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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."
You didn't read the article. It's just that simple.
http://www.mp3.com/news/222.htmli .html / a-1098-1.htm
http://www.musicalevolution.8k.com/albini.htm
http://www.negativland.com/albini.html
http://www.ram.org/ramblings/philosophy/fmp/albin
http://www.musicianassist.com/archive/article/ART
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.
It seems to me that Radio stations often determine what songs will be hits. How often have I heard songs that are plainly second rate just because they're by an already famous group?
Due to the limited number of radio stations, and the (probably very large) 'entertainment' budgets (read this as: bribe money set-asides) the record companies pay to have their leading albums played, the number of new independent and local bands played is very, very limited.
If the local bands and groups have a following from a bunch of gigs they play where people know them and like them, they will be playable locally. Trouble is, the station is typically owned by a large corporation. Strategic investment by radio media means less choice for us consumers.
Likewise, if local bands have airtime, they can make their own label and print CDs as they're needed, stocking record stores and via website sales.
-- Kevin
Unitarian Church: Freethinkers Congregate!
Although this article has nothing to do with nerds, let's look at what we've just read. - Artists don't make money until the record company breaks even. Yep, that would sound OK to me, especially if I was the record exec stumping up the cash to invest in some new talent. I run a business, not a charity. - Artists gotta pay their own legal fees? Damn right. When I set up my limited company to work as an IT contractor, I deducted the legal fees from the tax at the end of the financial year as expenses. So why can't they? - "Perhaps it's because of the way record companies make their money: they make it from our heroes, the musical artists." : Erm, uh huh. And Paramount/Warner Brothers doesn't make money from the actors? And DynoRod plumbing does make its money from the engineers they send out in dayglo red vans? - Anyone with any sense doesn't go into the music business to ensure they become a millionaire. You have to work for it - and hard. Like being a nurse, police officer or child carer - It's about job satisfaction and the fact that you want to express yourself by doing something you like doing. If you want a stable income, and a sense of job security and can do without fame, get a 9 to 5. And as a little aside, what crows me is the fact that (nearly) every rap video shows guys counting money, toting guns, wearing sunglasses and touching up bikini clad girls while driving in expensive cars through the bad neighourhoods they claim to have grown up in. If I was a record exec and saw my artists making crap like that, even I'd want to skin them for every penny too.
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.
For all you Lynxers out there
If a square is really a rhombus, why aren't all triangles purple?
The record companies certainly get a bad rap on this site (and in many other circles as well). However, we need to separate the facts from the emotion here. Record companies run a risky, speculative business, and it is a well-known fact that most of the artists they sponsor do not succeed. It is a testament to their ingenuity that they are able to make such huge profits by developing a successful formula to minimize losses on crappy bands (the 95%) and maximize profits on good bands (the 5%). How many speculators in other industries (such as real estate) can you name who are able to achieve such a high return on such risky investments?
My personal argument is not with the record companies on the basis of profit. They should be allowed to sell their wares and make money; after all, this is a capitalist world. My beef with the RIAA members is that in their zeal to increase profits, they advocate the loss of basic freedoms for U.S. citizens, in the name of "stopping piracy." The DMCA and SSSCA, as well as their continued attempts to squash fair use, spy on computer users, and shut down BearShare users are an affront to freedom and do nothing but mobilize public opinion against the entire industry. It's unnecessary, relatively unprofitable, and the public won't stand for it for long. The Ford Motor Company used to have a lot of popular support in this country before "Unsafe at any Speed" came along. And it took them years to recover from it.
If the RIAA companies would just focus a bit more on producing quality music instead of trying to control every aspect of their products' use, they will get a lot farther and probably make a lot more money. Which is fine with me.
~wally
I don't know if I can agree with that. He pointed out very clearly that a very small percentage of artists signed will even let the publisher break even, which is symphonies with the idea that the music business is very much like the venture capital companies.
So what you have is business model of taking large number of high risk investments. For the company to make money they need some of there investments to actually make a profit, which in turn means they can afford to risk money on new talent that might again prove to be profitable.
