I recently read a story where an artist sold a recording for a flat fee, and then the song went on to become hugely popular, but the artist didn’t receive any royalties. It’s a familiar story of exploitation, especially of Black artists who systematically receive less credit than they are due in American music.
However, I was distracted by an alternative interpretation that came to mind. To some extent, the rights to royalties for a song is essentially a lottery ticket. Song popularity follows a power law distribution (I presume, based on how these things usually work), so that a few songs become extremely successful while the vast majority remain in obscurity. It makes sense to want to sell your lottery ticket–provided that you get a fair price for it. If you have a losing ticket–as most people do–then selling that losing ticket is a way to still make money.
Under this alternative interpretation, the flat fee that the record label pays to the artist is potentially exploitative–but also potentially fair. And how do we know which it is? Certainly not by only telling the stories of songs that went on to achieve big success. We can’t just focus on artists who sold lottery tickets that happened to be winning tickets. What about all the other artists who sold losing lottery tickets–does this imply that the record label was “ripped off” in those transactions?
If the record label was being exploitative, it’s because they were not buying the lottery tickets at fair prices. All the artists who received flat fees deserved larger fees, including those artists who were unsuccessful.
I am not any sort of expert on the subject, but I find it highly plausible that record labels are systematically exploitative of artists. As I’ve argued, it is difficult to know the fair price of the “lottery ticket”, and that’s how it must be from many artists’ perspectives as well. Record labels, on the other hand, likely understand its value much better, and can use this information asymmetry against artists. Keeping a lottery ticket might be more risky, but it might be better to keep it for yourself than to sell it to someone who understands its value better than you do–if you have the choice at all.
So far, this is all based on guesswork. As a reality check, I read a bit about how these deals work in practice. In the standard deal, the artist gets an advance payment. The artist is entitled to a pre-agreed proportion of royalties–except that the artist’s portion goes 100% to the record label until it recoups the label’s costs. Basically, artists make a fraction of proceedings, down to a flat minimum fee. One way these deals can be exploitative is if the artist receives too small a proportion of royalties, but there are other tricks like option periods and hidden recoupable costs.
I don’t presume to know how to “fix” record deals, but I do wish we could get over the idea that artists must retain rights to royalties in order for a deal to be fair.
Many people’s idea of fairness is based on the meritocratic intuition: if a song is successful, then the person most responsible for that success–the artist–deserves the rewards. But I question whether this is really fair. For one thing, success is not the same as merit. A few songs become extremely successful while the rest dwell in obscurity; I do not think this is because just a few songs are vastly more meritorious than everything else. A comparison may be drawn to CEOs, who may very well work harder than most people, but surely do not work so much harder to justify 1000 times the pay.
For another thing, to distribute rewards by merit is only fair if the merit itself is distributed fairly. My intuition is that merit is not distributed fairly, it is at best distributed randomly.
In my socialist utopia, I suppose artists would receive some bonus for success, but a large amount of the profits would go to support other artists. Nobody knows upfront, before releasing their art to the world, if it will be successful or not. I think there is some benefit in supporting people who take the risk to produce art, even if the risk does not ultimately pay out.