All You Need to Know About the Music Business Eighth Edition

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  • Edition: 8th
  • Format: Hardcover
  • Copyright: 2012-12-04
  • Publisher: Free Press
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The definitive, essential guide to the music industry, now in its eighth editionrevised and updated with crucial information on the industry's major changes in response to rapid technological advances and economic uncertainty. Through seven editions and twenty years, All You Need to Know About the Music Industry has been the essential go-to reference for music business prosmusicians, songwriters, entertainment lawyers, agents, concert promoters, music publishers, record company execs, and music managersas they try to navigate the rapid transformation of their industry. Author Donald Passman, one of the most influential figures in the business, has been in the thick of this transformation and understands that anyone involved in the music business is feeling the deep, far-reaching effects of it. Drawing on his unique professional experience as one of the most trusted advisors in the business, Passman offers authoritative information on assembling a winning team of advisors, negotiating deals, music publishing and copyrights, new digital streaming services, and much more. The new edition includes up-to-date information on the new business models, including music streaming services and cloud lockers; developments in new legislation and industry-wide deals concerning piracy and digital rights; new challenges in performing rights; and updated numbers and statistics for the traditional industry. All You Need to Know About the Music Industry, called "the industry bible" by the Los Angeles Times, is a comprehensive guide to the legal and financial aspects of the music worldan indispensable tool that no one who makes their living from music can afford to be without.


Chapter 1: First Steps


For many years I taught a class on the music business at the University of Southern California Law School's Advanced Professional Program. The class was for lawyers, accountants, record and film company executives, managers, agents, and bartenders who want to manage groups. Anyway, at the beginning of one of these courses a friend of mine came up to me. She was an executive at a film studio and was taking the class to understand the music industry as it relates to films. She said, "I'm here to open up the top of my head and have you pour in the music business." I loved that mental picture (because there are many subjects I have wanted to absorb this same way), and it spurred me to develop a painless way of infusing you with the extensive materials in this book. So if you'll sit back, relax, and open up your mind, I'll pour in all you need to know about the music business (and a bit more for good measure).


I really love what I do. I've been practicing music law for over twentyfive years, and I represent recording artists, record companies, film companies, songwriters, producers, music publishers, film music composers, industry executives, managers, agents, business managers, and other assorted mutants that populate the biz.

I got into this on purpose, because I've always loved creative arts. My first show-biz experience was in grade school, performing magic tricks for assemblies. I also started playing accordion in grade school. (I used to play a mean accordion; everyone applauded when I shook the bellows on "Lady of Spain." I gave it up because it's impossible to put the moves on a girl with an accordion on your chest.) By high school, I had graduated from accordion to guitar, and in college at the University of Texas, I played lead guitar in a band called Oedipus and the Mothers.

While I was with Oedipus, we recorded a demo that I tried to sell to our family friend, Snuff Garrett (more about him later). Snuff, a powerful record producer, very kindly took the time to listen to the demo and meet with me. That meeting was a major turning point in my life. Snuff listened to the record, smiled, and said, "Don...go to law school."

So I took Snuff's advice, and went to Harvard Law School. In law school I continued to play lead guitar with a band called The Rhythm Method, but it was becoming apparent that my ability to be in the music business and eat regularly lay along the business path. So when I graduated, I began doing tax planning for entertainers. Tax law, like intricate puzzles, was a lot of fun, but when I discovered there was such a thing as music law, the electricity really turned on. In fact, I took the USC class that I later taught, and it got me so excited that I left the tax practice for my current firm. Doing music law was so much fun that it wasn't even like working (I'm still not over that feeling); and I enjoyed it so much that I felt guilty getting paid (I got over that).

My first entertainment law experience was representing a gorgeous, six-foot model, referred to me by my dentist. (I promised him I would return the favor, because most of my clients had teeth.) The model was being pursued (I suspect in every way) by a manager who wanted a contract for 50% of her gross earnings for ten years. (You'll see how absurd this is when you get to Chapter 3.) Even then I knew this wasn't right, and so I nervously called up the guy to negotiate. I still remember my voice cracking as I said his proposal was over the industry standards, since most managers took only 15% (which was true). He retorted with, "Oh yeah? Who?" Well, he had me. I wasn't even sure what managers did, much less who they were. So I learned my first lesson in the art of humility.

As I began to really understand how the music business worked, I found that my love of both creative arts and business allowed me to move smoothly between the two worlds and help them relate to each other. The marriage of art and commerce has always fascinated me -- they can't exist without each other, yet creative freedom and the need to control costs are eternally locked in a Vulcan death match. Which means the music business will always need lawyers.