Think about it this way, a artist/talent/band/singer whatever is a company, they might make money if they we're given some venture capital, direction and marketing, but they don't know how to do any of that, so you help them out, and give the a decent chunk of change to try it out. You say
"Hey, if it doesn't work out don't worry about it, we'll take the loss; but if it does work out, before we pay you your cut we want to get our investment back"
Sounds like a darn good deal if you ask me. They give you money on faith, you try your hardest to make a decent product (album) and if it sells well you see a cut of the profits.
This is also much the same way the game industry works, however you don't hear nearly as much public outcry on how the developers get screwed even though they never get a share of the profits, typically get laid off after a game ships and for the most part get paid sub pare in comparison to there skills.
this is my sig.
This reminds me of this wonderful article that's popped up on JWZ's site several times about the economics of the music industry.
It really sucks.
http://www.arancidamoeba.com/mrr/
by the retailers. Most retailers expect a 100% markup on what they sell - that is, the retailer expects to pay $7.50 to $11.50 for a CD that will sell for $15 to $22. When it comes down to it, the record companies may be greedy, but not so much as the retailers, who skim larger profit margins from the sale of CD's than do the record companies.
The society for a thought-free internet welcomes you.
as much as i dislike every aspect of the RIAA and its cohorts, i know from personal experience of starting a CD label that they are not "as [ir]relevant as buggy whip manufacturers". producing music has become vastly cheaper than it used to be, and the net offers some excellent possibilities for distributing compressed (lossy) audio. however, the net doesn't come within 10 miles of offering the marketing and publicity engines that the RIAA still know how to work (or maybe we should say control). its also a complete waste of time for people who want at least CD quality audio, though that will change as bandwidth increases over time. we spent about $5000 to do the production copy run on our first CD, and didn't have to pay for studio time since we own the studio. but this music isn't the kind of stuff that most people listen to, and the challenge of marketing it effectively is vastly more difficult and involved than running a website and having some MP3's available for preview. although their tactics and contracts suck, the truth is that its very, very hard to effectively market music without the involvement of major record labels. this is particularly true if the music you make isn't popular with the demographic that has made, say, ani defranco such a success.
God damn! A million dollars in recording costs? Half a million in marketing? Quarter of a million advance, most of which goes to management, lawyers and recording studios?
Bah. We've ended up at these insane levels of cost through a conscious choice to make products instead of music. And it's the big labels (that we're asked to pity) that have chosen to do this. That's why they're the Big Labels, you see? Smaller labels and artists (and authors and print publishers) can make a good living by selling actual art without million dollar videos and marketing campaigns.
Here's a synopsis of this article: big studios have big costs. Well, duh.
If you were blocking sigs, you wouldn't have to read this.
That distributing music is expensive is exactly why we need to sit down and think about other ways to do it. And when somebody comes up with an idea, the last thing we need is for labels to rush forward to destroy it.
Employee of Inrupt, Project Release Manager and Community Manager for Solid
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.
You have to remember (or realize) the dirty fact that the music business has almost nothing to do with music. It has to do with promotion. It makes about as much sense to complain about the music business ripping off the "musical artist" as it does to complain about the shock-absorber business ripping off the "drill-press artist" or the "rubber bushing #214A artist".
The music biz can pick, choose, or manufacture "artists" upon its whim, promote them with the guile that can only come from decades of dilligent mass manipulation - and truckloads of obedient kids will duly line up with money in hand, go shrieking to the concerts, and obliviously suck up every cross-promotional product without so much as a moment's reflection.
Please, once more for clarity: THE CONSUMER - AND ESPECIALLY THE TEENAGE / YOUNG ADULT CONSUMER - IS A FUCKING COW TO BE MILKED.
So don't be so upset that the music companies are taking all the money. They did the heavy lifting. They put out the ads. They put together the deals with Pepsi and Budweiser and AOL and Spin and Rolling Stone and MTV and the radio conglomerates to mind-fuck that band into your consciousness, and into the collective youth consciousness that virtually every teenager lives in terror of being excluded from.
So give credit where credit is due.
