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Business Ethics
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subego
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Jun 28, 2018, 09:31 AM
 
As I mentioned in the spreadsheet thread, I have albums for sale, and owe the musicians a percentage of the minuscule profits.

The only expense is manufacturing CDs. There are more expenses, a lot more, but I’m being generous, and only claiming this one.

It’s a recurring expense, so the profit is herky-jerky. Right now I owe the musicians nothing, because I’m making back the manufacturing costs. Those will get covered at some point, and I’ll be paying out. Then I’ll buy a new lot of CDs, and I won’t be paying out again. Those will get covered, and the payouts resume. Rinse, repeat.

My question revolves around whatever I happen to owe people at the moment I buy a new lot.

Is it ethical for me to take what I owe those people and put it towards what they now “owe” me to cover manufacturing costs?
     
andi*pandi
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Jun 28, 2018, 11:48 AM
 
Are you talking about the next round of manufacturing costs?
     
reader50
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Jun 28, 2018, 12:50 PM
 
I take it this condition is not addressed in your written agreements?

On the one hand, buying the next set of supplies when you're about to owe them something is diverting their money.
On the other hand, explicitly paying them first is making you forward interest-free financing from your pocket.

As an ongoing effort, I'd say buy the supplies when they're about to run out. As the supplies are necessary and neither you nor the musicians control when it happens, it will randomly benefit one party or the other. Ultimately it benefits both parties.
     
subego  (op)
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Jun 28, 2018, 05:38 PM
 
Originally Posted by andi*pandi View Post
Are you talking about the next round of manufacturing costs?
Yup!
     
subego  (op)
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Jun 28, 2018, 05:47 PM
 
Originally Posted by reader50 View Post
I take it this condition is not addressed in your written agreements?

On the one hand, buying the next set of supplies when you're about to owe them something is diverting their money.
On the other hand, explicitly paying them first is making you forward interest-free financing from your pocket.

As an ongoing effort, I'd say buy the supplies when they're about to run out. As the supplies are necessary and neither you nor the musicians control when it happens, it will randomly benefit one party or the other. Ultimately it benefits both parties.
Nothing in writing on this particular question, so there’s nothing stopping us.

We would only do it when we’re about to run out. There’s no other reason to buy the things.

I come to a similar conclusion about the ethics. It’s a random event, and we’re all in this together.
     
Spheric Harlot
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Jun 29, 2018, 05:23 AM
 
Every record deal I’ve been involved in has stipulated payouts after costs are recouped.

And of course, it’s imperative to list exactly *which* costs are recoupable, and to what extent.
     
OreoCookie
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Jun 29, 2018, 06:01 AM
 
The way I parse your message (and correct me if I am wrong) is that you already know it'd be more proper to pay out the musicians. But you hesitate in part because it will be a hassle for very little money. Put succinctly, I have the impression you know what you think is right already.

“Reinvesting” their money into making more CDs doesn't seem right to me: without knowing the legal situation here I'd assume that taking the risk for manufacturing CDs is on you, not the artists. If you use the artists's money to re-finance your operation, you'd withhold money that (as I understand you) you owe them. That is IMHO your risk and not theirs. Plus, it can lead to a situation where the artists will never see any money, because you did not manage to recoup the costs for the second pressing.

Naïve question: but this day and age, is it really necessary to produce CDs? Can't you put the music on iTunes or Amazon instead? (Sorry for my ignorance here, but it's been years since I bought a CD by choice.)
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subego  (op)
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Jun 29, 2018, 07:38 AM
 
Originally Posted by Spheric Harlot View Post
Every record deal I’ve been involved in has stipulated payouts after costs are recouped.

And of course, it’s imperative to list exactly *which* costs are recoupable, and to what extent.
This contract is probably more concise than you’re used to working with on a profit share. The whole thing is less than two pages.

It’s ultimately written to favor us. By using accounting shenanigans, I’m pretty sure we could get away with not paying anyone anything, ever.

We’re not going to do that, though. Even if we weren’t interested in maintaining a good reputation, or these people weren’t our friends, we just don’t operate that way.

In that vein, there are all kinds of legit, non-shenanigan costs we should recoup but aren’t. My equipment was free. The space was free. The months of work to mix it were free. I’m mastering it for free.

The only* expense we’re claiming is the manufacturing costs. Any less and it wouldn’t be fair to us.


*And the submission fee for digital distribution... I left that out of the OP for simplicity’s sake.
     
