Rockonomics 101

They’re the first Austin band to sell a million records since 1988. Does that mean the slackers of Fastball are going to get rich? Not necessarily.

March 1999By Comments

In January 1998 Tony Scalzo was still working the graveyard shift at The Bagel Manufactory in Austin. Although he was in his thirties and slaving in front of a hot oven for little more than minimum wage, he rarely complained. He’d often talk of how the solitude gave him a chance to think and to listen to long stretches of public radio. If he was truly disappointed that fifteen years as a professional musician hadn’t led to much more than a great recipe for cinnamon-raisin bagels, he wasn’t letting on. Then again, not even Scalzo could have imagined that within four months he and his bandmates in Fastball would be chatting on Jay Leno’s couch or offering guitar lessons to Conan O’Brien. But that’s just what happened. By March “The Way”—Scalzo’s single about a missing elderly couple from Salado—was already one of the year’s most unavoidable hits, a staple of pop radio, MTV, and VH1.

Fastball’s fast ascent had all the makings of a fairy tale: down-on-their-luck heroes, hard work, and a happy ending. In fact, if the band’s rags-to-riches story line echoes Cinderella’s, it’s wholly appropriate, since both were hatched on the same studio lot in Burbank, California. Disney-owned Hollywood Records discovered them in 1995, stuck with them after the commercial failure of their debut album, Make Your Mama Proud, and helped make “The Way” a radio smash. After only six months, the full-length album on which the song appeared, All the Pain Money Can Buy, sold its millionth copy—no small feat, since less than one percent of the albums released in 1998 went platinum that same year. Even more impressive, Fastball’s platinum certification was the first by a Hollywood artist in the label’s eight-year history and the first by an Austin act since 1988 (not counting the late Stevie Ray Vaughan).

The upshot of such success is that Fastball is a global business enterprise, one that has generated millions of dollars in revenue for Disney. The band itself stands to earn millions too, only not as fast as you might think. One of rock and roll’s most enduring myths is that once you hit it big, you’re immediately showered with the kind of cash pocketed by showbiz icons and pro sports heroes. That may be true for longtime superstars like Garth Brooks or Madonna or the Rolling Stones, but far more often rock stardom and financial stability are two distinct concepts—a lesson the members of Fastball have been forced to learn as they go along.

Although the music industry accommodates dozens of business models, there are three main methods for a band to make money. Scores of books and seminars attempt to explain the intricate details of each one, but the basic concepts aren’t nearly as complicated as the business managers, attorneys, and accountants would lead you to believe:

Record Deals By design, major league recording contracts place the record label’s financial interests ahead of the band’s. Labels have in place a staff and system capable of producing, distributing, and promoting records, and all but the biggest of stars typically forfeit more than 85 percent of an album’s suggested retail price for those services. Before a band sees any of the remaining money, though, it has to pay off its debts to the label. Those debts, known as recoupable expenses, are amassed when the label spends money for what most of us would assume is the cost of doing business, typically things like the recording of albums, artwork and packaging, tour support, and video production. If enough albums sell and the debt is fully repaid, the band begins to collect its take. If the album sells poorly and the debt isn’t repaid, it carries over to the next album—assuming there is one.

Touring Whenever a band plays a show, it is paid a fee and/or a percentage of the tickets sold by a club owner or promoter—but the financial consequences of touring are more complicated than that. You see, there are two ways for a band to tour: with the financial support of its label or without it. Almost every band asks its label for tour support while it is still in its starving-artist phase, the upside being that someone else picks up the tab for expenses like travel, lodging, food, and roadies. And it’s quite a tab: Road work with a bus and small crew can easily cost $15,000 a week. The downside is that tour support increases a band’s debt to its label. That’s why successful bands begin to tour self-sufficiently once they can afford to—so they can keep whatever they make. If a band is at the point of touring self-sufficiently, it is likely to be making at least enough to cover its expenses on the road. If it’s an established act like the Rolling Stones, it could be bringing in as much as $1 million a night—though, of course, its expenses are going to be much higher than $15,000 a week.

