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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."
Whta the RIAA tries to confuse is the fact that there are two kinds of "piracy". One of them is companies that print bootleg copies of records, which are hard to distinguish from legitimate records. This is, usually, done in industries in Asia, using mass production methods.
The second kind of "piracy" is done at home, by consumers who make copies of cassettes and CDs for their personal use, or, sometimes, for friends.
I think there is little doubt that industrial-size piracy does hurt the legitimate recording business and the artists. Those illegal records may be sold to totally unsuspecting stores and consumers.
However, the home-copying thing is much more fuzzy. I may make a copy of a CD to listen in my car, while my wife listens to the same CD at home. But this does not mean I have cheated the industry of selling another CD. I may feel that forking out $15 for a second copy of that CD is too much. In that case, my "illegal" copy brings a benefit to me, while hurting no one, since not making that copy wouldn't make me buy a second copy of the CD.
And all of the "copy prevention" methods being used and proposed are meant only against making copies at home. Industrial-grade pirates have more resources and can circumvent copy protection quite easily. If the RIAA would divert all that effort against industrial espionage and piracy, they would get considerably more return for their investment, while preserving their public image.
These are the numbers that need to be reduced to make music more profitable, and technology can help.
It's time to get rid of CDs. Vorbis (or, *sigh*, MP3) or even wav/aiff, combined with HTTP or FTP can do that. And by getting rid of the middlemen, You can either reduce the price (thereby increasing units sold) or make a greater profit per unit.
As for marketing, some music (e.g. heavy metal) is already getting by with virtually no marketing at all, so spending $0 here has become a proven strategy (though some of the musicians are unhappy about it ;-). Granted, that won't get you Big Bucks in sales, but it does work. One nice thing about the Internet is that messageboards, usenet, etc. allows word-of-mouth to travel a lot further and faster, so marketing gets replaced by just having better-informed and connected customers.
That leaves the production itself, and of course the musicians' time/labor. Personal computers can replace some of the once-expensive capital (my brother just mixed a friend's recording on his Mac). There's still some equipment and expense left here that can't be eliminated, I think. But it's a start...
As copyright owner of this comment, I authorize everyone to defeat any technological measure which limits access to it.
Suggested reading is Moses Avalon's "What the Reocrd Companies Don't Want You to Know" You can do a royalty calculation on his website. The Future of Music Coalition has an excellent document that analyzes the "standard contract" explaining how that 16% royalty turns into 6%. Both websites cut through the RIAA spin, and get to the underlying truths.
The truth is that the 90-95% of artists that don't recoup, don't recoup because of inflated expenses, the fact they don't get paid for "special" sales, such as overseas, and record club sales, and music taken out of the label catalog and not available for the public to purchase at any price. If the labels don't sell it, you can't make money off of it. In addition to this, you give up your copyrights to boot.
It took John Denver's Estate 5 years after his death to get a accurate total of his sales in which 19 MILLION more sales were "found". This Article on the RIAA website documents it. Talk about your "smoking gun".
I recently had a conversation with a member of a 60's group who had several top ten hits, his words explain it better than anything else I've ever heard. "If I were going to tell any group that is considering signing a major label contract any one thing it is, get as much money up front as you can, because you will never see another cent from royalties."
The article would have been more credible if it were honest.
E.g. It talks about the record company initially being out of pocket $500k ($250k production & propaganda, $250k advance royalties to artists). The company wholesales the record for $10 out of which come $2 for pressing, shipping, and mechanical rights, leaving $8. It then states that $2.25 goes to the artist as royalties so the record company gets only $5.75 to amortize its initial $500k, requiring the sales of 87k units before it breaks even.
Did you notice that? Pretty slippery. The artists don't get the $2.25, it goes directly to the record companies until the advance earns out. So the record company makes $8 in marginal profit on the first 111k of sales, and is in the black after 62.5k unit sales.
By the time the artists start earning royalties beyond the advance (111k units) the record company has made $390k in net profits. After that, the royalty-reduced $5.75 profit is acceptable if they can't find another way to gouge the artists.
This ignores the fact that the pressing and distribution costs go to companies that are probably related to the record company, and make profits of their own. It reminds me of Hollywood accounting, where if any movie, especially a blockbuster, makes a net profit (leading to money actually being paid to someone who has monkey points) it means that somebody didn't do their job right and will never work in this town again.
Of course, there always has to be a villain in the piece. OOOHHH THOSE SCUMMY SONGWRITERS!!! They're the reason music costs so much. Burn them!!!