Spheric Harlot
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Jun 29, 2018, 07:46 AM
 
Originally Posted by OreoCookie View Post
Naïve question: but this day and age, is it really necessary to produce CDs? Can't you put the music on iTunes or Amazon instead? (Sorry for my ignorance here, but it's been years since I bought a CD by choice.)
Selling CDs and other merchandise at concerts is often the only way to turn a profit on tour.

Touring is expensive, especially if you’re no longer 22, and couch-surfing no longer seems like a great trade-off for the fame and the coolness of being the band.

But at the same time, concerts are often the only place you’re actually going to sell any music at all, because people there actually know who you are.

It’s a total mess.
     
subego  (op)
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Jun 29, 2018, 08:00 AM
 
Originally Posted by OreoCookie View Post
The way I parse your message (and correct me if I am wrong) is that you already know it'd be more proper to pay out the musicians. But you hesitate in part because it will be a hassle for very little money. Put succinctly, I have the impression you know what you think is right already.

“Reinvesting” their money into making more CDs doesn't seem right to me: without knowing the legal situation here I'd assume that taking the risk for manufacturing CDs is on you, not the artists. If you use the artists's money to re-finance your operation, you'd withhold money that (as I understand you) you owe them. That is IMHO your risk and not theirs. Plus, it can lead to a situation where the artists will never see any money, because you did not manage to recoup the costs for the second pressing.

Naïve question: but this day and age, is it really necessary to produce CDs? Can't you put the music on iTunes or Amazon instead? (Sorry for my ignorance here, but it's been years since I bought a CD by choice.)
CDs have three niches which make them worthwhile.

1) They’re halfway decent “feelies” for promotion, like in a press kit

2) Some dipshits demand them (cough, radio, cough)

3) Drunk people forget what century it is and buy them at concerts


As to my ethics question, I know which answer is the most scrupulous, but there’s such a thing as unnecessary scrupulousness.
     
subego  (op)
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Jun 29, 2018, 08:11 AM
 
And, yes... you have correctly surmised the underlying motivation is doing it “right” would be a massive pain in my ass.
     
subego  (op)
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Jun 29, 2018, 08:54 AM
 
Originally Posted by OreoCookie View Post
Plus, it can lead to a situation where the artists will never see any money, because you did not manage to recoup the costs for the second pressing.
I’m not sure it matters, but this could happen ethically.

If I have to buy a new lot of CDs before this one has recouped the costs, and then have to buy another before that one recoups its costs, and so on, and so on, the artists never get anything.

Never making a profit due to my mismanagement is a risk they’re undertaking.

If I’m not mismanaging it, then they get the money, the only thing I’m doing is delaying a portion when it’s time to get new inventory.
     
OreoCookie
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Jun 29, 2018, 09:48 AM
 
Originally Posted by subego View Post
And, yes... you have correctly surmised the underlying motivation is doing it “right” would be a massive pain in my ass.
That's the vibe I got. But in the end, that wouldn't change even if you'd be able to sell one or two more pressings, right? The musicians would still end up with chump change.

Given what you explained me about the business sense of making CDs these days, would the artists be interested in x free CDs where x corresponds roughly to the amount they were due?* They could sell them or hand them out as promos on concerts?

* When I published my book last year, I got a whopping 5 free copies which is roughly a $500 value in addition to 250 €.
I don't suffer from insanity, I enjoy every minute of it.
     
subego  (op)
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Jun 29, 2018, 10:03 AM
 
I’m not sure I understand the first paragraph.

As for being paid in CDs, I were them, I’d rather take the money.
     
andi*pandi
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Jun 29, 2018, 11:55 AM
 
Why not just make a policy of asking them which they'd prefer?

a) first round of CDs sold, here's your percentage. Call me when you want more.
b) first round of CDs sold, here's your percentage, minus fees for another modest run.

BTW, what's your percentage?
     
subego  (op)
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Jun 29, 2018, 12:20 PM
 
Originally Posted by andi*pandi View Post
BTW, what's your percentage?
Whatever a musician gets for a song, I get double.


Edit: same with my partner.

Example... 6 musicians on a song

Each musician gets 10%, my partner and I each get 20%.

If there are less musicians, everybody gets more, if there are more musicians, everybody gets less.
( Last edited by subego; Jun 29, 2018 at 07:58 PM. )
     
subego  (op)
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Jun 29, 2018, 10:00 PM
 
Originally Posted by andi*pandi View Post
Why not just make a policy of asking them which they'd prefer?

a) first round of CDs sold, here's your percentage. Call me when you want more.
b) first round of CDs sold, here's your percentage, minus fees for another modest run.
The musicians aren’t doing the selling. We take care of however the music gets turned into money, and then the musicians get their percentage of whatever that is.

