The X Factor is no longer offering a �1m record contract as its prize ? but even when it did, that money was unlikely to end up in the winner's pocket
Last week, the news leaked that The X Factor has dropped the "�1m recording contract" top prize. Apparently this happened in 2009, but contestants were sworn to secrecy, so the change has only now come to light. The contracts this year's finalists have been asked to sign give them an advance of "just" �150,000 for their first album, according to the Sun. The advances for the follow-up albums increase by just under �100,000 with every release, which means the act would have to release four albums to earn a million pounds. No act has so far managed to reach that point before being dropped.
The 2008 Britain's Got Talent winner, George Sampson, has spoken about feeling let down by Simon Cowell for dropping him after his first single flopped, and of being upset that he didn't make any money out of his record deal ? in fact, he said, he "owed" money to Cowell's label, Syco.
That people are surprised by these revelations illustrates how the myth of the pop star life is still pervasive. As record sales have plummeted by almost 50% in the past decade, the advance most new artists can hope for, even from a major label, ranges between �75,000 and �150,000. If X Factor wannabes are still under the illusion that winning will make you a millionaire, they're in for a surprise when they realise how record deals really work.
I was always under the impression that the "�1m recording contract" was what the label would spend on and invest in the artist, anyway. Besides, advances are always recoupable ? hence the name. And to illustrate why artists almost never pay off this debt, and thus never see any record royalties at all, look at an artist whose new album was advertised recently in the first commercial break of The X Factor: Birdy.
That particular ad slot is one of the most expensive on television: primetime on one of the most popular shows. If I remember correctly, the ad was 30 seconds long, which means it would've cost around �125,000 (twice that if it was a minute). I don't know the details of Birdy's particular contract (with Atlantic), so this is somewhat hypothetical, but let's imagine she got an average record deal for a newcomer. She would have to pay for half of that TV ad, �62,500, out of her royalties. Receiving a typical royalty rate of around 15% of the approximately 47p that go to the label from each iTunes download, she'd have to sell 886,525 downloads just to pay for the ad. If her contract doesn't stipulate this, then it would most likely include a clause saying she'd get half the royalty rate on all UK sales in the accounting period relating to the ad campaign. If she received an advance of �150,000, she'd have to sell another 2,127,660 single downloads just to break even.
That's not all she would owe. There are plenty of other costs the label add to the artist's tab. One musician told me: "If I'd have known that it was actually my own money I was spending, I wouldn't have taken all those limos, first-class flights ? or flown in a saxophone player from another country just because I wanted him to play on my record."
Of course, just because an artist hasn't "paid off" their advance doesn't mean the label hasn't made their money back. After all, the label's share per download, which does not count towards the recoupment, is around 40p. (Although, even if it collected the full 47p, it would still take 319,149 downloads to make �150,000.)
Yet Sampson's statement that he owed Cowell money is a bit misleading. Once he got dropped, his tab was written off. Syco/Sony could only recoup what they spent from what he produced during his contract. You may wonder why a label would drop an artist before it made back what they spent on the advance, promotion, marketing, recording and tour support. But this figure, which can amount to hundreds of thousands of pounds, often rises faster than what an artist generates in revenue. IFPI recently claimed it costs $1m to launch a pop artist; according to Mike Smith, managing director of Columbia Records, it costs �10,000-�20,000 for his artists to perform on The X Factor, and up to �100,000 for a slot on the Brits. So labels may decide to cut their losses before they've spent too much on an act that isn't performing well in the charts. A prime example of this is Mariah Carey's deal with EMI/Virgin: even though it was reported to be worth $81.6m, EMI chose to buy her out for $28m after less than a year, rather than spend the full sum of the deal, following the release of her album and film Glitter.
In contrast, Robbie Williams's deal with Universal, announced last week, would be nothing like The X Factor contracts. Though no details have been released, judging by his previous contract with EMI and the kind of deal structures his management prefers, it's likely to be more of a partnership ? a multi-rights deal in which Williams would've picked the services he'd like Universal to provide in return for "shares" in the "company" that is Robbie Williams. This would also allow Williams to retain the rights to his music. Then again, I'm sure Take That's initial deal was nothing like that, as the group was an unproven entity.
It's all about who holds the trump card. And let's face it, people who try out for The X Factor are desperate (and/or delusional). In their case, the house will always win. Before a single album has been released, Cowell and ITV have made millions of pounds off the phone lines, the advertising and, in Cowell's case, even the theme tune: he and Ashley Tabor, group chief executive of Global Radio, are credited as its co-composers.
So my advice to X Factor and Britain's Got Talent winners is to ride the promotional wave, which they could never have afforded had they self-released their music, for as long as possible. Once they get dropped, they're much better known to the public than before ? and then they can self-release, or pick up another record deal.
Source: http://www.guardian.co.uk/music/2011/oct/28/how-x-factor-winners-lose
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