pldennison:
[ If you can:
a) show that you have any understanding whatsoever as to the costs to a record company
for artist scouting and development, upfront recording costs, advances, promotion and touring, all in the hopes of moving enought units to be profitable; and
b) try to understand that by screwing the record company, you're screwing tha artist, who has a contract structure (99% of the time) that keeps him or her from making any money at all absent moving a boatload of records (it's really, really hrad to get rich in the music industry)
I promise I won't think you're a thieving schmuck. ]
Right, and IRL I’m actually Meatloaf. Sit down, grab a coldie, and feast your peepers. This may take awhile:
[Begin references]
http://www.dacapo.mb.ca/album.html
Example 1: Very Large Project (eg. Sarah McLachlan type album)
Studio Time $18,050.00
Musicians $2,400.00
Storage $800.00
Producer Fee $8,000.00
Mastering Fee $500.00
MIDI $2,100.00
TOTAL ALBUM $31,850
http://www.wixy.com/faq.shtml#three
TRACKING 55,250
OVERDUBBING 35,750
MIXING 31,800
MISC. COSTS 18,600
TOTAL PRODUCTION COSTS $141,400
Not included in our example are advanced paid by the record company to the artist and producer. These advances against their respective royalty earnings typically range from $20,000 to $40,000 for producers and from $20,000 to $100,000 for the artists. (To reiterate, these costs are for recording an album only, not producing the actual CD that ends up in the retail store – editor.)
http://stripe.colorado.edu/~jheath/faq1b.html
Margin for retailers: 30%
Margin for production company: 70%
Artist royalties … are actually based on 80% of factory shipped units, rather than actual units sold.
The record companies themselves, who’ve had a history of spending ridiculous amounts on production costs, designers fees, and promotion, might do well to reduce these factors if they intend to compete in the future.
http://www.weeklywire.com/ww/08-24-98/memphis_cvr.html
Consumers and music-industry critics have complained for years about the high price of CDs. They note that, despite forecasts made when the technology debuted in the '80s, the price of new CDs has not dropped but has instead increased. But an examination of the budget involved in producing, manufacturing, and delivering a CD to music stores does not reveal much fat. And if blame is to be levied, it certainly doesn’t belong on the artists, who, ironically make the least on a major-label release.
For a typical $15 CD with national distribution, the store usually takes $5. The record distributor, who is responsible for getting the disc in stores and for some of the promotional duties, takes another $3. That leaves $7 for the record label and the band. The label takes its share first, recouping its expenses for production and promotion. Finally, once all the other expenses and shares are paid, the artist gets paid.
Usually a band ends up with about 12 to 13 percent or about 88 cents of that $7, which must then be split among group members and management. At 13 percent, if their record goes platinum (1,000,000 copies sold), the Flyers’ cut could reach $910,000. Divided among five band members, that comes out to $182,000, minus the agent’s cut, lawyers’ fees, etc.
http://www.richardnorton.com/musicians.htm
The highly demanded recording format is presently compact discs over cassettes and vinyl. Compact discs retail in stores anywhere from $12.99-$19.99.
Grand total of the packaged CD costing $1.22 per unit… for small orders of 2000 units or less (big orders are cheaper).
Major labels then sell their CDs (in quantity) to distributors at wholesale prices ranging from $6 - $10. The distributors then go ahead and sell to music stores, and so forth, charging $13 - $20 CD.
Most artists receive between 6 to 13 percent of the retail sale price after the record company recoups all money loaned to the artist. Royalties are only calculated after packaging costs and taxes are deducted from the sales price and are payable only on the amount of records sold (about 85 percent of the total number of records sold as CDs and 70 percent of records sold as singles.)
…the royalty rate which translates anywhere from 70 to 98 cents per album
Record companies usually deduct a certain amount of money income coming from sales for the cost of packaging records and CDs. They deduct up to 25 percent of the price on CDs for packaging, up to 20 percent for packaging on cassettes, and up to 15 percent on vinyl LPs. Artists/producers will not receive royalties on the money that is deducted for these costs. If the price of a CD retails for $15.00, 25 percent of that would be $3.75, which would be the packaging deduction. (Kashif 219)
Record companies exaggerate the wholesale price of records by 15 percent and pass along to wholesalers 15 free records for every 85 records the wholesaler buys. The wholesaler is still paying the exact same price for the same amount of records, but since record companies pay no royalties on free goods the artists does not receive royalties on 15 free records the wholesaler is supposedly “getting for free.” (Kashif 216)
The average deductions for free goods are 15 percent for CDs and 23 percent for singles. This means that for every 85 CDs or cassettes sold to record stores, an additional 15 are received as free goods. Of course, the artist gets no royalties on these records.
