Some adolescents go through a quotations phase. They want to show off their wisdom by memorising a few neat aphorisms. I was one of those kids and I supported my interest by buying a small book of quotations. This had pages of quotes from Shakespeare and the bible, and a good dozen or so from Oscar Wilde. There was only one, however, from a popular musician. This was Bob Dylan’s lyric from ‘Love Minus Zero, No Limit’, in which he claimed that ‘there’s no success like failure’.
I know that it’s become a clichéd term, but it’s pertinent to popular music because it is the code by which it lives. The whole economic structure of the record industry is premised on failure. In fact, it ignores Dylan’s rejoinder that ‘failure’s no success at all’. The main reason why record companies have power and income is because they own sound recording copyrights, and they only own these copyrights because they are bad at their job. Hardly any of their acts succeed: it has been argued that as many as 95% fail to achieve profitability. This failure rate helps to keep the struggling artists in hock and the successful ones in check.
The ownership of sound recording copyright is perhaps the most dubious of all record company practices. Copyright is usually awarded to the ‘creator’ of a work. When it comes to songwriting copyright this is fairly straightforward: the creators are the writers, therefore copyright is automatically awarded to them. Sound recording copyright is different. In the UK, according to the 1988 Copyright Designs and Patents Act, the creator of a sound recording is the party ‘who made the arrangements for the recording to be made’. In practice, this is usually translated as being the party who paid for the recording. But record companies don’t pay for recordings, artists do. Or at least they attempt to. The costs of production are advanced to artists and are then ‘recouped’ from their royalties.
It is only when artists have made a clear profit against both their personal and recording advances that they start to see income from their record sales. IFPI’s recent Investing in Music report suggests that the recording costs for a ‘significant project’ can vary between $200,000 and $300,000. If we estimate that the average dealer price of an album is $8 and that an artist's royalty is 18% of this amount, this would mean that an they would have to sell between 139,000 and 208,000 copies in order to clear their recording advances alone. Some artists can achieve this and thus could argue that they have paid for their recordings. And yet even if they do so, it is almost unheard of for them to be awarded the sound recording copyright.
The artists who don’t reach the break-even point, for either their personal or recording advances, don’t have to pay back the deficit on their accounts. However, rather than this being an act of generosity on the part of the record companies, it is a situation from which they profit. It is on the basis of these failures that they justify their ownership of the copyrights of the artists who succeed. Moreover, artists are caught in a vicious circle. It has been argued that one of the main reasons why they have to ask for large advances is because they don't make any money out of sound recording copyright, but the reason why they don't make any money out of sound recording copyright is because they can't pay off their large advances. Record companies claim that as many as 95% of all artists fail to achieve profitability. And it is on this overall failure rate that they justify their ownership of all sound recording copyrights. Ann Harrison has quoted the record companies’ claim that, ‘If they had to return the copyrights of successful artists, they say they wouldn’t be able to invest as much in new artists in the future and that the culture of the nation would suffer as a result’. Once again, this presents them in a potentially generous light. It needs to be remembered, however, that it is the record companies who are responsible for such a high rate of failure: they crowd the market with music knowing that most of it will not succeed. And their 95% failure rate adds up: it becomes part of the expense of launching a new act. Failure contributes to the punitive nature of recording contracts and to the inflation of sales targets. These targets are set so high that few artists can achieve them; thus they live in fear that they will be the next ones to be dropped.
One of the other quotes in my little book was ‘knowledge is power’, a term that has been loosely attributed to Francis Bacon. In the past, the major labels claimed that it was impossible to have knowledge about what would sell and that this is what led to them spread their bets. Whether this is true or not, they have used their inabilities wisely. It has long been an industry in which failure is power.