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The Almighty Buck

Money in the Music Business 221

Posted by michael
from the midas-touch dept.
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."
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Money in the Music Business

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  • Buggy Whip Thuggery (Score:1, Informative)

    by 1alpha7 (192745)

    . . . many people think record companies are just plain bad. Why is that? . . . Perhaps it's because of the way record companies make their money: they make it from our heroes, the musical artists.

    All notions of musical parasitism aside, record companies perform the critical functions that allow artists to reach the masses.

    No, musical parasitism not aside, technology has made the Big Five as relevant as buggy whip manufacturers.. Perhaps its their illicit oligopoly that offends the customers. Or just the use of that monopoly-like position to crush as much opposition as possible.

    1Alpha7

    • lets not forget their habit of lobbying for quasi-to unconstitutional extentions to IP laws, and stifling progress in the tech sector.
    • by paulbd (118132)
      as much as i dislike [equalarea.com] 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 [equalarea.com] 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.
      • . . . i know from personal experience of starting a CD label that they are not "as [ir]relevant as buggy whip manufacturers".

        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.
      • 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.
    • 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 [xdas.com], 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.
  • Sounds like VC (Score:1, Interesting)

    by Anonymous Coward
    This looks very much like the deal with Vulture Capitalists. You go to them, you beg for money, hoping to get rich. They get richer in the long run. Maybe you get lucky. Everyone complains.

    Any thoughts on who gets the shortest end of the stick? Nerds or musicians?
    • "However, the best opportunity for artists to make serious money is to write their own songs."

      It is such a shame that music has become another talentless investment. Back in the day, people like Beethoven didn't write music because they wanted to make some cash, they loved it, and they got the crap beaten out of them by their parents if they didn't play.

      Gee I would love to see N*Sync get slapped around for not being corporate hoars, and lip syncing a song because they want to be as rich as The Backstreet Boys (Pop music in all its evil).
      • Re:Music for money? (Score:1, Informative)

        by Anonymous Coward
        "Back in the day, people like Beethoven didn't write music because they wanted to make some cash"

        Sorry to spoil your dreams, man, but musicians throughout the ages were in the business to make money and live nicely. Read http://classicalmus.hispeed.com/articles/beethoven .html (search the page for the word "income"). Mozart suported his extravagant lifestyle by writing operas (http://www.mit.edu/~nat222/viktor/mozart.html). Biographies of famous musicians often fail to mention finances, but few said no to a lucrative court appointment.
        • Re:Music for money? (Score:2, Informative)

          by Waltre (523056)
          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:))
  • Compare this to Steve Albini [allmusic.com]'s somewhat infamous "The Problem With Music" article which appeared in print a few years ago. Here are links to it: (note that these are links to the same article -- pick one at random)

    http://www.mp3.com/news/222.html [mp3.com]
    http://www.musicalevolution.8k.com/albini.htm [8k.com]
    http://www.negativland.com/albini.html [negativland.com]
    http://www.ram.org/ramblings/philosophy/fmp/albini .html [ram.org]
    http://www.musicianassist.com/archive/article/ART/ a-1098-1.htm [musicianassist.com]

    • by paulbd (118132) on Saturday November 24, 2001 @10:59AM (#2606715) Homepage
      the problem with Albini's analysis is that it doesn't mention that the obscene $710,000 profit the record company made has to be used to amortize all the losses it made on the new mariah carey cd. see, there's this problem: you're a successful musician, and the record company appears to be ripping you off. they probably are. but a large part of the apparent rip off is because they are also making lossy investments in new artists which never work out. now, you could choose to excuse yourself from this charade, like ani defranco and others have done, by working on your own - you win, then you win big, but if you lose, you lose everything you put in. however, as long as you choose to allow somebody else to help you with the initial costs, you need to deal with the fact that their losses on other artists need to be covered by their profits on you. in such a system, the artists are simultaneously screwed and simultaneously supported. of course, the record companies are making obscene profits on the backs of underpaid musicians. but don't assume that when you get those numbers down somehow that the inherent inequality in the relationship will go away. if someone if going to make a risky investment in several artists, the ones that succeed will need to pay for the ones that fail. do you want your success subsidizing your fellow artists failures? do you want your failure subsidized by your fellow artists? or put another way, do you feel lucky, punk ? :))
      • see, there's this problem: you're a successful musician, and the record company appears to be ripping you off. they probably are. but a large part of the apparent rip off is because they are also making lossy investments in new artists which never work out.

