand why AREC would be receiving the royalty report. Upon their receipt, AREC can then examine it to see if under-reporting occurs. Would the artist know enough to determine that? Tough question.
Like you and Oren, I am engaged in the music business as a business manager for many recording artists and performers. I can surely tell you that many, if not all, only look at the bottom line of a report.
By Fred (152.163.188.68) on Monday, May 05, 2003 - 07:58 pm: |
A great deal of the complexity involved in reading and understanding a royalty report is the unfortunate result of industry practices and policies that really don't make much sense. The more confusing the statement, the less likely an artist is to understand it, and, not surprisingly, the greater the chances of error. That being said, I have only met a handful of artists who are entirely incapable of grasping the basics of a royalty statement.
What strikes me as increasingly strange is that the errors almost always break in favor of the label. Wayne Coleman, a prominent auditor, claims that in 9,000 audits, he has only found one where the artist owed the label any money. I know Wayne but haven't seen him since he made that statement, so I don't know what happened that one time. I also want to verify that "9,000 audits." Given the time and energy one audit takes, he must have started with the Dead Sea Scrolls to reach that figure.
Maybe what we have here is simply a problem in semantics. "Monitoring" to me is simply collecting information from independent sources to check the completeness of a royalty statement. If I know a record has been used in a commercial, I want to see the line item. If I know a recording shows up on a French compilation CD, I look for an entry on the statement to match the license. Beyond the existence of the potential line item, there is little I can know; the fees paid or the terms of the license are not usually determinable from outside.
Your definition of the word appears to be broader and include line by line analysis of the statement. There are few artists who can do this well, and there aren't that many lawyers and accountants who do it well enough to earn their fees.
I also limit my definition of "monitoring" to those ongoing cases where I have already prosecuted a previous claim on behalf of an artist. Starting from scratch is a major investment of time and energy, and my fee arrangement compensates me for that. Building the database is the tough part. Maintenance, which is what I took Oren's explanation of AREC's monitoring to be, is relatively painless. If I have this interpretation of the word wrong, let me know. Even for my higher earning clients, who can receive a fifty page statement on foreign royalties, I really don't spend more than a couple hours every six months going over a new statement, even one of this size, looking for changes, additions, deletions and omissions, thanks to my previous work building the database (for which I was compensated in the initial settlement). I don�t think I should continue to get paid for work I have already been compensated for.
The great majority of my artists cannot afford a full audit, and, to be frank, the amounts usually involved don't justify one, considering that the accountant has to be paid at a substantial hourly rate to go through the label's books. For those artists who can afford the full assault, the monitoring that I do provides the accountant with a database to start with, which helps keeps the costs down.
For those artists who can't afford a full audit, I conduct a "desktop" audit. I cannot verify that every unit shipped is reported on the statement, and I cannot verify that the correct rate is applied to every line item, but I can make sure that every use is listed, and I can make sure the fundamentals don't change from statement to statement. Unless AREC has access to information from the labels without having to institute a formal audit, they face the same limits on what they know if "monitoring" includes this kind of rough analysis. I have found Soundscan data, for instance, of limited use in comparing the numbers to royalty statements, especially on back catalog, and unless you have a songwriter in the group, good publishing numbers are hard to come by.
For example, the closing balance on one statement should be the opening balance on the next statement. It amazes me how often it isn't. Foreign royalty rates routinely change from statement to statement without explanation. I've even seen the first statement for foreign sales include a credit for returns. Unless those returned copies spontaneously generated, they had to be shipped first, but not if you believed the statement. I do look to the units sold from period to period to look for odd changes in magnitude of sales, but the reason for these are often impossible to pin down without a full audit.
When I have completed the desktop analysis, I contact my client. I tell them what I have found and what I believe is still missing. If it is a big enough amount, we look for an accountant to review my work and determine if an audit is worth it. If the probable recovery is too small to justify a formal audit, I reach an agreement with my client as to how they want to proceed.
Sometimes they carry the ball themselves, sending my correspondence to the label to seek an adjustment on their royalty account. Usually these cases settle for truly small amounts, and I consider myself compensated if the client picks up the next lunch check
Sometimes they ask me to do it, and we agree on compensation, which is usually a percentage of what I recover. If, as is sometimes the case, I can get the label quickly to admit to "clerical error" on a number of the questionable entries ("quickly" being a relative term dealing with record labels) and a proposed settlement is approved by my client, I will calculate the time I spent on the case based on my hourly rate. If my contingency fee is way out of line (higher) with the amount of work I have put in, I will unilaterally adjust my fee. This drives my wife nuts, but I don't feel I earned the larger amount. My adjustment doesn't mean I lose money on the work I do, but it doesn't mean I am eating the client's lunch, either.
To answer the question raised at the end of Oren's last post, the monitoring I do (by my definition) is not billable unless the client wants me to pursue the discrepancy. In many cases, the discrepancy isn't large enough to justify more than a letter or phone call or two. I may send the same letter six times (thanks to word processing), but the client and I both know that anything more isn't justified. I continue to monitor, because the next statement may be �wrong enough� to justify a major effort to get a correction, and it is just easier to keep the database updated on a regular basis rather than have to go back and redo it.
As to the "on going fee" situation Oren discusses, I can admit that no one has ever offered me stock, and for the conflict reasons Oren mentions, I wouldn't take it (and frankly would advise other attorneys not to unless they are going to have no future work with the corporation because of those conflicts).
Oren�s hypothetical about the current vs future deal does pose a common test for entertainment attorneys, and one that many, in my opinion, fail. There are lot of reasons to choose the pile of money on the table rather than the potential of more in the future, not the least of which is the good chance that, when dealing with a record label, that potential may be strictly a mirage.
This is not always the attorney�s fault, however. The AFTRA case settlement is a prime example. As I noted in response to Mikie earlier (and I am still waiting for Mikie to come up with the evidence of my evil ways), the settlement finally reached gave every named plaintiff a cash award of $25,000, with an option to take another $50,000 if they were willing to waive any claim for adjustment of their present or future retirement benefits. One of the plaintiffs took the optional cash, even though it would have taken proof of only about $120,000 in earnings over a 45 year career (or only about $3,000 in royalties a year) to qualify the plaintiff for an immediate retroactive payment that would have dwarfed the $50,000. Money on the table is hard to resist for a lot of people.
An attorney with a one-time arrangement with his client owes his client the same obligation as one with an ongoing fee relationship, but I acknowledge the chance for a �smash and grab� is difficult for some of our brethren to resist, especially if the front end number is big enough to give him some bragging rights. The potential of more money over time as an alternative doesn�t really pose a problem for the �one-time fee� lawyer, who can simply agree to deferred payment of his agreed fee without taking a permanent share of the income.
I have no objection in general to �on-going fee� arrangements. I have several clients who are more comfortable paying me a percentage of their gross music income than dealing with periodic bills, and they call on me knowing that any music issue they have will be covered. I do not, however, take a permanent cut from any deal I may negotiate for them. My clients want a lawyer, not a partner.