Publishing Basic United States copyright law protects songwriters by giving them the exclusive rights to grant or deny the reproduction, distribution, or performance of their work. Although many artists do not write their own songs, most modern rock bands do, and Fastball is no exception. For a band that generates its own material, music publishing is potentially the most profitable aspect of the business, because any money generated by the songwriters’ copyrights is out of the reach of its label, debt notwithstanding.

The majority of a band’s publishing income comes from its “mechanical” and “performance” rights. As the name suggests, mechanical rights cover the reproduction of a song on a record. In the standard contract between a band and a label, the label is required by law to pay the composer a fixed rate per song simply for the right to use the composition on commercially sold recordings. The mechanical licensing rate for the U.S. and Canada is 7.1 cents per song, which translates into 71 cents for every copy of an album sold (7.1 cents multiplied by ten, the average number of songs per album).

Performance rights can also trans-late into easy cash because a song’s copyright covers every time it is performed in public and each time it appears on radio and television. Songwriters register their songs with one of three major performance societies: ASCAP (American Society of Composers, Authors, and Publishers), BMI (Broadcast Music, Incorporated), or SESAC (which, oddly, doesn’t stand for anything). These societies issue blanket licenses for the performance rights to songs and make payments directly to the song’s author four times a year, based on how frequently a song is played live, on radio, or on TV. The bigger the hit, the more it’s performed, and thus the more it generates in revenue for the composer or composers.

But there’s a catch. Publishing rights are like real estate or any other tangible property: They can be held on to, leased, or sold. By law, every band that writes and performs its own material can lay claim to every dollar those copyrights generate. But if the band is anxious to be paid now rather than waiting for money to come in over time, it can choose to assign its copyright to a music publisher, a company willing to speculate on its current or future output and offer a cash advance in exchange for all or a portion of the copyright’s value.

Usually, bands sign “copublishing” deals, in which the publisher offers an advance in exchange for half the publishing income until the advance is paid back and a quarter of the income thereafter. If the publishing income is so paltry that there isn’t enough to pay back the advance, the publisher is out of luck—but if there is, the publisher gets a piece of the band’s success in perpetuity. Looking at it another way, the band gets a big fat check up front, 50 percent of all income for a time, and then 75 percent after that. Because there are no guarantees that a song will attain popularity or value, many bands like the cash advance, which is money that can be deposited and spent immediately regardless of how their song eventually fares and in spite of any debt they owe to their label. And if they have a hit? “Taking a publishing deal almost amounts to a bet against yourself,” says Wofford Denius, a Los Angeles music attorney who handles Texas acts like Wayne Hancock and the Damnations TX. “You’re giving up twenty-five cents on every dollar for the assurance that the money’s there today. It’s a gamble.”

Fastball took that gamble. At the 1998 South by Southwest conference, the music industry’s annual gathering in Austin, Scalzo and bandmates Miles Zuniga and Joey Shuffield discussed selling the rights to “The Way” and the rest of the songs on All the Pain Money Can Buy with nearly a dozen publishers. At the time, “The Way” was clearly heading to the top of the alternative music charts, which meant it stood to generate (in the best of all possible worlds) nearly $1 million in mechanical royalties from Hollywood and perhaps twice as much in performance royalties. “We were in the catbird seat,” says Zuniga. “It was unbelievable. We had a hit song. Everyone wanted us and was ultimately willing to keep topping someone else’s offer.”

When the dust settled, Fastball signed a copublishing deal with New York—based EMI that included the rights not only to All the Pain Money Can Buy but also to the band’s follow-up record. Although the actual terms of the deal have never been disclosed, industry insiders believe Fastball received an advance of between $1 million and $3 million. Perhaps owing to newfound clout, the band also won two friendly concessions from EMI: (1) Upon Hollywood’s acceptance of its next record, Fastball is guaranteed a second advance equal to the first one—regardless of the release’s eventual success or failure, and (2) all the copyrights revert back to Fastball in an unusually short time, rumored to be as little as three years. “That we might end up with one successful single and a mediocre second album and still make all this money up front was a pretty hard argument to ignore,” Zuniga says. “In this business you just don’t know what’s going to happen.”

