Slashdot Mirror
A Music Industry Case Study
spmkk writes "The NY Daily News has an uplifting look at the fate of a (hypothetical) 4-piece band "making it big" in today's RIAA-driven music industry. The condensed version: A band that sells 500,000 records for $8,490,000 gross ends up (after a few iterations of the new math) with $161,909 in their pocket. Split four ways, that's a whopping $40,477.25 each for a record that probably took close to a year to produce. And this is for a record that goes gold (as per the article, only 128 of some 30,000 records released in 2002 were so privileged). And I bet you wanted to be a rock star when you were a kid..."
Only oversight I saw was what the money from touring? Supposedly that is where a band makes all their money.
Also there is that little thing called the record contract. Most bands sign away the rights to their songs, so they don't own the original masters, the record companies do.
You can read her manifesto about this at http://www.holemusic.com/speech/
It's more in depth than this article and comes from someone who has been there, a good read..
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Oh bother.
In a 2000 speech to the Digital Hollywood online entertainment conference. It shows how a million dollar advance and a million copies sold can equal zero dollars.
People who disagree with you are not automatically evil, greedy, or stupid.
Already done.
1. 1 song @ $.70 x 500000 downloads= $350,000
2. 1 album @ $7.00 x 500000 downloads = $3,500,000
3. Amount given to the sharks at the record companies = $0
4. Number of downloads to reach the "hypothetical" band's earnings: about 231,000 singles or 23,100 albums
5. The satisfaction gained from knowing you didn't get screwed by the recording industry: priceless
One thing though, you're missing bandwidth costs. No sane ISP would host such a site for free. My favorite hosting service charges $100 for 30 gb/month traffic.
A full OGG'd cd in high quality is about 60 mb, and would cost $0.02 in bandwidth to download. Times 500K is $100.000 out of the 'profit'. Add the actual, pysical hosting (another $100/month), setup fee ($400), physical promotion (most people can 'steal' access to a photo-copier somewhere, but 4-color offset printing is a nice touch) ..
I agree totally with your fifth point, I'm just saying that 23.100 albums is indeed very conservative.
Go see live music. If you live in a city larger than 50,000 people, there should be a few bars that get live music. Go see them. If you like them, buy their music. No record company required. No inernet piracy required. Just good music.
Thanks to the joys of deregulated radio...
Clear Channel owns the air time.
Clear Channel owns the play lists.
Clear Channel owns the concert venues.
Clear Channel owns the concert promotion.
Clear Channel owns the ticketing companies.
So, unless you want to play in a bus shelter, unadvertised, playing songs that no one has ever heard of, guess who makes all the money?
Why do you think all those radio stations that sound exactly the same as each other have exactly the same bland "Front Row Seats!" competitions, the same bland "Sold Out Seats!" competitions and the same bland DJs who're supposedly on "Hard Rock" stations giving out tickets to go and see Britney Spears with them at the same three venues as every other gig you ever hear about? Clear Channel owns the entire chain from start to finish, nationwide. Even when there is a chink in their defence, the artists all know damn well that if they dodge Clear Channel in one city, they'll be blacklisted from every other one across the nation.
Everyone criticises the RIAA on slashdot. After all, they're the evil monopolies, making all the money at the artists' expense. The problem is, to get their product out, they have to deal with a monopoly. I'm not defending them but they're also not making money hand over fist either - not because of piracy but because Clear Channel squeezes every last penny out of music, shoe-horning it in to an easy to sell, nationwide generic sludge. Bad as the RIAA are, perhaps it's worth going after the real culprits.
Do we need any further evidence that the recording industry are the real pirates? Don't buy CDs. Buying them doesn't support the artists. It only enriches the parasites exploiting them.
How ya like dat?
This is one of the best breakdowns I have ever seen and it is the one that I point all of my friends to when they ask (along with Salon's Courney Love Does The Math).
But I don't understand why everyone gets so bent about Hillary Rosen and focuses all their attention on her. She's just a prostitute. The industry will ALWAYS have a prostitute. It almost seems like the Slashdot et al crowd is almost in collusion with the RIAA in this blatant misdirection. Is she scum? Yeah. But who cares? So is Valenti but he's a salesman, not the guy driving the vehicle.
