Home Business Isn't This An Appalling Record Deal For Kanye West

Isn’t This An Appalling Record Deal For Kanye West

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Much moaning about how terribly artistes are treated by the record companies. You know, this idea that streaming rates are so low, no one buys albums any more, the companies take all the damn revenue and all.

So, someone sets up a calculator. If you were offered this as an advance (note, advances aren’t money to the kiddie. They pay for the recording studio time, session musicians and so on, as well as cash to the artiste) then how many streams would need to be consumed before the deal earned out and you got some more cash? An entirely fair way of reducing the complexity of a deal down to the one number by the way. There will be other revenue streams not counted – songwriting royalties being important, especially radio needle time – but a decent reduction to one number all the same.

So, how appalling is this deal?

To take a real-world, albeit pre-streaming, example: Thanks to Kanye West’s recent publishing of his Universal Music Group contracts, we know that the 2005 deal for his second album, Late Registration, saw him take a $3.2 million advance with a 14-18 percent royalty rate. When you plug in those terms into the simulator, it shows that Kanye would need 3.6 billion streams before he could ever see a dime in royalties if he were to take the same deal in 2020. By the simulator’s estimates, this hypothetical deal would have made UMG over $11 million in net profit by the time Kanye hit enough streams to start earning royalties.

Well, that’s actually a pretty good deal for Kanye, don’t you think? Look at it from the point of view of the company. They have to break a global superstar just to get a three bagger. Makes them look positively restrained compared to venture capital.

Which, of course, signing new artists is, it’s venture capital. Or, another reasonable comparison is book publishing. How many copies do you have to sell to earn out a $3 million advance? And how much does the publisher make if you do?

What, actually, is it that is being complained about here? OK, perhaps the better question, what is it that, rationally, is being complained about here?

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2 COMMENTS

  1. As clear as mud. It could do with a bit more elucidation. With Deal #2, does or does not Kanye get the $3.2 million advance? I can’t get excited over the inexplicable.

  2. $3.2m is the advance, but out of that Kanye has to find recording studios, session musicians, producers (if he doesn’t do that himself), royalties for anything he might have sampled and — I imagine — creation of music videos for two or three of the tracks on the album in order to get the publicity out. That probably leaves a bit of pocket money for Kanye, but probably only to the order of a couple of Bentleys.

    Of course, what the original article doesn’t mention is that he would also be able to do a tour on the back of the album which is where the real money is made.

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