• Category: Art
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Date Submitted:
03/18/2011 04:09 AM
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1233/ 5
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Compass Records

Alison Brown and Garry West launched Compass Records Label (“the company”) in 1995 when the music industry was at the peak of its glory, having grown from $2 billion in 1969 to $40 billion in 1995. Although the market was dominated by four big players, there were still opportunities in niche segments and the company started to carve its niche in the folk and roots musical genres. Since inception, it grew at a Compounded Annual Growth Rate (CAGR) of 18.84%. Notably, in the years after 2003 when the music industry was declining at a CAGR of 5%, the company grew at a CAGR of 74.10%. In 2005, the company saw 80% of its titles turn in profits as compared to a 10% for the big four.
In June 2005, the company was contemplating on offering a recording contract (“the contract”) to a talented but new folk musician, Adair Roscommon (“the artist”). The artist, both a songwriter and a recording artist, had released an album in 2003 which sold 2,500 copies. Given a limited budget, the company needed to decide on the type of contract to offer: license for a limited period or produce and own. The company had historically preferred to license rather than produce and own. But with new distribution agents in Europe and Asia creating opportunities to sell CDs in new markets around the world, and the recently built studio making album production easier and cheaper, the company needed to re-evaluate their historical strategy.
The expenses incurred by the company upon offering a contract are classified under these categories:
1) Royalties: Mechanical royalties are fixed to a statutory rate of $0.085 per song per CD sold. For artists who are both songwriters and recording artists, the company includes a controlled composition clause or negotiates a co-publishing agreement allowing the company to limit its mechanical royalty expenses. Recording artist royalties are negotiated between the company and the artist. Depending on the stature of the artist, recording artist royalties…

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