The Money Will Roll Right In
If you've read much about Nirvana, you've probably come across a comment or two by Kurt that he made a million dollars from Nevermind and spent it all in one year. He repeated this comment several times: here's one excerpt from Melody Maker ó August 1993.
"But Iím not nearly as wealthy as people think. I know itís to be expected that people think I am wealthy, theyíll think, ĎYou sold 10 million albums, so thatís 10 million dollars.í But itís not. I made a million dollars off that record. Over 300,000 dollars went on taxes, there were legal problems and medical bills because we didnít get insurance in time. I found myself spending all that money, all at once, all in that one year. I also bought a house, too."
Are you honestly saying youíve got nothing left?
"I do now because a little bit more royalties have come through and we got the advance for this new record. And also in the last year Iíve gotten a bit more of a percentage on the songwriting royalties. I get a fair bit more than Chris and Dave do because I write 99 per cent of the songs. I just felt entitled to it, you know?
"At the time, when we were signing contracts and stuff like that, it was always divided equally and that was fine. But I never realised I would became a millionaire and then, all of a sudden, need money. Itís a ridiculous situation really."
I've always been REALLY puzzled by this because although we of course have no way of knowing the precise details of their contract, from CAYA we learn that they were entitled to "full mechanical royalties if and after the album hit gold". (pg 162). And there's lots of other money IF your records sell big time, which of course is the case here. So what's going on?
Well, first look back at the quote. In the first paragraph, Kurt says, "I made a million dollars off that album", but as you can see by the third paragraph, he's talking about 1992. By 1993, the money was continuing to roll right in. BUT, Kurt has already made the royalty switch and, although he feels it was justified, he still feels bad about it. Also, Kurt does not feel comfortable having hit it so rich: any number of articles lampoon his guilt on the topic. So he plays it down (or dumb if you prefer).
I hope you don't feel betrayed by the fact that Kurt was able to buy a million-dollar house at the beginning of 1994 and still had money to spare. Personally, knowing that I paid say $14 (about $10 US) for my copy of Nevermind, I would EXPECT that 10 million records sold = $10 million dollars for the artists. After all, who else is entitled to the money?
Out of curiosity, I've tried to figure out the money trail. As you'll see, there are a lot of variables. I've referred to several books, especially "Making Music Your Business", and web sites like http://www.bmi.com and http://www.ascap.com/artcommerce/menu.html ó which explain this in more detail. Also, the following examples assume "only" 10 million records sold. By the time of Kurt's death, total worldwide sales were probably about 15-20 million. At present, sales in the US alone exceed 22 million records, so worldwide numbers are probably around 50 million. You may look at these rather stunning figures and reckon that "suicide" is the greatest marketing tool ever: too bad the artist isn't around to enjoy it, eh? No need to be so cynical. If you look at the sales and when they occurred, you'll notice that Unplugged wracked up really impressive numbers, and would probably have done quite well regardless ó it's a brilliant performance and very radio friendly. But would it have been released had Kurt lived? I think they would have been under so much pressure from the bootleggers that yes, it would have. You'll also see that Nevermind has consistently sold well over half a million copies a year in the US alone, as befits its status as the most influential album of the 1990s.
So, how do bands make money? There's the "artist royalty", which is a percentage of the suggested retail price. Then there's the "mechanical royalty", which is the songwriter's fee for the right to use the song on a recording. These provide the bulk of the money, though there's also "performance royalties", for radio and nightclub play. Concerts are for most bands a break-even proposition whose function is to promote the album, so I've ignored concert revenue. Finally, there's merchandise deals: all those nifty T-shirts do add up eventually. But I'll ignore this for now too.
Now for the details. First off, an advance is just a loan that the record company will recoup from the artist royalty. So you have to sell a fair number of records to start earning anything more. Nirvana received a $287,000 advance on signing with Geffen, which according to CAYA "was swiftly decimated by taxes, legal fees, the management's cut, and debts." So I'm assuming that much of the Nevermind recording budget was NOT covered by this advance. AND they had to pay for all the videos too, so the band racked up even more debt. So let's guess that they owed Geffen at least $400,000 by the time Nevermind hit the shelves. Yikes!
Next, the artist royalty is typically anywhere from 10% to 25% of the suggested retail price of the recording, which was roughly $10 for cassettes and $14 for CDs in 1992. BUT you have to deduct about 20% for packaging, so they would be paid on roughly $9 - $10 per unit. Here's a quick overview of the math: http://www.ascap.com/artcommerce/money-recording.html. So, the artist's royalty would be anywhere from $0.90 to $2.50 per copy sold, reduced somewhat for promotional copies. (You can see where the 10 million records = 10 million dollars idea comes from, but we're not done yet).