In terms of when they get paid, the basic idea is we hold the money until we owe a musician enough it’s no longer ridiculous to go through the effort of cutting a check. Twenty dollars would probably be a general purpose minimum.

Under normal circumstances, when it comes time to buy a new lot of CDs, we would have already made payments to everybody, but would also have money we owe them that was waiting “in the bank” to get above the minimum.

This is the money which I want to consider as going towards the new lot. They have to pay off the new lot anyway, the only question is if it’s unfair of me to cover it with some current earnings rather than have it exclusively be future earnings.
     
Spheric Harlot
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Jun 30, 2018, 08:14 AM
 
If you can safely assume that a second pressing is in the interest of the band members, I’d go ahead and just inform them of the decision.

If you have a minimum payout defined, then it doesn’t matter — you could use future income to finance the pressing, but whatever is there that’s below the individual payout minimum gets frozen anyway, with nothing added to the balance until that sum is recouped, so using that money towards the pressing instead will not actually make any difference.

If any individual member has a problem with it, then you can take it up with him.
     
subego  (op)
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Jun 30, 2018, 08:25 AM
 
Another pressing is always going to be in the interest of the musicians, otherwise there’s no product for people to buy.

A large run may be a bad idea, but a run is a guarantee.
     
subego  (op)
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Jun 30, 2018, 09:05 AM
 
Originally Posted by Spheric Harlot View Post
If you can safely assume that a second pressing is in the interest of the band members, I’d go ahead and just inform them of the decision.

If you have a minimum payout defined, then it doesn’t matter — you could use future income to finance the pressing, but whatever is there that’s below the individual payout minimum gets frozen anyway, with nothing added to the balance until that sum is recouped, so using that money towards the pressing instead will not actually make any difference.

If any individual member has a problem with it, then you can take it up with him.
The minimum payout isn’t defined, but these are working musicians, so an extra $20 actually means something. I don’t want to keep much more than that unless the thing somehow starts making enough money where it makes sense to adopt a regular schedule instead of minimum payouts.

These are also basically studio musicians, so the whole thing is a black box to them. I kinda don’t want their opinion, because they won’t be thinking about it from a big picture perspective.
     
subego  (op)
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Jun 30, 2018, 10:02 AM
 
Originally Posted by OreoCookie View Post
That's the vibe I got. But in the end, that wouldn't change even if you'd be able to sell one or two more pressings, right? The musicians would still end up with chump change.
If the musicians end up with chump change, then so do I.

If the expenses for a run butt-up against the revenue the run earns, then no one makes anything, me included.
( Last edited by subego; Jul 1, 2018 at 04:50 PM. )
     
Spheric Harlot
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Jun 30, 2018, 12:31 PM
 
Originally Posted by subego View Post
Another pressing is always going to be in the interest of the musicians, otherwise there’s no product for people to buy.

A large run may be a bad idea, but a run is a guarantee.
Given.

The wording was a hedge against individuals no longer wanting to be associated with a product, or a band torn between wanting to sell a product and that product still featuring (and thus profiting) an ex-member.

I’ve seen a whole (almost-complete) production cancelled and entirely re-recorded in a different studio over that latter scenario. Egos can be ridiculous things.

And since your situation seems to be complicated (otherwise you’d know what everybody involved thinks)...
     
subego  (op)
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Jun 30, 2018, 06:26 PM
 
Oh yeah...

We wanted to sell albums of stuff the band plays, but was recorded solo by the band leader.

All proceeds were going to go into the “band fund”, for things like touring expenses. Note, at this point everyone in the band was voluntarily putting everything we got paid for gigs into the band fund.

They said no. They turned down free money because they weren’t on the albums.


This situation is the opposite of complicated, though. Again, I can pretty much do whatever I want, not ask anyone’s opinion, and not tell anyone what’s going on. It’s a black box.

I genuinely don’t want to take advantage of that, and **** people over, but I’m not asking the people involved because they’d thoughtlessly **** me over in a second. Musicians can be very “in the now”.
( Last edited by subego; Jun 30, 2018 at 07:18 PM. )
     
ghporter
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Jul 1, 2018, 06:30 PM
 
A couple of questions:

Are the manufactured CDs pressed? Is there a single, per unit cost, or are there volume price breaks? What is the arrangement with the musicians regarding their "cut" of each album?

