Victory, like most labels, offers a pretty straightforward cut of record royalties. For example, Hawthorne Heights was promised 11 percent of album sales after the first 50,000 units were sold. The problem is, bands often don't see much of that money. After paying for studio time, manufacturing, advertising, and publicity, the label must recoup those costs before profits are divided. And since Victory tends to promote its records far more than most indies, its costs are naturally higher.
So musicians have traditionally made their money not on record sales, but on touring, merchandise sales, and "publishing royalties" -- fees paid to songwriters any time their published material is performed, whether on an album, a TV commercial, or in a movie.
For decades, labels left this income to the bands. But as the industry becomes more cutthroat, labels are now beginning to slice into this revenue, much to the chagrin of artists. And Victory is among the more aggressive.
"I'm not sure that the Victory contracts are far out of line," says Elizabeth Gregory, a Nashville music lawyer. "But I think their methods of handling their artists are causing them problems. They've got a real tough-guy persona in how they deal with artists, and it's really no surprise that people are getting seriously bent out of shape."
Take publishing: On top of record royalties, labels must pay songwriting royalties. Any time a band licenses their music for a commercial or a video game, they also receive a writer's fee, which labels generally don't touch.
Normally, a band will sign with a third-party publisher, which not only licenses its music, but collects writing royalties from the label as well. A publisher ensures not only that a band's music is being aggressively pushed into licensing deals, but that the label is paying publishing royalties honestly.
Yet since Victory often signs bands with nowhere else to turn, its contracts tend to heavily favor the label. The company's deal with Hawthorne Heights, for example, allows the label to take up to 50 percent of its publishing royalties. Though the band has sold over 1.2 million albums, Hawthorne Heights has yet to see any money from record sales, and has received little more than a $5,000 advance on publishing income, according to a lawsuit filed by the band. And since Victory has an in-house publishing company, there's no third-party oversight to make sure it's paying out properly.
"It's controversial, but I wouldn't say it's uncommon," says Gregory. "It's something I try to steer my clients away from."
Still, Robert Meloni, a lawyer for Victory owner Tony Brummel, argues that the arrangement favors bands. "Most independent artists that do a deal with one of the major-label-related publishing divisions . . . often fall through the cracks and their songs never get pushed," he says. "This is exactly why Victory entered publishing in the first place -- as a service to its artists. There is nothing questionable here whatsoever."
A band's other major income is touring. In the past, labels seldom touched touring revenue. They didn't need to; it's the best free promotion their records can get. But not at Victory. The label started its own in-house booking agency this year. "We'll take our small, developing acts that are too young to get an agent at a bigger agency, and get them on the road and in front of people," Brummel told Billboard.biz in March.
Cleveland's Driver Side Impact is among those being booked for gigs by its label. Every time Victory books a show, it takes a cut of the concert's earnings.
Ultimately, Victory defends its contracts as fair; after all, the label argues, it's taking a chance on no-name bands. Gregory agrees that the terms are not unusual for small bands on indie labels, where record sales are so skimpy they need to look for other revenue forms to stay afloat.
The problems arise when the no-names go big. Brummel certainly took a chance when he signed Hawthorne Heights, at the time an unknown band from Dayton. But now that the band is grossing millions, the terms of the band's contract seem to unfairly favor Victory.
"In most of these cases, a label would be willing to renegotiate terms," Gregory says. "When an artist has sold one million records, they want to feel like they are well off. I don't blame them for feeling like it's their time to get a piece of the pie."
But Brummel makes it clear that a deal is a deal. Instead of worrying about money, his lawyers imply in court documents, Hawthorne Heights should start worrying about gratitude. "Brummel . . . risked millions of dollars," they wrote. "This is the 'thanks' Victory received from Hawthorne Heights."
They may be legally right. Then again, pissing off your biggest revenue producers has rarely been good for business.
