In 1992, Prince signed a reported $100 million contract with Warner Bros. Records. What were the specifics of this contract?
What were the specifics of Prince's "$100 million contract" with Warner Bros. Records in 1992?
On 31 August 1992, Prince signed a new recording contract with Warner Bros. Records worth a potential $100 million. Which was more than several pop mega-deals struck earlier: Madonna's contract with Warners and Michael Jackson's pact with Sony Music, both estimated at $60 million each. The deal was made public on 4 September 1992.
Advances for future releases
Prince's new contract was an extension of his previous contract. The reconfiguration amounted to a $10 million advance per record — twice that of Jackson's and Madonna's $5 million per album — plus a royalty rate of approximately 20 percent (some sources claim 25 percent) — three times his previous percentage.
However, Prince would only get this $10 million advance if the previous album has sold at least 5 million copies, i.e. it is an advance on sales, basically an interest-free loan, which would have to be paid back to the record label if sales were low — actually, deducted from royalties on older albums. An important clause, because while Prince's 13 albums had sold nearly 53 million, an average of 4.1 million each, a large chunk of that is due to 1984's Purple Rain, his bestseller at 14.7 million. As a matter of fact, only three of his albums had sold more than 5 million copies, though one of those was his latest album, Diamonds & Pearls.
This large advance was regarded as an attempt by Warner Bros. to motivate Prince to invest the same effort into future releases as he'd done for Diamonds & Pearls: releasing albums less frequently and promoting them heavily via singles, videos and extensive touring. Prince's sales had been inconsistent, especially in the United States; whereas Madonna had never sold fewer than 5 million copies of any recording, Prince's Lovesexy in 1988 sold less than 1.7 million.
Paisley Park Records
A further $20 million was used to make Paisley Park Records a joint venture with Warner Bros., which would force Prince to become more involved in the running of the label. Whereas previously Paisley Park Records would simply supply the master recordings to Warners who would then manufacture, distribute and promote the releases, now the label would decide on what to invest in videos and promotional efforts. Warners and Prince would share investments and profits. Some reports also mention an additional joint venture record label, possibly for singles (tentative name: Love).
The final $20 million involved another advance, this time by Warner/Chappell music publishers. Part of which was a new three-year agreement between Prince's music publishing company, Controversy Music, and Warner/Chappell Music for the handling of his copyrights worldwide. Another agreement would involve Prince and Warners actively looking for new talent. This was cited as the reason why Warner Bros. Records named him a vice president of artists and repertoire and gave him an office in its L.A. headquarters. However, it is assumed that Prince only wanted this position in order to acquire Time Warner stock options.
No signing fee
Noteworthy is that Prince did not receive a signing fee, unlike Michael Jackson and Madonna.
Prince's own entourage seemed pleased with the deal:
"We are extremely satisfied with the deal," said Gilbert Davison, president of Prince's Paisley Park Enterprises. "Prince has been with Warners since 1978. It's nice to know that they still see him as such a valuable asset."
Davison negotiated the pact with Paisley Park Vice President Jill Wills and Los Angeles entertainment attorney Gary Stiffelman. Representatives for Prince and Warner declined to discuss details of the contract, which has been in the works for more than a year.
However, the size of the deal was almost immediately disputed:
Not only were key officers at Warner Bros. surprised when Prince's publicists issued a press release Thursday announcing the pact, but they were "dismayed" — in the words of one Warner official — by the claim that it was the biggest deal in record industry history.
Without denying the Prince deal is one of the "four or five biggest" in the record industry, insiders claim the total figure is based largely on projected revenue — not guaranteed income.
Prince's lawyers were confident:
Gary Stiffelman, an entertainment attorney at the Los Angeles firm Ziffren, Brittenham and Branca, declined to discuss details of the contract, but dismissed allegations of self-promotion. Stiffelman negotiated the contract for Prince along with Gilbert Davison, president of Paisley Park Enterprises, Prince's Minneapolis record company.
Ken Terry and Irv Lichtman in Billboard cited "a veteran attorney" who calls the announced details of the deal "absurd", pointing out that:
at a 20% royalty rate, Prince would have to sell 5 million units -- close to his worldwide sales on Diamonds & Pearls -- before Warner could recoup a $10 million advance. So at best, the label has a chance at breaking even on such a deal. The lawyer suggests that any unrecouped part of the advance might be cross-collateralized against Prince's publishing income.
Their article further states:
Another top negotiator terms the numbers "enhanced" and opines that the real figures are tied to sales levels. "No one in the record business believes the figures, because they know how much a label can afford to pay," he contends. "If an artist is making $2 per album and they're selling 3 million albums, they could afford to give him $6 million-$7 million. Not more, because if they did, they'd be working for nothing."