If you want real music, from un-exploited "artists", simply stop buying from the evil corporations. Leave the talentless, classless, unimaginative, over-produced, formulaic dreck on the shelves. Scour the net for independent work. Discover music your friends have never heard before. Find intriguing, mysterious music made by small outfits without massive distribution channels and focus-group-driven images. It takes some time to find them out there, but when you do, they are precious.
Then whip our your credit card and support them by purchasing their work. You'll get a a CD with a home-made liner inside a plain brown wrapper with your address hand-written on it. And you know what? The artist will probably get every cent you send.
The band may not even exist in a couple years, but you will always have that CD, and the music on it - a memento of your discovery.
Oh well, never mind - I think I hear them ringing the bell up at the barn. They're putting out the hay. Time for you to eat what you're given, and have the suction milkers attached to your teats.
pr0n - keeping monitor glass spotless since 1981.
Well, while a recording budget $500K - $1000K may be the "typical recording budget for an artist's first album" it seems rather high. While that may be true for the types of Britney Spears and your favorite boy band of the week (which really are just products rather than artists), you can record quality music for far less.
To give you an example: I listen to a lot of Heavy Metal. One of the more interesting bands I've come across over the past year or so has been "Children of Bodom" (for those who don't know them, they are a speed metal band from Finland and quite musically skilled; their live album puts most other bands to shame). Their first album, which admittedly was pretty rough, was recorded in 2 days. Their second album (Hatebreeder) is a wonderful symphony of high-speed power rock and melody which sounds good and was recorded in a week. While I don't know the recodring budget they had, I can assure that it wasn't anything in the $500K region.
Another example I can give is a local band here (2 of my friends play in it) which just recorded their first album. They had 4 days to do it and the studio cost them
My whole point is this: decent musicians can produce quality music on a much lower budget. You don't need 1/2 year of studio time to record your songs (provided you have written them prior to waking into the studio).
The story about music videos is similar. Artists are often required to do videos which basically puts them into more debt. So they are effectively owned by the record companies who are in effect pimping them; it's like indentured servitude.
Part of the problem is that the music industry requires expensive productions and videos as marketing tools. Where they should be more like reporters (ie: finding and covering the news rather than creating it) they have become the creators of bands which then require huge budgets to be pushed to popularity. It doesn't have to be like this.
I think I'll be putting on my asbestos suit
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:))
making people aware of your music, hopefully to the point of wanting to pay for it, is expensive.
A typical recording budget for an artist's first album is between $250,000 and $1 million.
You could build the artist their own recording studio for that, and minimise the production costs of their next album. Geez even 250 grand would be enough. Wanna guess why they don't do it that way?
But worse still, this presents the story as being awful hard on the record company. Bullshit. Lets rephrase the process...
"Yeah, you write this piece of software. We'll give you money to cover the costs of it now, and advertise and sell it for you. We call that an 'advance'.
But when we start to sell it, you'll pay us all that 'advance' back, out of your share of the profits (we call them 'royalties), and in addition to you repaying our outlay, we'll get at least three and a half times the profits you do.
If you don't cover the money you owe us, then we'll ask you to do another project, and the amount outstanding will have to come from the profits you make on -that- one. We'll also reduce your new advance, and the amount of advertising we do because you're obviously unprofitable."
free experimental electronic music netlabel at www.viablehybrid.com
" Unfortunately for them, the Napster unpleasantness has merely exacerbated that characterization."
Unfortunate for them? Yes
Guns don't kill people; Physics kills people! - John Lithgow as Dick Solomon on Third Rock From The Sun
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.
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Only because they already control all channels of publicity (radio slots, major store shelf space, commercial slots). Otherwise, it would simply be an exercise of borrowing money, just like any other business.
funny munging
Eric Leach is an intellectual property and business law attorney at the firm of Goodman and Leach.
Good Man or Leech? I think I'd like to talk to Mr. Good Man please!!
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."
Exactly, cds are expensive and unnecessary. The record industry's businessmodel is not selling music but cds. The better the music the more cds they sell, however good music is not the primary goal (example: Britney Spears' voice is not her greatest asset. She has to use her whole body to get those cds sold.).