I'm not sure how Sub Pop's percentage (reportedly 2% of the gross) gets funded ó I'll assume that half of it comes out of Nirvana's royalty. Then there's the personal management (Gold Mountain) fee, which is from 10% to 20% of the artists' revenue. And then there's the business management fee - typically this is another 5% although one interview I saw from mid-1991 had Kurt saying it was 10%. You can see that their share keeps getting whittled down. If their royalty rate was 10% to start with less 1% for Sup Pop to give 9% of the bass cost, less 15% for promotional copies, less 25% for management fees, they'd be left with less than 50 cents an album. If you assume they got a great deal, the rate could be well over $1.50 per unit ó quite a range. I'll use a very conservative estimate of $0.60 to start.
Now of course, you have to pay back the advance. Assuming $0.60 per record, they'd have to sell over 500,000 records to break even. (FYI, this is why Kurt originally split the songwriting royalties evenly: when sales are in this mid-range, the only real money comes from songwriting since it's not offset by advances. And keep in mind that Nirvana expected it would take around a year to go gold: this would still be a massive jump from the estimated 100,000 copies of Bleach sold worldwide after 2 years of extensive touring. Also, remember Sonic Youth had only sold 250,000 copies of Goo in the year since they signed with Geffen.)
Okay, now we have to factor in the time delay. Record labels pay on a quarterly or semi-annual basis, and the numbers (especially for overseas sales) are typically delayed by from six months to a year. So the December 1992 statement would only reflect a fraction of the actual sales to that point in time. I'm going to assume the statement "only" reflected sales of 4 million.
So at December 1992, with all these assumptions, we'd have total artists' royalties of 4,000,000 X $0.60 - $400,000 = $2.0 million. Divided by 3 and you have Kurt's share of about $700,000.
But of course, we're not done yet. We also have the songwriting royalties. For a brief overview, go to http://www.ascap.com/artcommerce/money-mechanical.html. In 1992, the royalty rate was something like 6 cents per song per record. Typically, you're only paid for a maximum of 10 songs per album. Also, for the US and Canada, you only receive 75% of the royalties. Finally, we'll assume they had a standard administration deal with the publisher, which means a further 10% cut. So this works out to roughly 40 cents per album. Again, reduce this by management fees and whatever else crops up. So the songwriting royalties would have been something like 4,000,000 X 0.30 = 1,200,000 (maybe something less but still a nice piece of change). If you divide by the original 3-way split, Kurt's share would be something like $400,000.
However, per CAYA the band agreed to change the songwriting royalty split in March 1992, so that Kurt got a 75% share. So actually, Kurt's royalty share for 1992 would have been more like 20 cents per album or $800,000. And I've read that they renegotiated the contract with Geffen at the same time, which presumably would have increased the artists royalties from my low-ball estimate of 60 cents an album to AT LEAST the $1 per album range. But maybe it took a while for the accountants to change everything around. Kurt's comment in the 3rd paragraph of the above quote implies this.
Let me summarise. In order for Kurt to earn "only" a million in 1992, I had to assume that Geffen had only credited the band with sales of 4,000,000 at that point ó reflecting that sales reporting lags up to one year behind the date the sales are made. I also assumed a fairly low royalty rate and a 3-way songwriting split. But sales were continuing to add up and the songwriting royalty was changed too, and quite probably the artists royalties were renegotiated. By December 1993, assuming the same kind of reporting lag, the credited sales numbers would be around 8,000,000, which means Kurt probably would have earned something around $2 million for that year. And with the In Utero tour, the merchandising would have been a pretty penny too.
So why do I bring this up? Well, I've never cared for the implication made by some that Kurt had spent all his money and so COULD not have retired. Clearly, Kurt DID have the option of retiring, or certainly of taking a break from the music business. It doesn't mean he planned on doing so of course. Maybe he committed suicide knowing he'd done everything possible to care for his family financially. But never doubt, there was a lot of money involved.
These are US sales numbers according to Billboard as certified by RIAA (G = 500,000, P=1,000,000, then M2, M3 etc for multi-platinum). These certified sales total 22 million copies in the US. In general, US sales account for about 1/3 of worldwide totals, so I've multiplied the US numbers by a fairly conservative factor of 2 to come up with worldwide estimates.
Note that the record company has to apply for certification, which they don't always do on a timely basis. So Bleach for example obviously went gold much earlier than 1995, but Sub Pop didn't bother to certify it until they sold the 49% share to Warner. It would also be odd for Nevermind to have sold 3 million copies in the 2 years between October 1994 and 1996 and not have sold at least another million since, so probably Geffen isn't actively following this.