The members of Brainwash all shared a look with each other and passed around some silent communication.
“Five hundred dollars an hour?” Jim finally said. “There’s no way we could afford that.”
“We’re just a group of teachers,” Marcie said, “making teacher pay.”
“You would not be paying that five hundred an hour,” Jake said. “We would.”
“You would?” Stephanie asked.
“Yes,” Jake said. “That’s what signing you to the label is all about. We pay to get the album recorded, manufactured, distributed, and promoted and, in turn, we get to make a good chunk of the profit from it. Did you not understand that this is how the recording industry worked?”
“Uh ... well, yeah, I did understand that,” Jim said. “I just never thought about it so ... you know ... clinically.”
“When you say that you get to keep the profit,” Stephanie said, “what exactly do you mean by that? How do we get paid?”
“You’ll be given royalties on your album,” Pauline said. “The industry standard for first time contracts is ten percent.”
“Ten percent?” Jim said. “That’s not very much.”
“It’s not,” Jake said. “It kind of sucks, really. Fortunately for you, Nerdly and I were the victims of one of these first-time contracts back when Intemperance was first signed to National and we have sympathy for your cause. We are not going to screw you like we got screwed. I could not live with myself if I participated in something like that.”
“What are you offering then?” asked Marcie.
“We’re offering fifteen percent royalties on all CDs sold,” Jake said.
“That’s not a lot more than ten percent,” Stephanie said.
“It’s not,” Jake said, “but it’s also the highest we can go without taking too large of a financial risk ourselves. You have to understand that putting an album together and getting it out into the world is expensive. Our estimation is that it will cost approximately one and a half million dollars to get you recorded, mixed, mastered, manufactured and distributed. And that’s only the first part. You’ll also have to be promoted or no one will ever hear you. The only way for us to promote you is to use the thoroughly corrupted system that has been put in place and maintained by the big four record companies for decades. That is perhaps the most expensive part of the process. For an unknown band that they will probably think is going to ultimately fail—because you don’t look good on camera, remember?—we will be lucky if can secure promotion for forty percent royalties to whomever agrees to do it. That means that forty percent of every wholesale album sale—and that rate is at six dollars apiece currently—goes to National, or Aristocrat, or Warner Brothers, or whoever else picks up the MD&P contract. Are you following me so far?”
“You’re saying that even though you’re an independent record company,” Jim said, “you still have to deal with the bigs in order for your music to be heard.”
“Correct,” Jake said. “And the bigs aren’t cheap. So, right there you have forty percent royalties going to one of the big four and three percent going to Obie for letting us have the studio time. That’s forty-three percent, right?”
“Right,” Nerdly said.
“Add your fifteen percent royalties to that and we’re now at...” He looked at Nerdly.
“Fifty-eight percent royalties committed to production, promotion, and band compensation,” Nerdly said. “That leaves forty-two percent left over for KVA Records.”
“That’s quite a lot,” Stephanie said. “More than anyone else is getting.”
“True,” Jake said, “but I think you’re looking at this through the wrong prism. KVA is the one who is financing everything. We’re the one plopping down the million and half to get the CDs on the shelf. A million and a half is a lot of money, guys. Do you know how many CDs you’ll have to sell before we get that million and a half back and start showing some profit?”
“How many?” Jim asked.
“Tell him, Nerdly,” Jake said.
Nerdly told him. “At the going rate of six dollars wholesale per unit sold, multiplied by zero point four two—KVA’s royalty rate—we will get two dollars and fifty-two cents for each CD purchased. That means, that in order to recoup our investment, Brainwash will have to sell at least five hundred and ninety-five thousand, two hundred and thirty-eight CDs.”
“Wow,” Jim said. “That’s a lot.”
“You will have to go Gold and then some before KVA gets into the black on you,” Jake said. “We’re taking a fairly big risk here, guys. None of the big four would take a chance like this.”
“Absolutely not,” Pauline said. “They consider a break-even point of two hundred thousand units sold to be high risk. Granted, they can put albums out more cheaply than we can because they have all the infrastructure in place, and, of course, they screw their artists up their collective asses without using lube in order to maximize their profits.”
“That’s right,” Jake said. “We’re making things more expensive because we refuse to screw you in the industry standard manner. For instance, the only recoupable expense we will saddle you with will be advance money so you can settle in and take care of yourselves while you’re recording. We will pay for your housing, your food, your transportation to and from the studio. In addition, your royalty rate is your royalty rate without strings and exceptions attached. No breakage fees, manufacturing fees, shipment fees, fucking entertainment expenses or housing clauses—all the shit that they fucked us with on our first trip to fantasy land.”
The members of Brainwash looked at each other again. This time Jake was able to interpret their silent communication. They were starting to feel they were in over their head.
“Look, guys,” Pauline said. “This is a straightforward deal, the best you will ever be offered as a band that needs a record company to get them heard. Jake is sincere when he says that he wants no part of a screwing and I don’t either. We’re being extremely generous here with fifteen percent and no additional expenses tacked on. You will have virtually no risk whatsoever. The worse that can happen to you is that we’re wrong and your CD doesn’t sell that much. You’ll still get your share of royalties for each unit sold. And as long as you sell enough to cover your advance money, you’ll be in the black long before we will.”
“What do you mean?” Stephanie asked.
“We’re proposing an advance of fifty thousand dollars to take care of your living expenses during the recording process,” Pauline explained. “That is all you will be responsible for covering under this deal, and, in truth, in the unlikely event that your album completely bombs and doesn’t even sell enough to cover that fifty-k, we’re not going to go after you for the balance anyway.”
“How many albums would we have to sell to cover that fifty thousand dollars?” Stephanie asked.
“Bill, tell ‘em,” Pauline said.
“At fifteen percent royalties,” Nerdly explained, “on a six dollar wholesale rate, that means Brainwash, the band, will be collecting ninety cents per CD sold. In order to cover that fifty thousand, you will need to sell only fifty-five thousand, five hundred and fifty-six CDs. Everything after that is pure profit for the band, even if we end up losing money on this endeavor.”
The band pondered that for a minute. “Wow,” Stephanie said. “This sounds almost too good to be true.”
“We have faith in you,” Sharon said. “Or, at least we have faith in Jake’s ability to pick winners.”