How Much Does it Cost to Produce a Recording?

An anonymous reader writes "How much does the average new album cost to produce? I have seen this cost estimated between $500,000 and $1,000,000, but some quick figuring does not support a cost this high. According to various sources (Ok, Slashdot stories...), somewhere around 27,000 albums are produced each year and 906.6 million albums are shipped. I would guess that the album retail (about $15 per album) is based on a 100% markup, so that these 906.6 million albums are sold at wholesale for about $7.50 apiece, which means that the revenue from wholesale sales is about $6.8 billion. This means that the actual production cost has to be less than $250,000 per album, otherwise the record industry is losing money. I have left out the cost of actually printing and copying the albums as I think that the average cost is probably less than $0.25 per copy."

Comments

100%

[xao gypsie]

is based on a 100% markup

i would guess that the markup is higher than that. it has to be higher than that. most of the cd's i have recently bought were more that $15. it has to be somewhere in the range of 150-250%, especially becuase im sure it ain't getting more expensive to make a cd these days.

xao

The biggests cost...

[Faeton]

is never the printing, S&H, recording or any of that. It's *always* the marketing (I'm including music videos). Companies spend millions pushing their music onto MTV, MuchMusic (Canadian variant) and radio stations.

A music video, a self-contained commercial for the album costs a LOT of money ($100k up to $500k), without actually bringing any money in by itself (except for the growing trend of musicvid DVD's).

Everytime you watch a music video or listen to the radio, that's marketing money spent just to get you to buy the album. For people that want to go big-time, you gotta shell out the big-bucks. That $20 you pay for the CD pays for pretty much every method that got you aware of the CD in the first place. Except for word-of-mouth, which to marketers, is priceless (which it is, since it's free).

Recording Costs depends on the "artist"

[ryanw]

Standard recording costs range between $40 on up to $200 or $300 an hour depending. But an average joe could record at a high quality studio for about $60 an hour. Depending on how good the band is you could do a whole album in one week at 12 hours a day. Thats $3,600.00 in recording costs. About another week to mix the album at 12 hours a day. Another $3,600.00.

Mastering of an album costs about $4000.00 at Gateway Mastering. Thats the best place in the world. CD Duplication for color inserts and other things it's about $1.00 each.

So it's like $12000.00 for recording, mixing and mastering and another $8000.00 for 8,000 cd's. So now we're upto $20,000.

But now you gotta' pay the "independant promoter" companies (which are subsiderary companies to the radio stations) lots of money to get it played on the radio. Thats an extra $10k.

So a total of $30,000 for a good band to pound out a great CD.

Here is what Steve Albini said

[sielwolf]

Steve Albini (musician and producer... did In Utero, Surfer Rosa, etc) did this article on the Problem with Music. This all related costs for a band (an album, a single tour, and a few other things).

Of course this is in early '90 dollars but here is the snip on the bottom:

Advance: $ 250,000 Manager's cut: $ 37,500 Legal fees: $ 10,000 Recording Budget: $ 150,000 Producer's advance: $ 50,000 Studio fee: $ 52,500 Drum Amp, Mic and Phase "Doctors": $ 3,000 Recording tape: $ 8,000 Equipment rental: $ 5,000 Cartage and Transportation: $ 5,000 Lodgings while in studio: $ 10,000 Catering: $ 3,000 Mastering: $ 10,000 Tape copies, reference CDs, shipping tapes, misc. expenses: $ 2,000 Video budget: $ 30,000 Cameras: $ 8,000 Crew: $ 5,000 Processing and transfers: $ 3,000 Off-line: $ 2,000 On-line editing: $ 3,000 Catering: $ 1,000 Stage and construction: $ 3,000 Copies, couriers, transportation: $ 2,000 Director's fee: $ 3,000 Album Artwork: $ 5,000 Promotional photo shoot and duplication: $ 2,000 Band fund: $ 15,000 New fancy professional drum kit: $ 5,000 New fancy professional guitars [2]: $ 3,000 New fancy professional guitar amp rigs [2]: $ 4,000 New fancy potato-shaped bass guitar: $ 1,000 New fancy rack of lights bass amp: $ 1,000 Rehearsal space rental: $ 500 Big blowout party for their friends: $ 500 Tour expense [5 weeks]: $ 50,875 Bus: $ 25,000 Crew [3]: $ 7,500 Food and per diems: $ 7,875 Fuel: $ 3,000 Consumable supplies: $ 3,500 Wardrobe: $ 1,000 Promotion: $ 3,000