Anyway, I now channel my creative energies into innovative business deals, and my need to perform is satisfied by teaching, lecturing, and playing guitar at my kids' campouts. (I do a great "Kum-Ba-Ya.") Just to be sure I don't get too straight, however, I've kept up my weird assortment of hobbies: magic, ham radio, weight-lifting, guitar, dog training, five-string banjo, karate, chess, and real estate investment. I also write novels, which you are all required to buy.


Speaking of marrying creativity and business, I've discovered that a rock star and a brain surgeon have something in common. It's not that either one would be particularly good at the other's craft (and I'm not sure which crossover would produce the more disastrous results), but rather that each one is capable of performing his craft brilliantly, and generating huge sums of money, without the need for any financial skills. In most businesses, before you can start earning big bucks, you have to be pretty well schooled in how the business works. For example, if you open up a shoe store, you have to work up a budget, negotiate a lease, bargain for the price of the shoes, and so forth -- all before you smell that first foot. But in entertainment, as in surgery, you can soar to the heights without any expertise in the business end of your profession.

Making a living from a business you don't fully understand can be risky. Yet a large number of artists, including major ones, have never learned such basics as how record royalties are computed, what a copyright is, how music publishing works, and a number of other concepts that directly affect their lives. They don't know these things because (a) their time was better spent making music; (b) they weren't interested; (c) it sounded too complicated; and/or (d) it was too much like being in school to have to learn it. But without understanding these basics as a foundation, it's impossible for them to understand the intricacies of their professional lives. And as their success grows, and their lives get more complex, they become even more lost.

While it's true that some artists refuse to even listen to business talk (I've watched them go into sensory shutdown if you so much as mention the topic), others get interested and really study their business lives. The vast majority, however, are somewhere in the middle of these extremes. They don't really enjoy business, but want to participate intelligently in their career decisions. These artists are smart enough to know that no one ever takes as good care of your business as you do.

It was for my moderate-to-seriously interested clients that I developed a procedure of explaining the basics in simple, everyday language. With only a small investment of time, these clients got down the essential concepts, and everyone enjoyed the process (including me). It also made an enormous difference in the artist's self-confidence about his or her business life, and allowed them to make valuable contributions to the process.

Because the results of these brief learning sessions were so positive, several clients asked if we could explore the subjects more deeply. Thus the conception of this book. It's designed to give you a general overview of the music industry as it currently exists. You can read it as casually or intensely as suits your interest level, attention span, and pain tolerance. It's not written for lawyers or technicians, so it doesn't include the jargon or minutia you'll find in a textbook for professionals. Instead, it gives a broad overview of each segment of the industry, and goes into enough detail for you to understand the major issues you're likely to confront.


When I was in high school, a policeman named Officer Sparks spoke at an assembly. Mr. Sparks hyped us on the life of a crime fighter, certain that we all secretly wanted to be cops. While the man didn't sway me off the path of my destiny, he did show me something I'll never forget.

Officer Sparks ran a film in which the camera moved down a street. It was a grainy black-and-white movie, only about thirty seconds long, and consisted of a camera bobbing along a sidewalk. When it was finished, he asked if we'd seen anything unusual. No one had. Apart from a couple of people bouncing in and out of the doorways, it looked pretty much like pictures taken by a camera moving along a row of shops. Mr. Sparks then said that a "trained observer" who watched the film could spot six crimes being committed. He showed the film again and pointed out each of the incidents (there was a quiet exchange of drugs, a pickpocket, etc.). This time, the crimes were obvious. And I felt like a doofus for missing them.

Any time we learn a new skill, we go through a similar process. At first, things either look ordinary and deceptively simple, or like a bewildering blur of chaos. But as you learn what to look for, you see a world you never knew was there. To work your way through the process, and become a "trained observer," you need a guide to the basics -- a framework in which to organize the bits and pieces. And that is the purpose of this book -- to give you a map through the jungle, and show you where the crimes are.


There is no way one book (even one filling several volumes) could poke into every nook and cranny of a business as complicated as the music business. Accordingly, the purpose here is to give you the big picture, not all the details. (Besides, for some of those details, I charge serious money.) Also, even if I tried to lay out all the little pieces, as fast as everything moves in this biz, it would be obsolete within a few months. Thus, this book is designed to give you a broad overview (which doesn't change nearly as quickly), so you'll have a bare tree on which to hang the leaves of your own experience. Oddly, it's easier to pick up details (from trade publications, gossip at cocktail parties, etc.) than it is to learn the structural overview, because few people have the time and patience to sit down and give it to you. In fact, giving you the overall view turned out to be a much bigger job than I thought when I started. But you're worth it.


Since this is the fifth edition, I now have feedback from experiments using this book on actual human subjects. Of all the responses I got, I thought you'd enjoy hearing about two in particular. First, I received an irate call from a music lawyer, who was upset because he charged thousands of dollars to give clients the advice I had put in the book. Second, I received an equally irate call from a manager, who said that all the artists he'd approached lately had been pushing my book in his face.