Also, most artists misunderstand the 15 percent free goods issue with the free goods that record companies give to record stores, radio stations and TV stations. There is a difference with the free goods that labels give to record stores for promotion, product attraction, and in-store air-play (a further deduction of 5 - 10 percent from artist, producer, publishing royalties!) (Kashif 216)
Artists wanting to purchase their own music recordings for selling at live performances, as well as for giving to friends and family members, are only permitted to buy back the recordings from their own label at a special wholesale rate. The labels charge the regular wholesale rate $6-$8 per CD to the artists for their own music. (Keeping in mind, CD manufacturing at most costs $1.22 to make.)
A survey of the US soundcarrier market found that in 1995 the biggest six music distributors issued only one-third (5,850) of the 17,124 current titles selling more than 100 copies although the large companies were responsible for more than 80% of all recorded music sales (10). The importance of the many hundreds of smaller “independent” companies is their commitment to maintaining diversity in the music market by issuing recordings that would be uneconomic for the large companies to handle.
http://www.stern.nyu.edu/~sjournal/articles_00/Streaming_Technologies.htm
The Music Industry
… an album costs at minimum $250,000 to bring to market.
Royalty agreements in the music industry, like those in the film industry, are largely the function of relative bargaining power. Typically, the royalty base for an artist starts at around 10 percent of gross retail sales, adjusted for such items as breakage fees (damaged records in shipment), packaging fees (record artwork), promotional records (“freebies”) and record-club discounts. The royalty rate is then often based on a tiering structure such that the more records sold, the higher the royalty rate. This amounts to anywhere from $1.00 to $1.40 per CD, the proceeds of which the artist does not recoup until the album breaks even.12
In addition, the cost structure outlined confines an artist to releasing material in a certain format, at certain intervals. Finally, it is the label, and not the artist, that typically owns most of the copyrights to the product, most notably the sound recordings. Thus, while an artist enjoys the many benefits of being aligned with a label, there is a hefty price to be paid.
With the acquisition of Polygram and Universal by Seagram, over 80 percent of the global music industry is controlled by five major record companies which either wholly own or have controlling interests in the majority of record labels. According to 1997 figures, EMI Group Plc (EMI-Capitol) had $6.5 billion in sales, Sony Music Entertainment – $5.3 billion, TimeWarner, Inc. (Warner Music Group) – $3.7 billion, Bertelsmann AG (BMG) – $2.2 billion and Seagram (Polygram/Universal) – $6.2 billion.10 As of 1999, Seagram has the greatest market share. The Big Five’s hammerlock on the supply chain including talent, retailers, distributors, mass marketers and radio is undeniable.
In thinking about the concept of digital distribution, one must ask how consumers actually purchase and interact with music. Is there a model of distribution that is particularly compelling? Perhaps the best starting point is looking at what happened when the Video Cassette Recorder (VCR) was introduced in the early 1980s. During this period, the film companies claimed that the VCR spelled the death knell for the industry. The Chicken Little argument used was that if people could now make copies of films that were made available through broadcast or on tape, then most people would forego paying for them. Yet, this clearly is not what happened. Despite the fact that movies are essentially streamed to us via network television, pay per view and premium cable, few viewers bother videotaping them. Today, the film industry is as strong as ever.
[End references]
To summarize:
An album costs anywhere from $30 K to $250 K, up to a couple million for a big budget superstar.
The CDs cost about a buck and a half to make, delivered to the point of sale.
The CDs sell for around $15 to $20.
The store gets around $5.
The distributor gets around $3.
The label takes around $6.
The band gets less than a buck, and out of that comes the agent, and the lawyers.
The label cooks the books to the tune of 15% off the top by using legal loopholes.
The label charges the artist about 4 times actual costs for CDs of their own music to sell at concerts.
The big five labels control 80% of the market yet only release 30% of the new music each year.
Remember a couple years ago when burnable CDs first came out? Wasn’t it the RIAA that was right there with the RottLawyers on a leash, forcing the manufacturers to charge an extra $4 per disk just in case you recorded some of their music on it? And how for nearly a year they tried to get that same surcharge applied to data CDs?
So let’s see; the big labels dork the artists, choke the industry, dork the fans, shaft the public, and use waves of attack lawyers to try and keep their big thumbs on the gold mine. I gotta hand it to them, it’s a refreshing break from the usual method of showing just a trace of respect for the custumor. They are breaking new ground in the ‘bend over boy’ method of marketing. My actual quote from my last post was:
[… The RIAA can suck my ass]
Notice I said the RIAA, not the artists. That’s why I buy my music legally even though it feeds the shitbags. If I find some toe tapping tunes on the Web and I really like it, I go buy the CD. I’m not broke and I’m not a theif. But I can’t wait for the day when my music dollar goes mostly to the artist instead of a bunch of arrogant sphincter boys in pinstripe suits.