____ $25,000 each to their lawyer and business manager. That leaves $350,000 for the four
____ band members to split. After $170,000 in taxes, there's $180,000 left. That comes out to
____ $45,000 per person. That's $45,000 to live on for a year until the record gets released.
____ The record is a big hit and sells a million copies. (How a bidding-war band sells a million
____ copies of its debut record is another rant entirely, but it's based on any basic civics-class
____ knowledge that any of us have about cartels. Put simply, the antitrust laws in this country
____ are basically a joke, protecting us just enough to not have to rename our park service the
____ Phillip Morris National Park Service.) So, this band releases two singles and makes two
____ videos. The two videos cost a million dollars to make and 50 percent of the video pro-
____ duction costs are recouped out of the band's royalties. The band gets $200,000 in tour
____ support, which is 100 percent recoupable. The record company spends $300,000 on in-
____ dependent radio promotion. You have to pay independent promotion to get your song on
____ the radio; independent promotion is a system where the record companies use middle-
____ men so they can pretend not to know that radio stations -- the unified broadcast system --
____ are getting paid to play their records. All of those independent promotion costs are
____ charged to the band. Since the original million-dollar advance is also recoupable, the
____ band owes $2 million to the record company. If all of the million records are sold at full
____ price with no discounts or record clubs, the band earns $2 million in royalties, since their
____ 20 percent royalty works out to $2 a record. Two million dollars in royalties minus $2 mil-
____ lion in recoupable expenses equals... zero! How much does the record company make?
____ They grossed $11 million. It costs $500,000 to manufacture the CDs and they advanced
____ the band $1 million. Plus there were $1 million in video costs, $300,000 in radio pro-
____ motion and $200,000 in tour support. The company also paid $750,000 in music pub-
____ lishing royalties. They spent $2.2 million on marketing. That's mostly retail advertising,
____ but marketing also pays for those huge posters of Marilyn Manson in Times Square and
____ the street scouts who drive around in vans handing out black Korn T-shirts and back-
____ wards baseball caps. Not to mention trips to Scores and cash for tips for all and sundry.
____ Add it up and the record company has spent about $4.4 million. So their profit is $6.6
____ million; the band may as well be working at a 7-Eleven.

Ibid. Compare Senator Hatch's very different account of music production outside
the control of the labels:

____ I will quote him at length, because his experience is instructive. He said: "As a result of
____ doing it on my own, I get about $7 for every CD that sells in a store. And about $10 per
____ CD sold at concerts. In contrast, I've got a friend who is also a performer/songwriter who
____ opted to sign with a... label. He recorded a CD that cost about $18,000 to make, which
____ the label paid for. Now, when one of his CDs sells at a store or at a concert, he makes
____ about $1. The rest of the $7-$10 which I make on my CD sales goes to his label. On top
____ of that, he has to pay back the $18,000 it cost to make the CD out of his $1-per-CD cut.
____ In other words, he won't make a dime until he has sold 18,000 CDs. And then, he still
____ won't own the CD, the label will. They maintain the copyright. It's kind of like paying
____ off your mortgage and then having the bank still own your house.

Orrin G. Hatch, "Address of Senator Orrin G. Hatch Before the Future of Music
Coalition," Future of Music Coalition, January 10, 2001, 2. Currently, the average album
release is under twenty-five thousand per CD. Jon Healey, "Industry Seeks to Justify Huge
Overhead on the Price of Compact Disks," _Knight_Ridder_Tribune_Business_News,_ Sep-
tember 3, 2000.

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