The business model for an artist is different: artists want to sell good music and most of them also enjoy playing their music and would like to make money doing that. Until the internet with its cheap music distribution in the form of mp3 arrived there was some harmony between the artists goals and the record companies goals. However that is no longer the case.
Currently we are in a transition period where some people still spend money buying cds. However, this is a shrinking market. In the long term people will no longer be buying and selling units (e.g. a cd) of music.
You could get moralistic about this and call it theft and be very angry. However, the cold reality is that reproducing music has no cost associated with it. Therefore recovering the cost of the production (i.e. the recording) with asking money for the reproduction is not going to work. There are no good technologies that enable you to monopolize the reproduction process and there are serious legal obstacles for preventing other people from copying music as well. So given the technological and legal obstacles it is unlikely that there will ever be an effective way to stop people from copying music.
Is this bad for music in general? I don't think so. Apart from the past 50-100 years there never was a market for cds and that didn't stop people from making good music. If people could do it 100 years ago they will be able to do it in the future as well. Maybe there will be less multi millionaire artists like Micheal Jackson or Madonna but there will still be people making good music for other people.
Jilles
Maybe I've got this wrong but it seems to me that on a $14.99 CD sold that the article states $5.75 goes to the record company and $2.25 to the artist.
Doesn't the article forget that until the artist repays the advance that $2.25 goes back to the record company.
I reckon this moves the break-even point to 62500 CD's and the record company will effectively make $8 profit - not $5.75 up until the band repays it's advance.
Only two things are infinite, the universe and human stupidity, and I'm not sure about the former. (Einstein)
However in the six or seven years that its been feasible to do that, has there been anyone thats done it successfully? It seems like it would be a much better idea than for a band to go into major long-term debt to a record company, which unfortunately is what happens to the 90%+ that don't "make it".
I know there are exceptions, but as a rule, music made in years past was much better, simply because it wasn't so much prepackaged crap for the masses(e.g. anything that gets played on MTV). Why hasn't the net spawned a revolution in music like as was promised?
Perhaps what is needed is an open source-style revolution where people with day jobs post great music with the intention of making great music moreso than making money. It wouldn't surprise me to see such a thing. Musicians are a lot like geeks(in fact many of them are geeks) - they do what they love, their mindset is based on sharing, and they're fairly technical. So far it hasn't happened, but who knows.
No, Thursday's out. How about never - is never good for you?
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
If marketing were necessary, then how is it that I've discovered The Groove Collective, the US David Wilcox, the Canadian David Wilcox, David Grisman, Clifton Chenier, Buckwheat Zydeco, India Arie, ATB, Alex de Grassi, and a dozen other cool artists that I'd never heard of before, and find that I really enjoy?
Fuck RIAA.
All I need is access to well-titled MP3s, a community that can provide "other listeners also liked...", and a way to toss some cash directly to the artists I like.
It'd be nice, though, if one of those well-to-do hate-the-RIAA artists would help bankroll a site to accomplish this.
--
Don't like it? Respond with words, not karma.
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This is competition on the mass market with small reproduction cost, in an area very (yet very unpredictably) responsive to promotion money. It is only natural that promotion costs will rise to allow only the minimum acceptable profit that will hold the invested money in each company.
Those promotion costs become value in the promoted musician's name, so it is vital for them to lock down their musicians with debt and contract. Otherwise, another company could easily draw them away, offering more money but taking more profit, because they haven't spent anything to gain the wide recognition and carefully manufactured demand for the product.
Of course, most musicians wouldn't think twice about screwing over the recording companies whose money made them famous. When they succeed, it's purely "because of their talent." Fans tend to agree, because they value the music, but see no value in having their tastes manipulated. Contrariwise, to the promotion industry, talent is just a common raw material (preferably available in naive and desperate packaging) which is not valuable in the raw, but can be smelted and formed into a profitable product. Paying the minimum price for raw materials is just good business.
