Nirvana as a business, as a commercial product, has been quite a saga in itself. The first time the whole subject reared its head was right back in 1992 with a significant argument between Cobain and his partners in the band. The royalties and money due to the band consisted of a direct percentage of sales, then an additional percentage consisting of the publishing royalties.
The band’s contract with Sub Pop, signed in early 1989, was a fairly basic effort offering $6,000 in 1989, $12,000 in 1990 and $24,000 in 1991…To be split between the three band members. The band relied on their cut of sales plus touring income (the band’s descriptions suggest that even in 1990 the latter amounted to only a few hundred dollars each at the end of a couple months of touring.) Sonic Youth talk about how it was only the success of Daydream Nation, eight years into their career, that allowed them to quit their day jobs — Nirvana in 1989-1990 were living barely above the poverty line and only a relatively ascetic life made this liveable.
The contract signing with DGC sometime around April 30, 1991 certainly made life a lot more comfortable. The band described speculation about the size of their advance as “journalism through hearsay…The numbers kept getting bigger so that a lot of people believed that we were signing for a million dollars.” The amount they actually signed for, an advance of $287,000 split between the three of them and spread over two albums, was certainly a huge step up on their previous situation but, on the other hand, hardly immeasurable wealth; circa $95,700 each. The money was also whittled down by the 20-25% that had to go to their management company amid other expenditures including a group accountant from the firm Voldal-Wartelle & Co. In terms of the benefit to Sub Pop, there was a payment of $75,000 made, but an equally useful stream of secured revenue via two percent on Nevermind’s sales and then on Incesticide’s.
In a smart move, however, the band decided to take a higher percentage of sales rather than a higher advance. Subsequent successes made this a substantial money-spinner, enough to earn the band comfort but at the time the band still needed to repay the advance before they’d make any further money from this source — there was also the matter of taxes being due on all this. Money from merchandise would also be of surging importance for Nirvana though the sums earned are unknown. Revenue from live performance was a further source, the festival appearances in 1992-1993 undoubtedly netted the band above average sums for one-off shows helping to explain their ability to stay off the road for most of a year and a half.
Separately there was the matter of publishing royalties. The deal is that the record company pays for making a copy of the recording of the published music which is why publishing is significant. Nirvana received a reduced rate consisting of 75% of the compulsory publishing royalty rate, and only on ten songs on each album, because as they were the recording group as well as the songwriters they were deemed to have control over the length of recording (meaning otherwise they could inflate the royalties due by including more or longer material.)The publishing company’s duty was to chase payments due from use, performance or broadcast of Nirvana’s music, to maintain the full accounts of the money due and received, and, having taken their percentage (in the 30% region) to pay the band. 1991 saw Cobain set up ‘The End of Music’ under Virgin Publishing with each member receiving $1,000 a month on top of the advance — again, good money, not regal sums of stacked cash. The even division of royalties from this source was because, with the sales figures the band expected (remember DGC only printed 50,000 copies of the album initially), and given they had to repay their advance, it was the publishing that was expected to be their main source of income. This sum formed an additional percentage on top of the direct amount the record company would pay the band on each sale — again, minus management fees, taxes, and so forth.
The brawl in 1992 related entirely to this amount. The ill-tempered result was that Krist Novoselic and Dave Grohl receive a cut on only eleven Nirvana songs including 12.5% each on Smells Like Teen Spirit — Kurt receiving the remaining 75% on those songs, plus 100% of those deemed to be entirely is creation.
An amount went to Chad Channing for his involvement in Polly and some songs on Incesticide. This made Krist and Dave entirely dependent on their direct cut of record sales plus live performance and merchandise sales. It’s easy to look back and think “wow, but they were on the road to being millionaires!” At the time, in mid-1992, it was impossible to know how high Nevermind would rise, whether they’d have worthwhile income in two, three years time. In a career path that doesn’t come with a regular salary, to have someone bite the lion’s share of that publishing royalty was understandably unnerving.