It isn't anything you said, I'm just ranting.
My
Limekiller
Actually it was Andy Wallace (Slayer, Jeff Buckly, Faith No More, System of a Down (recently)) who mixed Nirvana's Nevermind that made it the radio-friend unit shifter that it became. If you ever hear Vig's mixes of Nevermind or the demos he did before that were supposted to be Nirvana's second Sub Pop album you'll hear a noticable difference. They were, to put it mildly, a little rough. Vig might have been in a little over his head at that point in his career.
Stupid Cheap Guitars
It has always been somewhat true that success in the music industry was based on image, not quality of music. Since the dawn of MTV and the half-million dollar music video this has become more true. Since the deregulation of radio in 1996, and the return of payola this has far more true. In short, almost any band can become popular with major label support, and almost no band can become popular without it. (Notice that the quality of the "alt" rock on the radio saw a sharp decline starting somewhere around 1996/1997, thank you Bill Clinton and Congress)
The members of the RIAA have virtually identical business practices so if you don't like the deal offered by say Capitol, you can't go to Sony and expect much better. And you can't hold out on Capitol, because they don't really need you.
Combine this with the fact that the music industry has been marketing toward a younger and younger audience (remember when the tastes of 20-somethings determined popularity? How many people over 20 can name more than 2 rock acts that had a #1 hit in the past year?). A young audience doesn't have a lot of history of listening to music. You can repackage an old formula (Nirvana, Pearl Jam, Green Day) and sell it to 15 year olds; they'll never know the difference.
Indie acts can take a far larger cut of record sales (though indie labels can frequently be desperate enough for cash to be just as underhanded as the majors, and there's always the danger that your label will go bankrupt), and indie acts take a FAR larger cut of touring and merchandise. So someone signed to Merge or Matador (2 fairly well known indie labels) selling 50,000 albums a year would probably make as much as someone on Sony selling 500,000. How many indie acts sell 50,000 albums per year? Not many.
So why not self-release? Well it takes a _huge_ amount of starting capitol. Say you want to print 5000 albums, about a minimum if you want to be stocked in stores just in your home state. At that quantity, CDs cost about $3 per, so that's $15,000. Not a small amount of money for your average musician. Of course, with no label, you get no promotions and no automatic opening gigs with more promanent acts, so selling those 5000 CDs to pay back mom & dad that $15,000 is quite a trick.
Can it be done? Yes. Is it worth it? Probably not. These days I can't imagine why anyone would sign to a major label unless they really wanted to see themselves on MTV. From a financial and creative standpoint, it makes very little sense.
In Capitalist America, bank robs you!
500,000 albums sell at $16.98 = $8,490,000 Okay, so that says: Total Earnings = $8,490,000. Now let's work out who gets what out of this.
... reaps ... $829,900
B = Band, R = Retail, S = Studio, Packaging, production costs, A = Advertising, L = Lawyers, T = Total Left to record company, M = Manager
The Grunts' royalty is 15% of retail. Now, if we take this at face value that means.
B(OfRetail) = 15% * 8,490,000 ~= 1.3 Mil. But since we know this is wrong, let us continue.
"packaging deductions" of 25% So, this translates into, or means that
S = $2,122,500, T = $6,367,500
now we also have, That's a "free goods" charge of 15% So that gives us (since this is advertising)
S = $2,122,500, A = $1,273,500, T = $5,094,000
Okay, now we are getting somewhere. Now the band gets from this. So, the band's royalty is actually: $764,100
B = T*.15 = $764,100 - Yep!, S = $2,122,500, A = $1,273,500, T = $5,094,000 - B = $4,329,900
Now, The $3,500,000 balance goes to retailers So, we have
R = $3,500,000, B = $764,100, S = $2,122,500
A = $1,273,500, T = $829,900
The record company
R = $3,500,000, B = $764,100, S = $2,122,500, A = $1,273,500, T = $829,900
Okay, our numbers all make sense thus far... now things get weird. Because the band was hot, they got an advance from the record company of $300,000. They spent $200,000 of that recording the album, which included a $50,000 advance to the producer. They pocketed the remaining $100,000.