Looking at the business of it, it seems pretty clear that the promotion dollars are more important (both more scarce and more necessary) than talent when it comes to making money.
The copyright profit model, combined with the few-to-many broadcast media, makes a naturally rotten situation. There's plenty of talent to be had cheap, and scarce little public attention to buy at high price. Add in the glamor and natural attraction of the work, and competition becomes so cut-throat that deceptive, underhanded tactics are necessary to survive, skimming along the edge of legality, as far as lawyers can push it out.
You can't blame them, really, any more than you can blame men trapped without food for turning cannibal; there's money to be made, in an attractive and well-loved industry, but not by honest and generous people. You can only work to remove the situation that causes it. It's not an easy problem.
I like the donation profit model, for sheer simplicity, but it's not 100% clear that it would actually work, as a matter of human psychology. The concert profit model (recorded music as promotion for live performance) is good for bands that sound best live, but what about music that makes lousy concerts? Pay-per-download (or pay-per-play) sounds nice, but either it requires essentially an end to personal ownership of general-purpose computers and recording devices (replaced by media terminals which can't be reprogrammed to circumvent copyright measures) or it collapses to a less efficient variant of the donation model. Are there any other ideas out there?
The problem is in getting heard, getting your name in front of paying public.
This is something that can perhaps be better dealt with thru a public digital accessible classification and sampling system.
Even CD production cost can be removed or turned over to consumers PC. And I'm sure there are many other things that can be done to reduce cost while insuring monies get to the creative parites.
But without the consumer ever hearing your work, you cannot make sales.
So here I am, a consumer looking for a certain type of music over the internet and listening to samples. Where upon finding a song I like I pay for it, download it, etc..
Seems to me there is plenty to do in making such a midpoint service available to artists and consumers. Even something that makes CD creation extreamly easy for the consumer of such service.
And because the consumer is paying for individual songs, they are going to get better value for their money while the artist get better feedback as to what music of theirs the public likes.
Once an artist reaches a certain level of sales, the traditional marketing methods can come into play. Traditional methods that now have a way to better prequalify or improve/reduce risk. Overall greatly reducing losses which in turn improve payouts back to the successful artists..
In other words, technology can be used to greatly reduce the cost of overall losses obtained in traditional systems of the majority that the miniority successful end up paying for.
And it can even be used to help those who aren't top popular enough to earn a living thru traditional methods, to do so thru digital means.
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I agree. $500K recording budget seems ridiculous. For example the classis jazz record "Kind of Blue" by Miles Davis, was recorded in two three hour sessions. The musicians were playing live, and what's on the record is the first complete take of each number.
This album has consistently sold well since it was made back in '59.
So, the bottom line is, if the musicians are good, it takes no time to record great music.
...richie - It is a good day to code.
The Beatle Years just recently did a history of the Beatles recording history. Trust me, if you listen to the earlier stuff, done cheaply, and the newer stuff with lots of money to spend and fancier equipment there IS a difference. You can't say that Boston and the Beatles sound better wiht low budgets than Britney Spears. Boston and the Beatles will ALWAYS sound better than Britney Spears. You have to judge the same artists, using higher tech and lower tech.
How, exactly, would you propose measuring the success of a musician to find out whose CDs are worth pressing by the million, and whose to throw in the dumpster?
Obviously the consumers are voting with their pocketbooks, and buying 16M of the CDs that you consider to "suck." Perhaps the problem is that a large percentage of people are not good judges of music quality. But how do you solve that?
As another example - Sanyo probably sells millions of their relatively inexpensive CD players. To an audiophile, they probably sound like crap next to a high-end Harmon Kardon box. But Harmon Kardon only sells a handful, and Sanyo sells millions. How do you get all of the peons who buy from Sanyo to switch? You can't, because the Sanyo equipment is good enough to do the job. Maybe music is the same way - not perfect, but sufficient for most people.