Tour gross income: $ 50,000

Agent's cut: $ 7,500 Manager's cut: $ 7,500 Merchandising advance: $ 20,000 Manager's cut: $ 3,000 Lawyer's fee: $ 1,000 Publishing advance: $ 20,000 Manager's cut: $ 3,000 Lawyer's fee: $ 1,000
Record sales: 250,000 @ $12 =
$3,000,000
Gross retail revenue Royalty: [13% of 90% of retail]:
$ 351,000
Less advance: $ 250,000
Producer's points: [3% less $50,000 advance]:
$ 40,000
Promotional budget: $ 25,000
Recoupable buyout from previous label: $ 50,000
Net royalty: $ -14,000
Record company income:

Record wholesale price: $6.50 x 250,000 =
$1,625,000 gross income
Artist Royalties: $ 351,000
Deficit from royalties: $ 14,000
Manufacturing, packaging and distribution: @ $2.20 per record: $ 550,000
Gross profit: $ 7l0,000
The Balance Sheet: This is how much each player got paid at the end of the game.

Record company: $ 710,000 Producer: $ 90,000 Manager: $ 51,000 Studio: $ 52,500 Previous label: $ 50,000 Agent: $ 7,500 Lawyer: $ 12,000 Band member net income each: $ 4,031.25

Of course Albini had a different point with this article: the majors screw people over so if you decide to not go independent, you are putting your life in your hands. Or from the article: "The band is now 1/4 of the way through its contract, has made the music industry more than 3 million dollars richer, but is in the hole $14,000 on royalties. The band members have each earned about 1/3 as much as they would working at a 7-11, but they got to ride in a tour bus for a month. The next album will be about the same, except that the record company will insist they spend more time and money on it. Since the previous one never "recouped," the band will have no leverage, and will oblige. The next tour will be about the same, except the merchandising advance will have already been paid, and the band, strangely enough, won't have earned any royalties from their T-shirts yet. Maybe the T-shirt guys have figured out how to count money like record company guys. Some of your friends are probably already this fucked."

Re:interestingly enough...

[racermd]

That's the theme that most everyone (not all) is missing: Marketing.

The major labels are as big as they are because they know how to market the talent that they sign. They get bigger with every artist/band they sign and become more in demand to the artists/bands due to the size of the marketing machine. It's funny that the demand for a label tends to increase in relative proportion to the number of artists they've signed. It's a kind of self-perpetuating desire.

I don't think I'm shattering anyone's illusions when I say this, but the major labels have never been "about the music". Their sole purpose is, has been, and always will be to market the heck out of you so that your (their?) product sells. Obviously, that makes them money that you're hoping they'll share with you. Sure, they hire people that know how to make music sound good. It's in their best interests to make you sound and appear good. No, they want you to sound *GREAT*. But the goal is to sell a product that was never their's to begin with to people who probably would never have known it existed, or even that it was desired. They take the job of promotion off the shoulders of the artist(s) so the they can focus instead on making a great product to sell.

And that's where the model starts to break down. They don't share enough with the artists to make them happy. They use scare tactics and legal papers to get what *THEY* want. The artists that want to be promoted widely must either sign with a major label or spend the majority of their time on their own promotion duties. There's 2 major problems with this alternative approach of DIY-promotion. First, the artist isn't focusing on the product that they're promoting, thus producing an inferior product that won't live up to the promotions. Second, the major labels have most, if not all, of the major distribution channels locked up to themselves by being prohibitively expensive for the DIY'er. It's really more about scale than total cost per unit. So not only is it time-consuming, it's also prohibitively expensinve to market yourself. If you were a recording artist, what would you rather be doing: sign a contract or spend your time and money marketing yourself? It's like choosing between the lesser of two evils. The only other option is to not participate at all. But those with real talent and the desire to be successful and famous generally don't have the time and/or money to do the job themselves. At least with the major labels, you can streamline the process a little and only worry about the money. From that standpoint, the labels start looking pretty good. Until you realize that you're locked into a contract that's even more expensive to back out of... We've heard that story too many times to count.

Then there's the issue of payola. Despite the fact that this is no longer supposed to be going on, it does happen, just under the radar and/or with shady deals. The local FM radio station probably won't even consider playing a song by a new artist unless they get something out of the deal. I'm sure everyone can cite exceptions to this, such as a local-only segment run for maybe an hour of each day, but that's all they are: exceptions. As a general rule, you won't find new talent on any of the "popular" radio stations across the country at prime times unless it's delivered by one of the major labels. If you can cite exceptions to this, please do so in the hopes that we can find a station in our area and support them.