So this means that the band got $200,000 of their royalties early, and spent $200,000 on recording costs, and the band kept the $100,000. So we have
R = $3,500,000, B = $764,100 - $200,000 = $564,100, S = $2,122,500 + $200,000 = $2,322,500, A = $1,273,500, T = $829,900
Now as well, we have more advertising (the video). So here we go. the label spent $100,000 making the band's first video Which was expected to be paid back
R = $3,500,000, B = $564,100 - $100,000 = $464,100, S = $2,322,500, A = $1,273,500 + $100,000 = $1,373,500, T = $829,900
Whoa, now our numbers aren't lining up as well. Where the problem? The article says: So the royalty drops to $364,100.
For some reason the writer of the article decided that the $100,000 that the artists kept wasn't really paid out to them. Even though they "pocketed the money" or kept it, or however you want to put it. They made $100,000. That's the deficiency. They do fix this later on. Now, let's finish.
But the band's producer also earned a 4% royalty of $203,760, of which he already received $50,000. So the band has to pay him an additional $153,760, reducing their royalty to $210,340. Let's put this as production costs. Since the producer must be paid as well.
R = $3,500,000, B = $464,100 - $153,760 = $310,340, S = $2,322,500 + 153,760 = $2,476,260, A = $1,373,500, T = $829,900
Good.. Good... After pocketing $310,340 (which includes the remaining $100,000 of the advance) All Fixed
the band has to pay their manager 15%, or $46,551, and give 2% of the total deal, or $101,880, to the power lawyer who got them the deal in the first place. That takes the band down to $161,909. Let's see now:
R = $3,500,000, B = $310,340 - $101,880 - $46,551 = $161,909, S = $2,476,260, A = $1,373,500, T = $829,900, L = $101,880, M = $46,551
Total = $8,490,000 - All is accounted for.
Okay, so now that we have all of the numbers worked out.. Whose coming out on top here.
Well, the Retail guys definitely make a pretty penny. ($3,500,000), but that has to be divided over all their stores, so it doesn't work as well.
Studio costs are really high. (Higher than they probably should be.) That would be something of note.. But most importantly... the record company gets T = $829,900
That's it... Sure they get "whatever's left over from packaging and advertising" but that's not going to be that much. So the record company is making very little off this deal.
Really, if this shows anything, it is that the current system is too cost intensive, and that if it were optimized, there may be a better way to save money, and make sure everyone gets paid. It's not a conspiracy people. It's just common sense. These fees have to paid somehow, sure they may be high, but they are still necessary costs.
Personally, I don't see a problem with the record companies persay. I see a problem with how the money is spent recklessly. If you like a song, buy the CD, sure the artist doesn't get much, but it will make sure that more music like it is made in the future. All of those other costs have to be covered as well. If the only people who pay for CDs are people who listen to Britney Spears or Enrique Iglesias (Not saying they aren't good singers), then the only CDs that will be made are those by B.S. and E.I. The artists people are willing to pay for, and make sure that the investments that these companies put into them are returned.
It's simple math, that's all it is, and that's all it will be. It's not a revolution, or a conspiracy.
~ kjrose
Someone needs to moderate this up as Informative. It's so very true -- bands aren't supposed to expect to make money from selling their recorded music. The money is supposed to be in touring ticket sales, and maybe royalties for soundtracks, etc.
Dossy's Blog
To show you just how desperate musicians are: a pretty big county label in Texas use to send their agents to nightclubs, bars, etc ... and would literally sign everyone, any band they could get their hands on. The contract read basically the label owned the songs, and rights, and even the performers names (in case the name of the band changed) and in return the band got a 4 year deal (with no money) but did get 20 hours of recording time paid for by the label (at the labels own studio, between midnight and 8:00am). The label did nothing for them, but if the band happened to do something (get noticed or write a hit song) the lable would walk in with contract in hand and demand most the money from it. The musicians were so screwed. I knew a few of them who acutally legally changed their name just to get out of the contract. But heah ... they got to tell everyone (for 4 years) that they were signed with a label.