~wally
The cost of doing business in the music industry is summed up in the article as the production and pressing costs.Remove the production costs by allowing music to be published "as is" from new artists. A few new artists are quite capable of rendering professional sounds from their home PCs. Remove the pressing "risk" by not pressing any albums! The popular MP3 services sell music this way. There is very little risk making CDs one-at-a-time. It does, in fact, bypass most of the costs, and you're not sitting on a trashheap that won't sell, either.
The article doesn't mention all of the contracts in place between record companies, recording studios, and CD manufacturers. The companies can't change the way they do business if there are long-term contracts in place. They are afraid to change their distribution practices because music-buyers are resistant to change as well. It's an awful Catch-22.
It'll actually take the bankruptcy of several major labels to change the way music is sold. I don't see that happening anytime soon.
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!!!
First guess is all the right braces.
Strip them out and try posting again.
Your rebuttal deserves a wide audience.
Thanks for a good article in Electronic Musician - I found
the songwriter's section most illuminating (and actually
somewhat encouraging).
There were a couple of figures that didn't make sense to
me - in your hypothetical record deal, you mentioned a
$250,000 advance to the band - and you also mention that
the record company intercepts the bands royalties (if they
are there) to recoup the advance. So it isn't really true that
the record company only makes $5.75 per album, is it?
They're also being paid back, on top of that, from the royalty
rates of the artists until they recoup. Minus the record
producer, that's an extra $1.80 per album up through the
first $250,000. Secondly, most articles I have read say that
many record companies try and make the marketing expenses
recoupable against royalties as well - whether or not it was
structured as an "advance" to the band - which if true would
make the entire $500,000 recoupable at $1.80 extra per album.
On top of that, royalty rates for first-time artists have certainly
be consistently reported as lower than 15%, which dramatically
increases the gap of time (and units) between when the
record company breaks even and when the artist starts
seeing income.
Let's restructure it so that $500,000 is recoupable and the
royalty rate is 10% (still high compared to many first-time
artists). $1.50 royalty per cd, minus 3% producer
fees, is $1.05 per cd royalty. Until the label recoups,
they are making $7.55/cd, or $6.50 straight profit.
The label recoups their out-of-pocket costs after
66,225 units. However, they haven't finished recouping
from the band yet, and continue to make $7.55 until they
do. The band gets $1.50 per cd, which means they don't
start making bucks until 333,333 units are sold. By that
point, the record company has sold 267,108 more copies
at a pure profit of $7.55 apiece, or over two million dollars.
The producer has made $150,000. The band only has their
advance.
I think your article highlights the adversarial positions
record companies and artists have towards each other - when
I look at the numbers this way (hopefully accurate), it doesn't
seem quite as fair as it did when I read your article.
Thanks for the exercise though,
Curt Siffert
skkkoooonnnggggkkk ptui
It seems to me that the biggest problem with music recorded by independent artists is the (typically) poor production values of their recordings. Sure, it's easy to create slickly produced electronic music, but even just making an acoustic drum track sound decent requires a talented engineer with a decade of experience, which many small studios are lacking. Also needed are good microphones, a quality drum kit, and fresh drum heads for each session. Even if the use of the Internet sets distribution costs to zero, quality recordings are expensive to make.
I guess that's OK for the masses who could give a hoot about the quality of sound that they listen to, but I care! After spending a small fortune on high end audio equipment, the last thing I want to do is take a backwards step in my source material.
Music from my computer doesn't even come close to matching the fidelity of music from my dedicated stereo system. Yes, I have a computer connected to it so that I can have hours of MP3's (ripped from CDs that I purchased) playing in the background, but when I sit down in front of the speakers to actually focus on the music to the exclusion of anything else, you can bet that the audible differences between Ogg Vorbis, high bitrate MP3 and anything else coming from that computer and the output of my CD, SACD and turntable are like night and day. The computer, even with a relatively good Sound Blaster Audigy card, just can't compete.
Another, even more insidious problem, is that the course that you advocate pretty much eliminates the availability of music to anyone who doesn't have a computer and a broadband connection to the Internet.
When I listen to music, I want to hear everything that the artist performed. Digitally compressed formats, while convenient, mask much of the detail that makes a high end audio listening session the incredibly enjoyable experience that it is.
-h-