Throughout our “Your Favorite Rapper Is Poor” series, I’ve had two primary goals. One, to help the average fan understand that when they watch videos filled with Lamborghinis and racks, it’s not just possible, it’s common for those rappers actually to be in debt. And two, to help rappers not get wholly fucked over financially, to whatever small extent possible.
With that in mind, I stumbled across some videos (word to Tech Dirt) from entertainment lawyer Martin Frascogna that are must-watch material for those interested in the NOT getting fucked over category. Before we get started, this is one of those posts that’s either going to be fucking fascinating, or deadly boring, depending on how much you care about the intricacies of entertainment law. If you don’t care at all, I recommend you enjoy some random hot girls.
If there’s only one word you need to know about music finance, that word is percentages. Percentages, percentages, percentages. Also, percentages. Percentages are the reason $1 million in album sales becomes $100K (an artist’s contract gives them 10% of royalties), which becomes $75K (artist pays manager and lawyer 25%), which becomes massive debt if the artist received a $1 million advance.
And that's just the incredibly abridged version—most contracts are embedded with additional percentages designed to chip away at an artist’s profit and keep them in debt to the label. As Frascogna points out, one of the best examples is “breakage fees,” a percentage taken to cover the cost of vinyl and CDs that break in the process of shipping them to stores.
First, it’s unclear why artists, and not the labels, should be responsible for the broken product, considering artists have absolutely no influence or control over shipping. Actually, it is clear why—because most artists don’t have the leverage to fight a breakage fee in their contract, so the labels don’t give a fuck.
Second, breakage fees are (almost always) charged even on digital sales. I'll give you a minute to think that one over. Yeah, they’re charging artists a unicorn rental fee. Digital files can’t break, but why let something like reality get in the way of making money.
Moving on, let’s flip the script and get into the exciting world or trademarks:
A trademark is a great way to get some of those percentages flowing in your direction. No other party—promoters, labels, clothing companies—can do a goddamn thing that involves your name or “mark” without getting your permission and, should you want, sliding you a check. A trademark is the reason that Supreme can’t just make bank selling Three 6 Mafia shirts without cutting in Three 6 themselves.
I know it may be boring, but trademark revenue can be essential. We’ve already established that it’s challenging, if not virtually impossible, to make money directly off music sales (percentages!). Here’s an easy way to let someone else do the work and take a percentage for a change. (Note: Of course, that means other people have to give enough of a fuck about you to think they can make money off your trademark, that's where making good music comes into play.)
Last but not least, and now we're getting into the dull fine print, venue, and jurisdiction:
Again, breaking it down as basically as possible, when you sign that deal with Universal, you might not think twice about the fact that you’re an ATL rapper and Universal demanded jurisdiction in L.A. But then you sue them for $100K. By the time the case is closed, you’ve spent $20K flying out to L.A. for every court hearing. Faced with that reality, artists will often not even bother suing; it will cost them more to sue then they’d make, which is exactly what the labels are counting on.
Crucially, I’m not saying something as simple as don’t sign to a record label. Labels can do a lot of evil, but they can do a lot of good too. Sure, Atlantic took their hefty cut of B.o.B.’s number one album, but without Atlantic’s marketing push, I probably wouldn’t be writing the words “B.o.B.” and “number one album” in the same sentence.
If you’re an artist about to sign a contract with a label, you have to approach that contract with every ounce of caution, pessimism, and paranoia you can muster. People at the label may be cool, but those label lawyers only care about one thing—making the labels every dollar possible. And as smart as you are, these people have devoted their entire professional lives to figuring out ways to make money off you. If you don’t approach signing a deal with caution, you’re a mark.
And even if you know what traps to avoid, you might not have the leverage to fight them. Case in point:
Relatively Unknown, New Rapper: “I’m not paying breakage fees for digital sales, that’s crazy.”Label: "Get the fuck out of my office then."Relatively Unknown, New Rapper: (Sighs deeply) “Fine, where do I sign?”
So if you don’t want to get completely fucked, the best thing you can do is wait to sign until you’ve got some serious leverage. For example, I, of course, don’t know the intricacies of The Weeknd’s contract with Republic. Still, you’ve got to believe he was smart in waiting to sign. A year or so ago when he first blew I’m sure he had offers, which he could have signed with very little leverage, but now here’s how that label conversation probably went:
The Weeknd: “I’m not paying breakage fees for digital sales, that’s crazy.”Label: “Get the fuck out of my office then.”The Weeknd: “No, fuck you. I’ve proven I can tour, I’ve proven my popularity is sustainable, I’m getting placements on Drake albums and I’ve got ten other deals on the table.”Label: (Sighs deeply) “Fine, where do I sign?”
If you only remember two words from this article, it’s percentages and leverage.
Editor’s Note: I shouldn’t have to say this, but....disclaimer: I may know more than your average guy on the street when it comes to the law and music, but I know exponentially less than an actual lawyer. This post isn’t a substitution for real legal counsel, or any form of legal counsel period, just something aimed at getting you thinking.