Basketball players aren't the only professionals happy when they score points. In the business of music production, points refer to the royalty percentage that is generally part of a producer's compensation.
Typically, a producer negotiates between 2 and 4 percent of the retail sales of an album he or she produced, as well as a cash advance on those royalties. While 4 percent out of 100 percent might seem insignificant, tie that to a few million records over the course of a multi-year career and the "mailbox money," which in the music industry's heyday constituted almost an annuity, and it begins to look quite substantial.
But in the face of declining CD sales and increasing single-song downloads, the point model for producers has gotten a lot hazier. The revenue stream for the music industry as a whole has shifted over the last few years, with more emphasis on live performance, which leaves producers in the wings unless they're hired to produce a live album. (And that sub-category of recordings has become less robust since the heady days of Jackson Browne's Running On Empty and Peter Frampton's Frampton Comes Alive.)
How are record producers adapting to a changing economic landscape? There are several strategies. Perhaps the most widely employed has been to garner more royalty participation through co-writing songs with the artist.
Tony Drootin, a partner in New York-based SevenSeas Media Management, which represents producer/mixer writers such as the Copenhaniacs and Marshall Leathers, says that writing with artists has become even more critical as producer fees decline. Royalty participation via publishing is becoming so important that some composers have become producers themselves in order to gain better access to artists.
To underline the importance of participating in royalties via publishing, Drootin notes that producer royalties are limited to unit sales and some uses of the master recording such as DVD sales. Publishing royalties, on the other hand, can come from unit sales, airplay, synchronization use in films and television, commercial adaptations, and other sources.
"Some producer/songwriters are taking less on the producer advance side in an effort to make sure their composition makes the album," Drootin says. "Publishing is where it is at right now."
In addition to securing publishing splits on albums as a means of compensation for her producers, Alia Fahlborg, head of Nettwerk Producer Management, who represents GRAMMY-nominated producer Howard Benson, GRAMMY-winning producer Matt Serletic and GRAMMY-winning mixers Bob Clearmountain, Chris Lord-Alge and Tom Lord-Alge, among others, has also started to negotiate 360 deals for producer clients.
"I see the 360 deal as one of the future models for producer deals," says Fahlborg. "Record sales have become less important over the past several years and there is more emphasis on the combined income streams. Record companies now have an interest in the whole pie, and for most artists and bands, the driving component of all of the other income streams is still the recording. Producers are in the trenches with the artist creating that main product from which all of those other income streams are generated. It makes perfect sense for them to participate accordingly. I'm finding that artists and labels are opening up to sharing the revenue in order to secure a producer who can really make a difference for them."
Aside from downloads and streaming music, another economic issue is the widely fluctuating price of CDs. With artists selling albums through websites, at gigs and through myriad distribution channels such as Amazon and the Orchard, the same CD can range in cost from $5 to $15, creating an accounting nightmare.
Producer manager Bennett Kaufman, who heads up the BK Entertainment Group in Los Angeles and a roster including GRAMMY nominee Johnny K, Neal Avron, Don Gilmore, and Brian Malouf, says he'd prefer to go to a flat-rate proposition — an advance for production work and then a "penny" rate — for instance, 40 cents per LP sold, which presumably would be adjusted pro rata for single-song downloads. "Then you can sell [CDs] for $1 or $18, it doesn't matter," says Kaufman.
More revenue could potentially accrue for producers pending the passage of the Performance Rights Act, H.R. 848, and S 379, currently before Congress. The bill, which is strongly supported by The Recording Academy and the musicFIRST Coalition, would close a loophole that now exists and create parity with Internet and satellite radio, which have been required to pay performance royalties since the passage of the Digital Millenium Copyright Act in 1995, by securing a royalty for terrestrial radio airplay for both featured and non-featured artists.
In addition to artists, producers also have participation in Internet and satellite performance royalties via a letter of direction in which featured artists authorize SoundExchange, the nonprofit performance rights organization that collects statutory royalties from satellite and Internet radio, cable TV music channels and other digital platforms, to pay royalties to the producer. Passage of the Performance Rights Act would extend this participation to terrestrial radio.
"From a financial perspective I strongly believe that producers should participate in performance income, both from streaming as well as from broadcast," says Kaufman, who was part of a Recording Academy contingent that lobbied Congress last March in Washington, D.C. "This is a very important issue for us right now."
Three-time GRAMMY winner Michael H. Brauer mixed the top-selling global album in 2008, Coldplay's Viva La Vida Or Death And All His Friends. Brauer estimates the 6.8 million copies sold worldwide were probably 40 percent to 50 percent less than the top seller would have been five years ago, adding that he's seen his royalty revenue drop commensurately. He believes the fact that mixers now participate in royalties suggests that if artists and management truly believe a particular producer, mixer or engineer is vital to making their record a hit, they'd be willing to include that person in the airplay royalty stream.
"Fifteen or so years ago, no one wanted to give the mixer a point," says Brauer, who has mixed for artists including the Fray and John Mayer. "Now, certain mixers can command it because they refused the work without it. And once artists saw that the top 10 mixers were making all the hits, they went along with the idea."
The rules that once shaped producer royalties have changed dramatically. Until the music industry once again finds some consistency, each deal could be a different proposition.
"As CD sales keep declining, the producers who are willing to be flexible in how their deals are structured are the ones who are surviving," says AaronWilhelm, a manager at Nettwerk Producer Management and colleague of Fahlborg. "If you can't roll with how things are changing you're going to get left behind."
(Dan Daley is a freelance journalist covering the entertainment business industry. He lives in New York and Nashville.)