I'll also draw a parallel to Microsoft's own strategy. In case anyone's been living under a rock or in a coma for the last 3 decades, I'll need to explain that Microsoft is primarily a marketing machine. It's products are "good enough" for the general popluation, but are far from superior. I don't think too many of the /. crowd will argue with me when I say that MS software is bug-ridden crap. But people will line up just to pay for a new copy of an OS or office suite that they don't need. In the many reviews of recent history focus on how MS became the behemoth entity that it is, most will point at a stroke of marketing genius by Gates in that he *licensed* MS-DOS to IBM instead of selling it outright to them to include with their brand new desktop-sized computer. Does anybody else see the similarities here with the major music labels, the artists they represent, and the general public? Ownership of the products being sold is retained by MS, and we're all just buying the right to use it. And the sheeple wouldn't buy this stuff unless MS did a good job of telling people that they need to have it.

I will reiterate that marketing (and distribution as a result) is the key that the major labels hold. And they will hold it for as long as they see it as an advantage. Since the internet can be (and is, indeed) a lucrative distribution channel for any size label, it only stands to reason that they want control over that medium. But since the internet is founded primarily on trust and freedom (as in speech), gaining control over it has been fairly painful for all parties involved and can probably never be totally controlled by the major labels.

I will also point out that the future of the major labels' is far from certain, but I do think that they have an opportunity to survive more peacefully with the internet population in the future. Understandably, control over distribution is a concern. But I also really think that the leverage of the major labels will be weakened by an extremely inexpensive and accessible distribution channel like the internet. Don't get me wrong. General promotion for things like concerts, appearances, etc., will be their primary draw to up-and-coming artists. But none of this will happen until the internet is "old-hat" to the grandparents. Until then, it's business as usual.

I actually have very little experience in the professional music industry, but I am a hobby/home musician that frequently jams with friends and perform only for people I know. When I perform, I only recoup my costs (very little, usually just a few bucks for gas) and usually get a free meal. I'm happy that way and never want it to get bigger. Before I settled into this mode, I did look into promotion and explored the options of signing with a label. I almost had an ulcer (at age 22!) just hearing about what other smaller "signed" artists got in their "deals". The point is that I did my homework, but my knowledge is almost all second-hand.

My debut album costs

[Thunderweasel]

I self-produced my debut album. Over 1000 Compact Discs for approximately $3,500. I discovered though, after you have the product is when the real costs start to accrue. Lawyers, distributors, advertisements, promotion, all of them want their pound of flesh.

I had something that I needed to say with the album. I wasn't looking to become a Superstar I just wanted to make my money back. A lot of people were really supportive of my songwriting. Requesting my songs in the clubs. I'd been interviewed by reporters, signed autographs, and won a competition with one of my songs. I figured if I could get $5 per CD then I could sell 700 and break even. Leaving 300 sample/promotional CDs.

I got a distribution deal, UPC barcode, top spine label strip on the CDs, and got one of my songs onto a compilation CD that was sent to approximately 400 radio stations here in America. I'm thinking why would anybody need a record label? I can do this all on my own.

Then I found out that this is when the hard work really begins. Everything I've done until now has been for naught. I've got boxes of CDs that no one knows about and I don't know how to promote them. I'm a songwriter, not a salesman. I can hire independent promtional teams for as "little as $250 a week" they said. They'll get my name out, put stickers on walls, give away T-shirts, etc. Of course I have to have the stickers and the T-shrits, after I've spent thousands making the CD.

Well I'll just play, I thought. The music's what important. Until I got a phone call at home from a club owner saying they couldn't allow me to play my songs there, because someone had threatened them with legal action. Appearantly my songs are "intimidating" and they took offense to them. I don't who it was, but it was probably the same person that was sending certified letters to my P.O. box saying if I didn't apologize for my music they were going to sue me within five days.

I was getting requests for my CD from radio station DJs in Europe (Great! I've promotional ones I can send them). I didn't figure the cost of mailing them out. The shipping costs added to the price, dollars depending on where it was going. Some countries have import tariffs, customs requirements, etc. I either had to sell more CDs or increase the price. Can't sell them without promotion, which I can't afford.

I tried a free web hosting service to promote the album, but the bandwidth was far too limiting to allow MP3 downloads. So I pay monthly for improved reliability Shameless self-promotional plug. More money. More cost.

Then the distributor sends me an E-mail saying Valley Media, which is their link into main distribution channels, has gone bankrupt and I won't see any money for any of the CDs they had in their warehouse.

I've been threatened, harrassed, investigated (3 times now), insulted, lied to, stolen from (by companies not fans). I understand why some bands say they don't want to be famous. I found out what real parasites some people can be.

I finally put all the songs on my website as free MP3 downloads. I rather give the music away that have it used against me. Besides it's not that good. (Told ya' I not a salesman)

P.S. Did you know that managers at some chain record stores don't have the authority to buy CDs? They're only allowed to stock what they've been shipped from the corporate buyers.