The State of the Music Biz Nation

By Fate Sensation

Issue #03 (June/July 2006)

7-22-06

Let's talk about artists getting ripped off by the people they trust. Fate Sensation is quite amazed at the vast amounts of cash artists have lost and the very long time frames over which the thefts occurred. Fate Sensation, being a numbers guy at heart, looks forward to balancing his check book every month and would notice even a single penny missing from his account. Perhaps when Fate Sensation gets rich, he will learn not to be so detail oriented!

Trent Reznor Wins $2.95 Million Verdict

In May 2005, a jury awarded Nine Inch Nails front man, Trent Reznor, a $2.95 million judgment against his former manager of 15 years, John Malm. Reznor claimed Malm breached his contract and acted fraudulently by duping Reznor into signing unfavorable contracts which, despite earning millions of dollars in revenue, had left Reznor with only a few hundred thousand dollars. At trial, Reznor testified he often signed contracts without reading them or understanding what they were about. Reznor testified he trusted Malm to handle the business side of things and was stunned when he learned of his financial plight. Whether Reznor will be able to collect the judgment remains to be seen.

Have you ever signed a contract without reading it? Even the ever cautious Fate Sensation admits he might have agreed to a software user's agreement without reading every word once or twice. Shame, shame!

Leonard Cohen Wins $9 Million Verdict

In a similar lawsuit, Leonard Cohen, a well-known singer/songwriter, sued his former manager of 17 years, Kelley Lynch, for breach of contract, breach of fiduciary duty, fraud and professional negligence. Poor Leonard decided to take some time off from his hectic schedule and enrolled in the Mount Baldy Zen Center to focus on his spirituality. Upon his return to the outside world, he discovered his holdings had been reduced by over $5 million. In April, 2006, a jury awarded Cohen a $9 million verdict. Unfortunately, the money has apparently disappeared and Cohen is having a hard time enforcing the judgment.

You can't take it with you, right? Remember the famous Biblical saying - it's easier for a camel to get through the eye of a needle than for a rich man to get to heaven. Leonard's manager was just doing him a favor!

k.d. lang Sues Former Manager

In November 2005, Singer k.d. lang, a Grammy-winning vocalist, sued her manager of 15 years, Annabel Lapp, for allegedly embezzling potentially millions of dollars from lang's accounts. lang was unable to specify an exact amount because she is not in possession of her financial records and has been unable to obtain them from her former manager.

Fate Sensation wonders how hard it is to actually look at one's bank account and credit card statements for a minute or two upon their arrival each month. Of course, this assumes one is clever enough to arrange to actually receive one's bank account and credit card statements each month.

Ruben Studdard Wins $2 Million Verdict

In June 2006, a jury awarded "American Idol" winner Ruben Studdard a $2 million judgment against Studdard's ex-manager, Ronald Edwards. It turns out Edwards was helping himself to the money in Studdard's checking and other bank accounts and using Studdard's credit cards for Edwards' own benefit. All told, Edwards helped himself to over $246,000 of Studdard's money. Studdard learned of his plight when he applied for a home loan and was told his credit was in tatters. Edwards' promotions company was dropped from the lawsuit because it had no assets and Edwards has filed for bankruptcy making it very unlikely Studdard will be able to reclaim much of his missing money.

Fate Sensation reiterates - how hard is it to look at one's bank account and credit card statements for a minute or two upon their arrival each month?

Fate Sensation is glad to see the good guys and gals are winning these lawsuits. Unfortunately, actually collecting a judgment can be nigh impossible, making the artists' victories very hollow indeed.

Fate Sensation encourages all artists to take ownership of their financial affairs. Look at your bank account and credit card statements for a minute or two upon their arrival each month. Have your finances looked over by an independent accountant every now and then. If you give your manager power of attorney over your affairs, set limits. Educate yourself about the contracts you sign. Otherwise, Fate Sensation may be writing about YOU in his next newsletter on this topic!

On a final note, Fate Sensation is now quite tempted to become a manager. One or two successful but trusting artists later, he could retire to Costa Rica, Belize or maybe the Cayman Islands. He wonders if these countries have extradition treaties with the United States...

The Allman Brothers And Cheap Trick Sue Sony BMG Over Digital Royalties

Classic rockers, the Allman Brothers and Cheap Trick, have filed a class action lawsuit against their record label, Sony BMG, alleging Sony BMG is incorrectly calculating royalties for paid digital downloads. According to the plaintiffs, they receive a mere 4.5¢ out of the 70¢ the record label receives for a typical 99¢ sale. At the heart of the dispute is whether a digital download should be treated like the sale of a CD or other tangible product or whether it should be treated differently. Plaintiffs argue, for example, the standard "container charge" should not, for obvious reasons, apply to digital downloads. Plaintiffs are working under contracts which predate digital downloading. According to a recent article in Music Connection, even major label artists with newer contracts typically only receive 9.5¢ to 11¢ per download.

As a D.I.Y. artist, Fate Sensation uses CDBaby as his digital rights aggregator. CDBaby then licenses the right to offer Fate Sensation's music to iTunes and other digital retailers.  When an individual Fate Sensation track is purchased through iTunes, iTunes received 29¢, CDBaby receives 6¢ and Fate Sensation receives a whopping 64¢. Rock on Chicago!

Of course, the trick for D.I.Y. artists is to actually generate sales. Both the Allman Brothers and Cheap Trick should be making more than Fate Sensation because people download their songs in larger numbers. So far, Fate Sensation remains a taste shared by a highly intelligent, sophisticated, select few (who, by the way, have earned Fate Sensation's friendship, respect and admiration without condition throughout the universe in perpetuity!).

Support Fate Sensation by buying his CD at CDBaby, downloading it from iTunes or streaming it at Rhapsody.

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