Indeed, the greatest lure of a publishing advance is that the music industry offers so few guarantees of success. Going on tour, for instance, is always an uncertain proposition, because you never know whether anyone will turn out to see you—or, consequently, whether you can command enough money to make it worth your while to hit the road. Fortunately for Fastball, it became clear very quickly that the touring end of things would take care of itself quite nicely. After the release of Make Your Mama Proud, in 1996, the band toured fourteen months in a van to play gigs that typically paid less than the travel and lodging expenses incurred. But by last March Fastball was being offered $500 a night to open a two-month alternative rock tour. Those gigs, in turn, paved the way for a special $5,000-a-night, three-week stint on the H.O.R.D.E. tour, which put the band in front of 15,000 people. By year’s end Fastball was being paid between $2,500 and $10,000 a night for a headlining club tour across America and overseas.

If only the recording-contract portion of the equation were so easy. Although the terms of Fastball’s deal are not public, they are said to be receiving about 13 points—that is, 13 percent of the suggested retail price of All the Pain Money Can Buy, or roughly $1.15 per copy. It’s tempting to do the math and conclude the band earned $1.15 million in royalties when the album went platinum, but don’t forget about the label’s recoupable expenses. Before Fastball collects a dime, it must first pay back all the money Hollywood has spent on its most recent record. To complicate matters, it must also pay back perhaps another $400,000 in debt left over from Make Your Mama Proud, which has sold fewer than ten thousand copies. And it could be worse: Had Hollywood released a single to radio or filmed a video for a song from the record, that modest $400,000 figure could have doubled. “Generally speaking, we have to spend more money to sell more records,” says Rob Seidenberg, the Hollywood executive who signed Fastball and handles its label affairs. In fact, because Hollywood has already footed the bill for promoting two singles to radio, helped support eight months of domestic and international touring, and paid nearly $400,000 to record a pair of videos, Seidenberg says it’s unlikely that the band can recoup its debt with a record that merely goes platinum. “A million records generally doesn’t do it these days,” he says, “especially if it takes two singles and two videos and they’ve been on the road. At a million and a half, the money gets significantly better, but it still depends on how many singles and videos it takes to get there.”

That a million records “doesn’t do it”—even at a label as traditionally conservative with its spending as Hollywood—is perhaps the harshest reality check possible for Fastball or any young band tasting its first success. And unfortunately, more singles and videos are necessary evils, so it may still be years before Fastball sees profits from the sales of All the Pain Money Can Buy. The band and the label plan on working the record throughout most of 1999, with constant touring (including expensive trips to Australia, Japan, and Europe) and as many as three more singles and videos. In the best-case scenario, that promotion should lead to exposure that drives up album sales and creates radio play, thereby creating mechanical and performance royalties far greater than what would be necessary to repay its advance to EMI. The worst-case scenario is that the next pair of singles fails to maintain the buzz and the band heads into its next record still in debt to Hollywood.

Either way, Hollywood executives and others on the Fastball team say they’ve seen but a few bands in the midst of supporting a platinum record take such a hands-on approach to managing and balancing their long- and short-term finances. Perhaps it’s because Scalzo has seen life inside the bagel industry and isn’t itching to get back. Or maybe it’s because Scalzo, Shuffield, and Zuniga are smart enough to know that their publishing advance could be the only real money they see until “The Way” resurfaces sometime next century on nostalgic compilations, soundtracks, and radio programs.

“We’re trying to be as careful as possible,” says Zuniga. “There’s a lot stacked against you, but I think you can make a lot of money if you pay attention. I think most artists who get ripped off just don’t want to deal with it. As long as they have enough money to buy drugs, alcohol, new guitars, or women, they don’t care and won’t ask. But what they don’t realize is that this is a business, and it may only be open for a while. Paying attention makes good sense.”

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