one of the things that's very important to them at the courts,
like I've created this thing, this came from within me, and so.
>> For an artist. >> Yeah, for an artist.
>> Yeah. >> And so if we can be of service to them
and be really good at helping them organize
the conversation between the creator and the consumer.
But do it in a way that allows the economics of it to work out so
that they can retain ownership, that's going to allow me to do a lot more
business because- >> Yeah.
>> It's a very difficult thing for an artist to feel like I've created
this thing and now I'm basically selling it off or giving it away and
often- >> Yes.
>> Under terms that they're not happy with but they don't really have many other
options, and I'm trying to provide another you know option to that so-
>> In some ways,
it's sort of the opposite of the 360 deal.
>> And in fact, I referred to us as the home of the 60 deal-
>> RIght.
[LAUGH] >> Because we don't,
not only do we not own their masters,
we only keep 10% of the wholesale cost of the music.
So the artist retains basically about 75% of the gross value of the recordings.
Now the thing that is different is, under a label relationship,
the label takes on the costs of the, they underwrite many of the costs.
I mean the recording costs are deducted from the advance.
>> Right.
>> Right away, but in terms of the marketing of the record,
it's something that the label undertakes.
But they pay an artist a royalty that's anywhere near between 15 and
20%- >> Right.
>> Which is not really 15 or
20% because they have all these standard industry deductions.
What we do is, we do a 75%, 75% of the revenues go to the artist but
all of the expenses are charged back to the artist, in terms of advertising and
all that, but we devise the plan in consultation with the artists.
We get their approval of all, we basically map out the entire financial life of
their record and say we're going to spend this much on publicity,
we're going to do this, and we front a lot of that money, too.
So we don't always front all of the money, but
we often front, well, quite often we front all of the money,
we basically take as much risk as we feel like we can.
I mean if we're going to earn 10%, then that 10% is sacred,
I mean I can't run a business if I don't have the cost certainty of knowing
that we're going to earn a certain amount based on what our work will produce.
But financially it winds up working out much better for
the artist in our, I'll not name names.
We had an artist recently do 150,000 units on their record, and they,
after all expenses were paid back, they earned a net of $650,000,
which that would never happen in a traditional label deal.
>> No, I'll also not name names and say that I know somebody who sold 300,000
copies of a record and didn't make any money because they didn't recoup-
>> Right.
>> From the major label that they were part of.
>> But they probably, only slightly in the label's defense,
f they had the ability to earn a, there was probably a gap,
they got an advance that probably gave them some remunerations.
There was some gap between the advance they got and
the cost of the recording, but what was left over
was probably not nearly enough to give them proper
remuneration for their work, that's my guess.
But I also don't want to make judgments on,
I mean as long as everybody knows the score, I don't fault anybody for
getting into any business relationship or offering any terms.
We're in a competitive marketplace, we're in a competitive environment.
>> Yeah. >> I think there is a certain morality to
what it is I'm offering, but I don't like to actually talk about that.
That's not really what I sell because if we can't do the job for the artist,
we're not the right home for the artist.
But if we can do the job as well or better, which I think is the case,
I'm very proud of my team and how good we are at marketing records.
But if we can do the job as well or better than our label competitors, and
they actually get to own their recordings, ad they make a lot more money
off of their recordings, then why wouldn't they do business with us?
And that increasingly is what's happened- >> Right.
>> That's really what's fueled the enormous growth of the company.
>> What strikes me about what you're saying right now is that you are so
transparent about, well, this is exactly how the money happens with us.
And there are a lot of calls right now for increasing transparency in the business.
>> I couldn't agree more.
>> What do you think will happen if everybody sort of knew where all the money
was going,
do you think this is a realistic thing to expect from the business in the future?
What do you think is going to happen in order for that transparency to happen?
>> Well once again transparency is an asset in
the conversation when you're talking with artists.
And, I mean to me, in a market place where nobody
is offering transparent options then the artist
just has to find a least onerous relationship,
but one of the things we do with >> 30 tigers as we give people
access to the Red's B to B, their business to business site, so
that they can actually look at their orders and their activity in real time.
We provide very easy to understand statements to our artists.
In 14 plus years, we've never been audited once and we've never been in court.