February 19, 2004
The Bull by the Horns
Posted by nerdling | February 19, 2004 03:47 PM
Every now and again I remember that money really can buy almost anything, particularly acceptance. Monsanto, the company which has been producing a frightening array of noxious chemicals for the better part of the last century—Agent Orange and PCBs among them—is now poised to takeover the world through genetically modified crops. The firm is now aimed solely at the biotech market, selling their modified seeds, which resist drought and insects with higher yields than traditional crops, to factory farms and third world farmers—all of whom pay annual royalties for the patented seeds.
But that's good news, right? Everyone gets food free of bugs, rot, and pesticides, it can travel long distances without spoiling; the world's food supply would be practically immune to disaster. And those things are positive and hurrah for that, but the downside to the ag biotech market is that Monsanto would control, quite literally, every crop in the world. They would also vicariously control every farm in the world, and that's just a bit too much power for any one entity to have. Chances are the Monsanto takeover would also mean the death of family farms, which have already been suffering at the hands of larger factory farms with more ready capital and, uh, flexible employment and quality standards.
Ugh. It makes my skin crawl just to think about it. This is why everyone should buy local and organic—you may find a bug or two every now and again, but you don't have to worry about what your veggies have been spliced with.
In other news, the RIAA and the FBI have officially announced their aforementioned naive and pointless plan to include a copy of the FBI seal (similar to the one you see at the beginning of a movie, warning against piracy) in the packaging for all CDs, DVDs, video games and software. I don't know about anyone else, but I have never read the FBI warning during a movie, nor do I bother to read the ratings guides on video games, nor the lyrical content warnings on CDs. Hell, I don't even read the warnings on cigarettes.
And besides this bit of nonsense, I'd like to point something out: PIRACY IS NOT HURTING THE ARTISTS ANY MORE THAN THE RECORD COMPANIES ARE. I keep hearing the impassioned pleas of RIAA spokespersons defending the rights of artists and songwriters who are losing money due to piracy. Those artists and songwriters are not losing money because the record companies have already taken it, and the record industry is worried about losing their own money. They don't care about the artists because, let's face it, there's always more where they came from.
For those of you unfamiliar with what I am saying, here is a breakdown of the economics of an average record deal:
The money being made off of an album is measured in royalty points or percentages. Each person or persons involved in the making of the album gets what are called points on the backend, meaning that they get a portion of the total number of points that comprise the costs and profits of the album. Most of the time when a band signs a record deal they are given money up front, called an advance. An advance is just that: money the record company is giving based on the projected sales of the album. If the company does not recoup that money in record sales, it must be paid back.
There are two royalty sources that an artist can make money off of: mechanical royalties and artist roytalties. Mechanical royalites are paid to the songwriters. The statutory rate is somewhere around seven cents per song, so a songwriter who writes every song on an album of, say, 10 songs would be receiving 70 cents per album sold. That doesn't sound so bad until you realize that the labels are only paying out mechanical royalites at 75%, effectively witholding 25% of the copyright income.
Artist royalties are earned through record sales; an established artist could be looking at 10–20 points, while relatively obscure bands have been known to receive 6 or 7; the industry average is somewhere around 12 or 13. Now, when a new band is signed and an album is made, there are a myriad assortment of costs involved, and quite a few of them are—surprise!—the responsibility of the artist, not the label.
For example, all of the promotional costs are recoupable from artist royalties. This means that videos, radio promotion, commercials, and/or retail tie-ins come out of the pocket of the artist, depending on the percentage lined up in the contract. The label fronts the money and decides on what and how much promotion to put behind an album; if the label does not promote an album and it does not sell, the artist is still responsible for recouping that money. Why? Because an artist does not see a profit until the recoupment is clear (this includes the advance).
So, say an artist managed to negotiate a 50% recoupment percentage with seven points in artist royalties; the promotion on the albm runs to $200,000 so the artist is obliged to pay back $100,000 of that cost. Now, in order for the artist to pay that back the label will have to make almost fifteen times the amount the artist does. How does that work, you ask? For each $100,000 in album sales, 7% ($7,000) of that hundred grand will go to the artist's recoupment and the rest to the record company to be split among the other royalty makers.
In order for the artist to recoup $100,000 in promotion expenses at 7%, the album would have to turn in sales of $1,425,000 (roughly 95,000 albums sold). Out of nearly $1.5 million, the artist sees nary a penny.
To clarify my position: I am not saying that piracy is a good thing. I think that there is a fair balance to be found between offering downloads for free as a marketing tool and the flagrant abuse of file trading that has been taking place. I, for one, do download music; on average, I might download five songs in a week, and I buy between five and ten albums per month (at independent record stores and distros, or straight from the labels and artists). I use those downloads to determine what I want to buy, and I don't keep songs that I don't like and don't intend to buy. I don't have a problem with downloading because I choose to download responsibly, and so should everyone else. No matter how poorly the recording industry treats the artists, it is the responsibility of the fans to act reasonably and with consideration for the difficulty of being a professional musician. If we, as the consumers, do not maintain that relationship while voicing our concerns we lose our bargaining power and the whole boat sinks, musicians in tow.
I'm down off my soapbox now, but heed the words of Steve Albini and Don Henley—and don't listen to the manipulative flapjaws at the RIAA.
I'm no fan of gigantic, shady corporations like Monsanto (and ADM, for that matter, another huge and often negative influence on world agriculture), genetically modified foods have a lot to offer the world.
It may take a few decades, but eventually Monsanto's secrets will be revealed through market pressures, litigation, and regulation.
The underdeveloped countries of the world really need this stuff: Disaster- and weather-resistant crops, rugged crops that can be spread across the Third World to solve famines and crises. . .this is really good news. It's a huge privilege, in our comparatively ultraprosperous country, to be able to buy plentiful, locally-grown organic produce.
But I realize it's not that simple. Just like the pharmaceutical companies control AIDS drugs, and don't apply them as liberally as they should to the millions suffering in Africa, Monsanto is unlikely to really spend a lot of time and money solving world hunger, unless it's easily linked to their bottom line.
I'm just saying that the PROMISE of genetically modified foods is very great. If we can somehow get the practice right, much good could be done.
Posted by: scotty at February 20, 2004 09:37 AM
What worries me about the application of genetically modified crops is not whether or not those advances could do good things; undoubtedly, as you pointed out, they could do wonders for economies less prosperous than ours.
My concern is that, much like in so many other things, Monsanto is interested in making money in the third world, not solving world hunger. They are offering resistant seeds in countries where those seeds would be life-saving--but they are charging an arm and a leg for the privilege.
Monsanto's interest is in making as much money as possible and they don't care if that money is from poor farmers or wealthy investors, so long as the money keeps coming, even if prosperity comes at the cost of lives and the further exploitation of people that cannot possibly compete on their level.
I have the same gripe with the pharmaceutical companies: they are enforcing legislation which prevents suppliers in other countries from producing low-cost medicines that would help AIDS and cancer suffers because that would violate their patents and cost them money. Thousands of lives are a small price to pay for their profit margin, I guess, and the lives of those who would be helped by genetically modified crops would be reduced simply to bargaining chips when it came time to renegotiate seed prices in those places.
Posted by: Marleigh at February 20, 2004 02:59 PM