Another attorney cited was even more blunt in his assessment:
"The deal is mind-boggling," comments attorney Marc Jacobson. "Historically, Prince doesn't have what it takes to support a deal like that. But I hope I'm wrong. However, I'm certain Warner is protecting itself in any number of ways. The arrangement might call for additional albums if sales don't measure up. There could be cross-collateralization on the publishing end, or a controlled-composition clause calling for 50% off the statutory rate. Or a lowerign of royalty rates on sales so that Warner could recoup its advances more quickly. It's apparently a front-loaded deal giving Prince publisity value, with little chance of Warner getting stuck."
Unhappy with some of the reporting and speculation in Billboard magazine, Prince's lawyer Gary Stiffelman reacted via a letter, claiming that Prince's deal covers:
his own albums, two record labels, a publishing joint venture, the administration of Prince's own music (although not, as speculated by some, for all of the albums covered by his record deal), and Prince's employment as a VP of Warner Bros. records. He remains free to negotiate for films, television, books, and other projects.
He contrasted this with Madonna's similar-sized deal which reportedly also covered books, movies, cable television.
Stiffelman points to Prince's prolific songwriting contributions to other artists' careers, arguing that:
his record and publishing ventures would justify more substantial funding, and that his own publishing interests would generate substantially greater advances than those of the artists with whom he was compared.
He also objects to the speculation concerning the advances:
I find disingenuous any speculation of experienced dealmakers that is based on the premise that each album separately must justify each advance, and which chooses to ignore catalog sales and other factors that contribute to the financial logic of a long-term investment in an artist.
Fred Goodman claims that Prince's lawyers received a phone call from Warner Bros.:
A source involved in the negotiations, who spoke on the condition of anonymity, says that even Warners executives telephoned Prince's lawyers after the agreement was announced to ask how the contract could be worth so much. One published report put the actual value of the deal closer to $30 million, while others have speculated that the most he can earn is $10 million per album.
Prince's lawyer points out a difference between Prince and other artists:
Mr. Stiffleman also views Prince as unusually prolific. In the time between Michael Jackson's 1987 release of Bad and last year's Dangerous, for example, Prince released four albums. "Together, they sold as well as Bad, and I'd wager they were more profitable," says Mr. Stiffleman.
Jon Bream managed to get an on the record response from a Warner Bros. VP:
"It looks like we're giving him the farm. It's a generous deal, but it's a realistic deal as well," said Bob Merlis, Warner Bros. vice president of publicity. "If his sales continue the way they have for Diamonds and Pearls (his current album, which has sold 5.8 million copies), we're all going to make money from the deal. If they go up appreciably, obviously he'll make a lot more money." Merlis would not confirm the amount of the contract, but Prince's managers released some details in a news release Thursday.
Bream also compares sales figures:
Since 1983, Madonna has made eight albums with combined worldwide sales of 76 million, or an average of 9.5 million each. Her bestseller is 1986's True Blue, with 17 million. Since 1979, the prolific Prince has released an album a year for Warner Bros. These 13 albums have sold nearly 53 million, or an average of 4.1 million each; his bestseller is 1984's Purple Rain, 14.7 million. Two of Jackson's four solo albums, Thriller and Bad, have combined sales of 73 million.
In a Variety article from September 1995, Adam Sandler reveals that Warners' investment in Paisley Park Records wasn't without conditions:
But the deal [...] permitted Warner Bros, to recoup the money it gave to Paisley out of Prince’s past and future recording revenues.
The deal also gave Paisley five years to become profitable, while Prince’s recording contract with Warner Bros. Records ran until 1999.
Warner is said to have invested more than $25 million -- $100 million if you believe the Prince camp -– yet the deal did not yield any successes. Warner severed its ties with Paisley Park in 1994
"Prince's Contract Tiff Is A Maze Of Numbers" by Richard Harrington in The Washington Post on 28 October 1994
"Just How Princely Is Prince's Deal?" by Chuck Philips in the Los Angeles Times on 5 September 1992
"Prince's behind-scenes bankability" by Jon Bream in the Minneapolis Star Tribune on 5 September 1992
"A Man of Many Talents (and $100 Million?)" by Fred Goodman in the New York Times on 1 November 1992
"A King's Ransom for Prince: Artist Signs Record $100-Million Contract With Warner" by Chuck Philips in the Los Angeles Times on 4 September 1992
"Prince's new record deal" by Jon Bream in Entertainment Weekly on 18 September 1992
"What are realities of Prince deal? Attorneys see safeguards for Warner" by Ken Terry and Irv Lichtman in Billboard on 19 September 1992, pp. 12-13
"Letters: Amused by speculation" by Gary Stiffelman in Billboard on 17 October 1992 (a letter by Prince's attorney reacting to a story in their 19 September 1992 issue)
"Vanity, thy name is not record label success" by Adam Sandler in Variety on 4 September 1995