Way to go! Keep shoving!


When you go through this book, forget everything you learned as a kid about taking good care of books, treating them as sacred works of art, etc. Read this book with a pencil or highlighter in your hand. Circle or star passages you think you'll need, fold over pages, stick paper clips on them -- whatever helps. This is an action book -- a set of directions on how to jog through the music biz without getting mugged. So treat it like a comfortable old pair of shoes that you don't mind getting dirty. It doesn't matter what they look like, as long as they get you where you're going.


When my sons David, Josh, and Jordan were little, their favorite books were from a series called Choose Your Own Adventure. They work like this: You start reading the book on page 1 and, after a few pages, the author gives you a choice. For example, if you want Pinocchio to go down the alley, you turn to page 14, but if you want him to go to school, you turn to page 19 (my boys never picked school). From there, every few pages you have more choices, and there are several different endings to the book. (The boys liked the ending where everyone gets killed, but that's another story.) These books are not meant to be read straight through; if you tried, you'd find yourself crashing into various endings, twists, and turns of different plots and stories. Instead, you're supposed to skip around, following a new path each time.

This concept gave me the idea of how to organize this book. As noted below, you have a choice of reading for a broad overview, or reading in depth. The book tells you where to skip ahead if you want to do this. However, unlike the Choose Your Own Adventure books, you can read straight through with little or no damage to the central nervous system.

Here's how it's organized (there's no particular magic to the order, except that you need some concepts before you can understand others):

Part Ideals with how to put together a team to guide your career, consisting of a personal manager, business manager, agent, and attorney.

Part IIlooks at record deals, including the concepts of royalties, advances, and other deal points.

Part IIItalks about songwriting and publishing, including copyrights and the structure of the publishing industry.

Part IVexplores special things you'll need to know if you're a group.

Part Vdeals with concerts and touring, including agreements for personal appearances, and the role of your various team members in the process.

Part VI, on merchandising, tells you how to profit from plastering your face on posters, T-shirts, and other junk.

Parts VIIthroughIXexplore classical music, new technologies, and motion pictures. They're the last sections because you need to understand the other concepts before we can tackle them.

Now to choosing your adventure. You have four ways to go through this book:


If you really want a quick trip, then:

(a) Read Part I, on how to pick a team of advisors

(b) Get people who know what they're doing

(c) Let them do it

(d) Put this book on your shelf to impress your friends; and


(e) Say "Hi" to me backstage at one of your concerts.


Short of this radical approach, if you want a broad-strokes overview of the business, without much detail, skip ahead each time you see theFAST TRACKdirections.


If you want a more in-depth look, but less than the full shot, then follow theADVANCED OVERVIEWdirections. This will give you a solid overview, plus some detail on each topic.


For you high achievers who want an in-depth discussion, simply read straight through.

You should, of course, feel free to mix and match any of these tracks. If a particular topic grabs your interest, keep reading and check out the details. (Amazingly, the topics that grab your interest tend to be things currently happening in your life.) If another topic is a yawn, Fast Track through it.

So let's get going. Everybody starts with Part I.

Copyright © 1991, 1994, 1997, 2000, 2003 by Donald S. Passman

Introduction to the Fifth Edition

Step right up, folks. We've got the Internet. Piracy from the wilds of Holland and Vanuatu. Digital downloads from Hollywood. Internet streaming from New York. And the horror of record companies hemorrhaging money (you must be over twelve to view this exhibit).

This is the fifth edition ofAll You Need to Know About the Music Business, and the most extensive update I've ever done. In these times of major change, the established businesses are getting very weird (it's called "fear," but macho record execs don't use that word). Among other strategies, the companies have started sniffing around for new ways to make money. Like taking pieces of your non-record income, such as touring, publishing, and merchandising.

Traditional record deals have also gotten more complicated. The contracts now have to cover things that don't exist in any established way (like the sale of music on the Internet, or through a cell phone). Always a lot of fun.

In this edition, I've updated all the numbers and practices for rec-

ords, songwriting, touring, merchandising, films, and so forth. And for the deals with your advisors -- managers, lawyers, business managers, and agents.

In addition, you'll see how the industry is reacting to the earthquakes in our biz:

  • How royalties are computed in the digital age.
  • Industry strategies for combating piracy.
  • My thoughts on what the future will bring, and whether there will be a future. (In case you're reading this in a bookstore and thinking of buying the book, I believe there is a future. So buy it, okay?)

Now come on in, and let's have at it. The water's a little chilly, but you'll get used to it.

P.S. Congratulations if you're reading this. It means you're a real go-getter, since most people don't read the introduction to a book

Copyright © 1991, 1994, 1997, 2000, 2003 by Donald S. Passman

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