Royalty system in the country's music industry

Royalty system in the country's music industry

By Endi Aras

JAKARTA (JP): A popular music group from Bandung, Trio Bimbo,
has had bitter experiences. It sued the Remaco recording company
for copyright violations. Arguing that the company had illegally
recorded and sold its songs since 1978, the group demanded Rp 50
billion in royalties in compensation. In September last year, the
South Jakarta District Court ruled against Bimbo and ordered the
group to pay Rp 500 million for defamation.

According to the court, Trio Bimbo had no rights to its songs
as it had sold them to the company in a so-called flat system.

Bimbo said it would appeal. And until now, the matter is not
yet resolved.

In the 1970s, Indonesia's recording industry only recognized
the flat system. The royalty system has only been socialized here
in the last couple of years.

Musica Studio, one of the country's oldest recording
companies, used the flat system when it first started out, but
several years later, when its business began to flourish, it
started using the royalty system.

PT Musica Studio's executive producer, Indrawati Widjaja,
said, "We believe cassettes last forever. And this system
benefits the artists because if their cassettes sell well, they
will reap big profits, as will the producer. With this system,
producer and artist are partners."

PT Warner Music Indonesia's artist and repertoire manager
Wirasto regarded royalties as artists' retirement pay.

"Artists don't have retirement pay, but with royalties, they
will have money for their retirement days," Wirasto said.

Unfortunately, some artists still insist on selling their
albums using a flat system. With the flat system, they might
receive a huge sum of money, but only once. Through the royalty
system, the artists receive royalties as long as their cassettes
or CDs are on the market, although in the beginning, they only
receive a down payment.

"For artists who prefer the flat system, we apply a bonus
system. If the album sells well or we feel there's profit after
the break-event point, there will be bonus," Indrawati said.

However, Indrawati added, there was no standard for the amount
of bonus given to an artist, while Wirasto said a bonus was a
voluntary gift.

"It can't be determined. A bonus depends on the company's
willingness," Wirasto said.

Unlike the bonus, there is clear criteria to decide on the
amount of royalties. The amount depends on, among other things,
the popularity of the artist. The percentage of royalties might
change during the album's marketing. For instance, an artist who
signed a contract for three to four albums, might get a raise in
percentage for the second album if the first album sells well.

The amount of a down payment given to an artist in the royalty
system is negotiable.

Some singers and songwriters prefer the flat system as they
are lured by the huge sum of money given before an album is even
put on the market. If their album does not sell well, it is the
producer who suffer a loss. On the contrary, if the album sells
well, the singers or the songwriters will not get anything more
from the producer.

Popular singer Iwan Fals used the flat system when he sold
Belum Ada Judul (No Title Yet) to a producer from Harpa Record
for Rp 300 million. Many people were stunned. For some, the
amount was fantastic; no other artist had received such an
amount. But when the album sold out, Iwan no longer had any
rights over his album.

His other album Hijau (Green), which was sold to Pro Sound for
Rp 365 million under the flat system, did not sell well, making
the producer suffer the loss. But it is no longer the artist's
problem.

But the socialization of the royalty system five years ago,
and after foreign recording companies entered Indonesia, many
artists prefer the royalty system.

Iwan Fals, who joined Musica Studio using the royalty system
in his early career, returned to that company. Every month he
receives a report about the sales of his albums and receives his
royalties.

Krisdayanti, who signed a contract with Warner Musik Indonesia
for six albums, can now be proud because some of her albums have
sold well, entitling her to huge royalties. She even received a
big bonus.

The Yogyakarta group Sheila On 7, which has just released its
first album and managed to sell about 800,000 cassettes, reaped
in big profits through the royalty system. If its royalties are
only 5 percent from the sale of each cassette price of Rp 14,000,
which means Rp 700 for the group, it received about Rp 560
million, and people are still buying the group's cassettes.

Some dangdut singers have had a different experience. When
they first became singers, they signed a contract for three
albums. But when their first album did not sell well, producers
were reluctant to make the second album while the artists could
not produce other albums with different producers.

In the contract, everything should be clear. Manager of the
Dr. PM group, Rio F. Soelaiman, said, "If necessary, ask a lawyer
to deal with the contract so the artist won't be in a weak
position."

Top male singer Chrisye has reason to smile. His album, Badai
Pasti Berlalu (The Storm Will Be Over), which cost almost Rp 800
million to produce and promote, has now reached break-event point
after just three months on sale.

But Franky Sahilatua has a different opinion. He said that as
along as the consignment system was still effective here, the
royalty system would not work.

"The royalty system won't work here if the consignment system
still applies. The royalty system needs precise selling and with
the use of the consignment system it's difficult to do," said
Franky, who also acts as a producer for his works.

But he also regards the flat system as not good because of the
unpredictable nature of the music industry. "Even an angel can't
predict the success of a cassette."

He pointed out that Indonesia's music industry is growing in
the wrong ways. "The tree is not growing properly because the
formulation of the soil, or the fertilizer, is not right. To fix
it, there's a need to remove the plant, from the roots. The roots
of the music industry are in its marketing system," said Franky.

Since the two systems -- royalty and flat -- are not right, a
semisystem is being widely used. "For the present situation,
that's all that can be done. But the semisystem (half flat/half
royalty) reflects confusion," he said.

The semisystem means that payment to an artist is made in
advance, and after the producer reaches the break-even point, the
artist will get a bonus.

He said that in Indonesia, only one or two recording companies
really use the royalty system. Other companies say they are using
the royalty system but in reality they use the semisystem, he
said.

Overseas, producers use the royalty system because the
marketing system no longer uses the consignment system. The
impact of the consignment system here, for instance, is that
local agents have no responsibility to promote artists. With that
system, he said, it was difficult to directly count royalties
from the cassettes being distributed in the market.

"Some of the cassettes being distributed are being returned.
If 60,000 out of 100,000 cassettes are returned, it means only
40,000 cassettes were sold. This is why it's hard to use the
royalty system because there's no precise count," Franky said.

That's also why the singer-songwriter decided to become a
producer, so that he is also responsible for distributing his
cassettes.