Here's my take. If you are the one responsible for getting all the manufacturing done, and you're also the one who manages the books, as long as you can show that the costs of manufacturing "Joe's" album are spread across the amount you owe Joe and everyone else who gets a cut on that album, there shouldn't be any problem. Copious documentation of how much was spent on manufacturing (contracts, receipts, etc.) should cover you if "Joe's second chair guitar player" gripes that he thinks he got less payout than the first chair did.

On the other hand, if there are any specific agreements that cover any of this, you must first comply with all of them before you "spread the cost" of manufacturing.

Glenn -----OTR/L, MOT, Tx
     
subego  (op)
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Jul 2, 2018, 01:20 AM
 
Our current contract is all performers who end up in a song get paid the same percentage.

Whatever that percentage is, my partner and I each get double.

The actual percentages are however that works out to be 100%.

A nice, simple example is a song with 6 musicians. Each musician gets a 10% slice of that song’s profits. My partner and I each get a 20% slice.


For expenses, to go with our last order...

It was the first run for that album, so we wanted the run to be as small a batch as possible. In other words, the opposite of volume discount. At this scale our manufacturer duplicated instead of pressing them.

It came out to $561.31 for 100, or about $5.61/disc. Whatever we make over the $561.31 gets split among the participants like I described above.


Nothing I want to do will jack someone out of what they’ve rightly earned, but when we order a new batch, what I want to do will delay payment on some of those rightful earnings.

Theoretically, I could do such a poor job at profiting, the money I’m delaying gets delayed forever, but at some point I’d put a fork in it and make a final payout of those delayed earnings.
     
reader50
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Jul 2, 2018, 03:49 AM
 
Why not burn the CDs yourself? 100x CDs (printable Verbatim) runs about $25. An inkjet that can do CDs runs no more than $180 (here's one) (edit - another for $80). Price per CD on the first run would be perhaps $2.10 each (edit - $1.10 each). Later runs would be even better, less than 30 cents each. Not counting the child labor costs swapping the CDs around.
     
Spheric Harlot
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Jul 2, 2018, 11:08 AM
 
Originally Posted by reader50 View Post
Not counting the child labor costs swapping the CDs around.
This is one of the problems with that, especially once you get into cutting and folding/stapling booklets.

The other is that self-printing them doesn't give the same results as a professional silk-screening.
     
subego  (op)
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Jul 2, 2018, 01:29 PM
 
If we were just printing the discs, it would be a lot cheaper.

The big per-disc expense is printing the case.
     
subego  (op)
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Jul 6, 2018, 05:09 AM
 
Thanks everyone for helping out!
     
subego  (op)
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Jul 6, 2018, 06:29 AM
 
Here’s a peek into the newly created, and quite horrifying balance sheet for the album I used in the example.



Getting close to 2 years and it’s made about $65. The bulk is from East Asia, where we’ve been mistaken for somebody else.

This is why the books didn’t exist before now, I’ve got lots of runway before I’m the one who’s owing people.

To be fair to us, this has gotten zero promotion, and we haven’t been doing live shows, so no way to unload the CDs. We did this more because we had the recordings, so it couldn’t hurt to make them officially exist.

What we’re working on now will get promoted. The effort I’m putting in on a question like this is really more for that.

I mean, it’ll have puhlenty of runway too, but I happened to have the time right now to **** around with building an autopilot.
     
reader50
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Jul 6, 2018, 11:39 AM
 
Why no live shows? I miss the pics with the whiteface, prothetic makeup, and occasional Sith attacks.
     
subego  (op)
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Jul 6, 2018, 02:56 PM
 
In simplest terms, no band.

Every 6 months or so we put out feelers again. If it’s dry, we work on other stuff.

This time around, the other stuff was making and finishing some new recordings. We’ll do feelers soon, and if it’s still dry, we’ll make videos for the new recordings with actors instead of musicians.


Edit: a few people who worked on these recent recordings would want to be in the band, but the rest either can’t or don’t want to make that sort of commitment.

For example, our brilliant cellist is also a med student. He can show up for a half-dozen rehearsals and a couple recording sessions, but not much more.
( Last edited by subego; Jul 6, 2018 at 03:26 PM. )
     
subego  (op)
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Jul 6, 2018, 06:09 PM
 
We miss it too. Band leader has stopped going to see live shows because they make him depressed he doesn’t have a band.
     
   
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