How do record labels exactly work? In the last Consider This, we looked at what watermarking is and if it may be implemented onto Filter's new album as some other albums had in the past.(Word is Filter will NOT watermark the Amalgamut for the public consumer). Now that we know what that is, the next logical question is how do record companies actually work. An anonymous reader explained it to me to clarify the whole record company issue.
While it is true that record companies do make music off the albums sold to the public that have been made by an artist(such as Filter), the artist gets the money as well. Though most of us do not understand how this works(and I didn't until it was explained to me), it is in the songs themselves that determine who gets the money, at least for the artists. Songs have points assigned to them that determine their worth to different people. The record company recieves a number of points from a song, and the writer and producer of the song do as well. So essentially, since Richard has a hand in every song, he can get points from that song, especially as the writer.
For radio airplay, the writer of a song gets so many pennies and nickles for each playing. Doesn't sound like much, but once the entire airplay across the country is added up, the pennies and nickles add up to quite a bit. So, when a song is a hit, the writer gets paid an awful lot of money for the playing of the song in a quaterly payment. Basically, that means groups that don't write their own music make nothing off of the airplay, but their writers do!(finally Dion doesn't make some stupid cash because she didn't write Heart Will Go On. Damn annoying song if you ask me).
Same as radio, each time a song is used for a soundtrack, a television show song or anything else, it is the writer who makes the money back. So when the X-files used "Hey Man, Nice Shot" in the episode D.P.O. Richard made the money on that small clip in the show. Or most recently, Behind Enemy Line's use of the same song on their soundtrack and in television ads that promoted the movie. Essentially, record companies invest and make money from an artist, but if a contract is drawn up correctly, the author of a song and producer of a song make money on it as well.
Now, I'm not going to sing a tune praising how wonderful record companies are, but hopefully this helps explain some of the ways that these economics work and allow us to understand some of the happenings with not only the shut down of Napster, the shut down of Internet Radio(they have put a stay of 30 days to decide the royalty situation), and most recently the possibility of copy-proofing CDs.