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Money in the Music Business
paulbd writes: "Electronic Musician has a good article on the economics of selling music on CDs. Its a sobering read that gives some of the hard numbers that do a little to counter
the sense of record companies being vultures. Recommended for anyone who seriously imagines making a living from selling music."
. . . many people think record companies are just plain bad. Why is that? . . . Perhaps it's because of the way record companies make their money: they make it from our heroes, the musical artists.
All notions of musical parasitism aside, record companies perform the critical functions that allow artists to reach the masses.
No, musical parasitism not aside, technology has made the Big Five as relevant as buggy whip manufacturers.. Perhaps its their illicit oligopoly that offends the customers. Or just the use of that monopoly-like position to crush as much opposition as possible.
1Alpha7
Live to be Moderated
A load of total BS. Another attempt to jimmie the numbers and make it seem like the record companies aren't so evil after all. All of the numbers used for expenses are deliberately on the high side. In the end, another attempt to cover up the fact that the record companies earn enormous profits, with only a tiny fraction going to the artists.
"...an artist royalty rate of 15 percent, the record company owes the artist approximately $2.25 per unit sold."
In your dreams. Only the biggest mega-superstars bet anywhere near that much. Many artists get less than $1 per unit sold.
I run a tiny bedroom indie record label, partially to release stuff by my own band (moonkat) but also to release stuff by other bands I like. The figures in the article, while more at the high-level end of the spectrum, are entirely plausible. So, for example, no-one makes any money out of selling singles - they cost about £1 to make, I sell them to the distributor at £1.23 and all of that 23p plus more besides gets spent on publicity.
As far as albums go, yes, I could make money because I sell them to the distributor at £5, but the promotion costs are also higher, and the album has to pay for all the money I lost on the singles. Besides which, they may turn out not to be popular at all, in which case I lose all the money I spent. The band themselves have already made more money than I will - through radioplay royalties.
So far, since starting a record label 6 months ago with £10000, I have made a loss of £6000, and a further £2000 is in the form of advances to bands (so they could buy equipment) which I will may well never recoup unless they suddenly become successful.
I don't advise anyone to start a record label unless they enjoy feeling like a glorified secretary to (often ungrateful) bands.
"Back in the day, people like Beethoven didn't write music because they wanted to make some cash"
n .html (search the page for the word "income"). Mozart suported his extravagant lifestyle by writing operas (http://www.mit.edu/~nat222/viktor/mozart.html). Biographies of famous musicians often fail to mention finances, but few said no to a lucrative court appointment.
Sorry to spoil your dreams, man, but musicians throughout the ages were in the business to make money and live nicely. Read http://classicalmus.hispeed.com/articles/beethove
Hey, I read the article, and still believe that he didn't write his music, or study it for his entire life, for the purpose of making money.
Not trying to have a dig at your message, I do admit that he made money from teaching, as well as performances, but this is a far cry from having music written for you, and looking pretty for a camera. These guys were hardcore musicians and deserved to live well for their contributions to music, whereas N*sync, well...they have their music written by company songwriters, and have helped music very little with their contribution
P.S: I never actually post my opinion on Slashdot, and do not know how to post anything but replies, so you should know that my posting was not in reply to yours, and I was not having a dig at your posting, but I know no other way. (fill me in if possible:))
The rationale behind that hologram sticker in some products is exactly to prevent large scale piracy. It doesn't work very well, since the technology to duplicate that hologram is about the same that is needed to copy a CD. I guess the main reason why software piracy is so much more prevalent than music piracy is that software brings higher prices.
But I wasn't thinking about what you can buy in the streets in Indonesia. I was told by someone in the marketing department of a music company that there are pirates that make CDs by the truckload, copies perfect to the last detail, so good that they are sold to major retailers in the USA as the real stuff. And they don't even need to copy a CD, they bribe technicians in the recording companies to get a copy of the original master record, before any sort of copy protection is put in.
Yup, but look at their expenses.
I used to work stock at a Caldor's (defunct discount store). They grossed about $20K per day. I have to guess that, at any time, they had no less than fifteen employees on duty--some at the checkout, some visible in certain departments, and some busy in the back loading stock. Assuming the store is open for 12 hours a day, that means that they have to pay for $600 in payroll. Assume $10.00 per hour (in paycheck, plus employer-side social security taxes, plus benefits packages), and you are spending $6K per day in payroll. With 100% markup, your $20K in sales cost you $10K in merchandise, so now you're down to $4K margin on the day.
From that $4K/day, subtract the advertising budget, PITI payments on over a million dollars of building, parking lot, and land, consider shrink (missing inventory--often theft from your employees), unsellable returns, and utility bills, and how much is left? Not bloody much.
Retailers take a lot of gross margin, but not a lot of net margin. When many hands touch the merchandise, all that money goes many ways.
The fact is, it took a lot of people to get you that CD you bought in the store. The artist, the studio techs, the CD burner people, the warehouse jockeys, the retail drones, a couple of OTR truckers--and they all have to eat. So everybody gets a little piece of the sale.
I'm not saying that one or two people in the supply chain don't get a large piece of the sale, but it's not always as large as you might think.
--The basis of all love is respect
Well, I was going to post, but I kept hitting the lameness filter for too many junk characters (don't know what character's throwing it, though, so of course I can't fix it. What characters trip the filter aren't in the FAQ, either. Guys: make it a ratio, not a count. Long posts get screwed. And make it tell you what character is getting tripped.)
A link to my rebuttal, and a hope that people will still respond.
Warning: that rebuttal is *long*.
StoneCypher is Full of BS
Lots of things to get confused about in the Electronic Musician article beyond the obviously wrong break-even point for the label. I'd look elsewhere for music biz education. Perhaps there's more in the print version? Off the top of my head:
Initially they refer to the "$250,000 advance" but later to the "$500,000 advance". They imply but don't state that promotion costs are also recoupable from artist royalties.
The assumed $2.25 per unit payment to the artist becomes $1.80 (down 20%) without explanation. The 3% producer's cut they mention leaves the artist around $2.18.
We seem to be talking major label here, so it's silly to ignore who bears the cost of video production.
No mention of the reduced royalties, both artist's and mechanical, for foreign sales. I hear figures like 50%.
No mention of half royalties for record club sales--zero royalties if your record is a 13-for-one-cent selection.