Royalty lessons from Ray
Genius loves profit share
Real quick, as they say: tomorrow (Thursday Feb 12th) I’m doing a live demo of Infinite Catalog called “Royalties Don’t Have To Be Hard” for A2IM. Sign up!
There’s a great scene in Ray, when Atlantic Records co-founder Ahmet Ertegun (played by Curtis Armstrong), gives Jamie Foxx’s Ray Charles this impressive speech:
"Man, I could promise you fifteen cents a record, but you won't get it. Anymore than he'll pay you seven. What I will do is promise you five cents a record and pay you five cents a record."
When I saw this as a teenager, I loved it. Here was someone being honest while promising less to deliver more, and beating out those who weren’t doing the same.
Knowing what I know now, those words were, I’m sorry to say, a lie.
Because in every “royalty base” deal like this, a label promises an artist $X per record/cd/etc sold (or more accurately, a % of $X per record).
And then other, less-read parts of the contract immediately undercut that.
Production, manufacturing, marketing, promotion - all those costs get paid by the record label… initially. Those costs are then recouped, in most cases exclusively and entirely, from just the artists share of the royalties. That 5¢ per record they were supposed to get paid.
Contrast this with later in the film, when Ray’s out of his Atlantic deal and has a better offer elsewhere, one that sounds a lot like the other kind of record deal…
He’s been offered “75¢ of every dollar.” Not every record. Every DOLLAR. (As in “net dollars earned.”)
That’s a profit share deal my friends, and it is indeed much better than the royalty base kind (here’s my old MBW article diving deeper into why). And that’s not even considering the owning his own masters part, which is much more common in profit share deals.
In a royalty based deal, you can promise an artist any amount per record - but they won’t get it. Not really.
What you can do instead is, promise someone X% of every dollar. And then pay them X% of every dollar.