Tuesday, July 26, 2011

Music Business/Law Tips - "Record Clubs" (Part 1)

To the consumer, joining a record club might seem like an inexpensive way to obtain some music. However, the recording artist that creates the music should understand how record club sales influence that artist's bottom line.

Record clubs first became popular long ago when there were no major record chain stores. To some in remote areas, a record club would be the only way to buy a certain record. These clubs generally license the entire product catalog (i.e., records) of various record companies. The clubs then manufacture and distribute these records to their club members for very low prices. Unlike product sold at retail stores, clubs have the right to give away one free good for every one sold. They must have the right to do this; otherwise, they would not be able to make offers such as eleven CDs for a penny. This is problematic because an artist receives no royalty on free records distributed by clubs. Also, there is no way for the record club to limit how many copies of one particular artist's records are given away. Hence, a popular artist would be negatively affected.

[part 2 next time]

Ben McLane Esq

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