From Flower Vase to Film Emperor in Hollywood

In the music industry, newcomers without backing often hope to go to big companies, seeking shelter under a large tree. They can't wait to sign when they see contracts from top companies, and the bigger the contract and the longer the term, the more excited they are, because they are uncertain about their future, and big companies are their best bet.

Little do they know that these newcomers are just objects in the eyes of big companies, which can be discarded at any time without any burden. Big contracts are just a way for big companies to exploit them, and they will never suffer losses when dealing with newcomers.

From this perspective, Warner Records' three-album contract shows their hesitation and lack of confidence; but it also shows Mike's sincerity, and they should genuinely want to cooperate with Anson.

As soon as Anson opened his mouth, he joked, and the atmosphere became light and brisk. But before Mike could respond, he continued to ask, "So, what about the royalties?"

Now, Mike wasn't surprised anymore: he was numb.

Obviously, Anson had done his research. He knew the band's position and the record company's mentality. All indications were that Dustin was right, this was a tough nut to crack, and openness and honesty were the best option.

Mike: "Warner Records can offer the band a contract with an 11% royalty split."

This time, Mike didn't embellish it, because he believed Anson knew what it meant. 11% was an important number.

The so-called royalty is actually the record split.

The record company records albums and sells them through record stores, supermarkets, department stores, and other distribution networks. For every album sold, the singer receives a percentage of the profit.

At 11%, for a ten-dollar album, the singer would receive one dollar and ten cents in royalties. Of course, taxes would still need to be deducted.

This portion of income is called royalties.

Unlike film box office revenue sharing, every singer in the music industry has royalties. The difference lies in the size of the royalty split.

Of course, musicians also have other income methods through records and music, including inclusion in film and television works, covers by other singers, and use in other people's concerts, etc., but royalty income from album sales is still the main source of income from record contracts.

Here, royalty and copyright are different.

The income that musicians get from record sales is called royalty; while the ownership of the songs created by songwriters is called copyright.

As long as someone uses the song, no matter what the purpose, they need to pay a fee to the copyright owner. Copyright income far exceeds royalty income.

For a simple example, Anson is the songwriter of the song "Wake Me Up", and he owns the copyright of the song; then, the band recorded and released "Wake Me Up" through Warner Records.

Then, Anson can first obtain royalty income through album sales as a member of the band; and secondly, he will also receive another income as the copyright owner—

The band members have no copyright income.

Copyright income is not within the scope of the record company's control, unless Anson sells the copyright to Warner Records, otherwise Warner Records cannot get involved.

Royalty income is the income that musicians split from the record company. Naturally, record companies often suppress singers' royalty splits.

Generally speaking, musicians' royalty splits are between 10% and 20%; and new singers are often at the lower limit of this range, which is 10%.

From these data, it can be seen that musicians really don't make money. If they don't have copyright, it is often difficult to make money by relying solely on royalties. Even if album sales exceed one million, the income is still mediocre.

For singers, what really makes money is concerts. Those legendary top singers have to hold long tours every now and then, and this is the reason.

At the same time, also because of this reason, in the pyramid of the entertainment industry, singers are always inferior to actors in status; and countless singers try to go to Hollywood to expand their territory at the peak of their careers.

Let's bring our attention back.

It is really rare that Warner Records is willing to increase the royalty by 1% like cutting their own flesh.

As Mike said, they are full of sincerity.

It's not the right way to negotiate if you just nod and agree without bargaining. At least you should try.

Mike: "For example?"

Anson: "20% royalty split, at the cost of $800,000 per album."

Mike: ? ? ?

Mike immediately realized that Anson was examining the record contract using the negotiation method of film remuneration, but obviously, records and movies are two different things.

Generally speaking, musicians should strive to increase the lump-sum amount, for a very simple reason: the record market is sluggish, and albums are not selling well now—

Calculating with a $10 album and a 20% royalty, you need to sell 400,000 albums to get the income, to get an income of $200,000.

Of course, now they are discussing increasing the royalty from 11% to 20% in exchange for $200,000 in cash, which also means that the band needs to sell at least 222,000 more albums to make up the difference.

In 2002, album sales in the market often took three million as a watershed. Only a few top superstars could cross this line; and for newcomers, album sales were often less than one million, or even less than 500,000.

This is completely different from movies.

Looking at Anson's request now, Mike couldn't help but smile:

Warner Records' internal disagreement lies in the fact that they are worried that this band cannot be accepted by the market, and album sales may not exceed 500,000 copies.

Once they offer a contract price of one million dollars per album, after deducting production costs, promotion costs, channel splits, and other costs, the break-even point should be around 300,000 to 400,000 sales.

This is the root of the internal disagreement.

But now, if the band is willing to lower the contract price per album and replace it with a royalty split, it is equivalent to helping Warner Records share the risk, and the burden and pressure all fall on the band—

They even worried that the band might not sell 300,000 copies, but now Anson's words mean that the band must sell 220,000 more copies to make up for the loss. No matter how you look at it, it looks like they are digging a hole and burying themselves.

Warner Records naturally welcomes this.

Rarely, since meeting Anson today, Mike laughed sincerely for the first time.

"Anson, the right way to negotiate is that one million dollars is still one million dollars, but the royalty ratio is increased," Mike kindly reminded.

Anson shrugged lightly, "But obviously, Warner Records will not agree to such a deal."

Mike: "Yes, we won't."

Anson: "So, I propose a fair deal, a condition you can't refuse."

Mike: "But you know that this means that you may need to sell 200,000 more albums to make up for such a gap."

Anson pursed his lips, "What, don't you have that much confidence in us?"