**Chapter 450: Walking Into the Trap**

In the music industry, newcomers with no support often aspire to join major companies, seeking shelter under a big umbrella. When they see a contract from a top-tier company, they eagerly sign it, thinking the bigger and longer the contract, the better. They are uncertain about their future, and a big company seems like the best security.

However, these newcomers are merely disposable objects in the eyes of big companies, with no burden when discarded. The big contracts only serve to make it easier for these companies to exploit them. When dealing with newcomers, the company never takes a loss.

From this perspective, Warner Records' three-album contract reveals their hesitation and lack of confidence. But it also shows Mike's sincerity; they genuinely want to work with Anson.

As soon as the conversation started, Anson made a joke, lightening the atmosphere. But before Mike could respond, Anson continued, "So, what about the royalties?"

By now, Mike wasn't surprised anymore; he had become numb.

It was clear that Anson had done his homework. He knew the band's position and understood the record company's mindset. All signs pointed to Dustin being right—this was a tough nut to crack, and open communication was the best strategy.

Mike said, "Warner Records is willing to offer the band an 11% royalty deal."

This time, Mike didn't try to embellish it because he knew Anson understood the significance—11% is an important figure.

Royalties are essentially a share of the sales from the album.

The record company records the album and distributes it through various outlets like record stores, supermarkets, and large malls. For each album sold, the artist receives a percentage of the sales.

An 11% royalty means that for a $10 album, the artist earns $1.10 before taxes.

This income is known as royalties.

Unlike film box office bonuses, which must be negotiated, every artist in the music industry earns royalties. The difference lies in the percentage.

Musicians can earn from other sources besides album sales, such as licensing their music for films, covers by other artists, and use in other performances. However, album sales royalties remain the primary source of income from record deals.

It's important to distinguish royalties from copyrights.

The income musicians earn from album sales is called royalties, whereas the ownership of the songs written by songwriters is called copyright.

If someone uses the song for any purpose, they must pay the copyright holder, which often surpasses royalty income.

For example, Anson wrote and composed the song "Wake Me Up," so he owns the copyright. Then the band recorded and released it through Warner Records.

Thus, Anson would earn royalties as a band member and additional income as the copyright holder.

The other band members, however, do not earn from the copyright.

Copyright income is not controlled by the record company. Unless Anson sells the copyright to Warner Records, they have no claim over it.

On the other hand, royalties are income that musicians receive from the record company, so naturally, the company tries to minimize the artist's share.

Generally, musician royalties range from 10% to 20%. New artists usually get the lower end, around 10%.

From these figures, it's clear that musicians don't make much money from royalties alone. Without copyrights, they often struggle to make money, even with million-selling albums, as the income remains modest.

For artists, real money comes from concerts, which is why legendary top-tier artists frequently go on long tours.

This is also why, in the entertainment industry's hierarchy, musicians rank lower than actors. Many musicians try to break into Hollywood at the peak of their careers.

Now, back to the discussion.

Warner Records' willingness to increase royalties by 1% is rare.

As Mike said, they are sincere.

With scale, confidence, and sincerity, Warner Records is indeed the band's best option at the moment. Anson admits he is tempted.

But he stays calm.

Anson thought for a moment and said, "Is there a possibility that we could negotiate the numbers a bit more?"

It's not the right way to negotiate if you don't haggle and just agree right away. At least, one should try.

Mike asked, "Like what?"

Anson replied, "20% royalties, at the cost of $800,000 per album."

Mike: ???

Mike quickly realized that Anson was negotiating the record deal as if it were a movie deal, but clearly, records and movies are two different things.

Typically, musicians should strive to increase the upfront payment, for a simple reason: the record market is in decline, and albums don't sell well.

With a $10 album and 20% royalties, they would need to sell 400,000 albums to earn $200,000.

Of course, they were discussing raising royalties from 11% to 20%, which means the band would need to sell an additional 220,000 albums to make up the difference.

In 2002, a sales milestone of three million albums was the benchmark, which only a few top stars could surpass. New artists often sold less than a million, sometimes even under 500,000.

This is completely different from movies.

Looking at Anson's request, Mike couldn't help but smile.

Warner Records' internal debate was about their concern that the band might not be accepted by the market, and the album sales might not surpass 500,000.

If they offered $1 million per album, after deducting production, promotion, and distribution costs, the breakeven point would be around 300,000 to 400,000 copies.

This was the root of the internal disagreement.

But now, if the band was willing to lower the contract price per album and replace it with increased royalties, it would help Warner Records share the risk. The burden would shift entirely to the band.

They were worried the band might not sell 300,000 copies, but now Anson's proposal would require them to sell an additional 220,000 copies to break even. It looked like a case of digging their own grave.

Warner Records naturally welcomed this.

For the first time since meeting Anson, Mike genuinely laughed.

"Anson, the right way to negotiate is to keep the $1 million while increasing the royalty percentage," Mike kindly reminded.

Anson shrugged slightly. "But obviously, Warner Records wouldn't agree to that deal."

Mike agreed, "No, we wouldn't."

Anson replied, "So, I'm offering a fair deal, one you can't refuse."

Mike said, "But you realize that means you might need to sell 200,000 more albums to make up for the difference."

Anson smirked, "What, don't you have that much confidence in us?"