Doveryai, no proveryai (Trust, but verify) - if you’ve been following this blog (thanks!) you may recall that our first post closed with a hat tip to this saying in the context of streaming royalties.
If you’re not familiar with its provenance, trust, but verify is a Russian proverb, popularized in the West by President Reagan during the nuclear disarmament talks of the 1980s. Suzanne Massie, the American writer and frequent interlocutor of President Reagan, advised him that: “the Russians like to talk in proverbs. It would be nice of you to know a few.”* It quickly became his signature phrase.
In our first post, we mentioned that as distribution models change with dynamic new advances in technology, so too do the incentives to game the system. And while everyone races to understand just how to reckon with this new reality, the industry assumes a posture that looks something like this**:
Not actual industry meeting footage, but close**
An experienced artist manager recently shared with me that in previous decades, when physical distribution was at its peak, he could back into his artists expected income by auditing the shipping manifests of the logistics services responsible for transporting CDs from warehouses to record stores.
Say that 1000 CDs fit on a pallet and 10 pallets fit in a 20ft container. That’s 10,000 of Artist A’s CDs leaving the warehouse.
Each of those CDs is priced at $17.98. The retailer takes 30% off the top, or $5.40. Assuming 10 songs per CD at the mechanical royalty rate of $0.091 per song that’s another $0.91 in royalties per CD. So, we have $11.67 left of which the artist gets 12-20%. For our example, the artist negotiated a good deal and gets 18%, or $2.10 per CD.***
If you’re still with me, that all boils down to this: 10,000 CDs left the warehouse, and if they all sell, Artist A should see ~$21K.
The point of this is that while most of us don’t love checking someone else's math, it’s doable when you have independent data points from which to work.
And it’s a necessary function in a case like this where you want to be certain your client is taking home their fair share. If that manager couldn’t check the shipping manifests, and the distributor didn’t know it, it might have been a different story. Trust, but verify.
Which brings us back to the Russian proverb underpinning this post. The stakes for the music industry aren’t quite as high as negotiating the INF Treaty. But, with the recorded music on pace to deliver annual revenues north of $34B in the coming years, the consequences of trust without verification are undeniable.
History doesn’t repeat itself, but it often rhymes! So let’s borrow some proverbial wisdom, learn a lesson from history, and do better as an industry.
*Suzanne Massie speaking on the 22nd Episode of the television documentary, Cold War
***The New Economics of the Music Industry: https://www.rollingstone.com/music/music-news/the-new-economics-of-the-music-industry-234924/