        How is a record company any different from, say, a Venture Capatalist? Well, that's easy: A VC is willing to eat a loss, but a record company isn't... Part of this is based on business models. A VC is looking for a group that will be successful for a *long time*, one that can make a billion a year, every year. A record company, on the other hand, is looking for a flash in the pan. Somone who can make them a quick couple of hundred million before burning out. A VC can afford to lose on 9 out of 10 investements becuase that one that is successful will be around for a while and continue to bring in more money. This is not the case for record companies, becuase, with some exceptions, of course, even thier most successful artists aren't usually *continuously* profitable.
  • by rudy_wayne (414635)
    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.
    • by Anonymous Coward
      This is a good simplified outline of the *process*, the numbers are arguable.


      They're talking about big mainstream acts. But the numbers probably scale down fairly close for Indy acts, where costs -- and potential album sales -- are usually a LOT lower.


      the artist will probably spend $200,000 of the $250,000 advance on actual recording costs.


      Not that many bands, at least the ones right out of the gate, spend that kind of money in the studio. That's 1000 hours -- 25 40-hour weeks -- in a (cushy) $200/hr studio. Maybe in the Spinal Tap era.


      EM seems to be taking its numbers from a worse case scenario, and a seriously out-of-date one at that.

      • Bearing in mind that the *bands* time in the studio is typically only about half the cost of recording an album.

        Among costs typically incured are the odd session musician, outside arrangers, equipment setup and rentals, etc. and these can add up, even for what looks to be no more than a 4 piece band.

        Then there are the engineering costs. Mixing and other post production jobs often take MORE time than that in actually putting down the tracks, and are billed at the studio hourly rate.

        And to take an extreme example from an era well before Spinal Tap's, Crosby, Stills and Nash spent *5 years* in the *studio* to produce their first album, and this for a three piece acoustic act.

        Yeah, some modern pop bands can bang out crap for the masses fairly quickly and cheaply.

        Those crafting well produced works of musical art requiring the talents of many people other than themselves have a harder time of it.

        KFG
  • 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
  • by Anonymous Coward
    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.
    • Important problem: Artists don't make money till the record label breaks even, which is fine, except the labels turn around and claim the song is a work for hire which gives the label, not the artist the rights to it. If the artist is producing a work for hire, then they are EMPLOYEES of the label, and shouldn't pay thier own fees, nor should thier pay be dependent on the success of the album. If the label is just acting as an agent, then the rights to the song should remain with the artist.
  • by ManInBlac (40475) on Saturday November 24, 2001 @10:01AM (#2606609) Homepage
    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.
    • So would you consider starting an online venture to try to take advantage of alternative forms of distribution? I think it would be really great if a bunch of indie labels got together and did it right.

      There are a lot of ways to do it, but say that your band and others like it sell memberships to a web site at their concerts. Say for £10 the fan gets an account and the right to download as much as they want for 12 months. £5 goes to the band that sold the membership, the rest is split up amongst all the member bands in proportion to downloads (with some taken off the top for running the site).

      I think this would work great for smaller local bands that have a following, but aren't big enough to sell a million records.

    • And, of course, Sister Machine Gun's [smg.org] own indie company, Positron! Records [positronrecords.com], is quite cool as well. They're always sure to throw in tons of free stuff and the shipping is faster than light.

      Oh, yeah, and the music's great.

  • by Walter Bell (535520) <wcbell@nOspAM.bellandhorowitz.com> on Saturday November 24, 2001 @10:04AM (#2606611) Homepage
    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
    • Stopping piracy (Score:4, Insightful)

      by mangu (126918) on Saturday November 24, 2001 @10:39AM (#2606688)
      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.
      • 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.

        Is there really any evidence that this goes on on a large scale? I spent considerable time in Indonesia during the last decade, and if you knew where to look (which wasn't that hard) you could find industrially made unlicensed copies of every piece of computer software ever written, as well as VCD (mpeg1) disks with just about any movie (telesyncs, cams, screeners, or just copied from video or original VCD), and even whole stores selling photocopied books, but until disks full of MP3s started popping up around 98-99 it was practicly impossible to find music disks...
        • Re:Stopping piracy (Score:2, Informative)

          by mangu (126918)
          The rationale behind that hologram sticker in some products is exactly to prevent large scale piracy. It doesn't work very well, since the technology to duplicate that hologram is about the same that is needed to copy a CD. I guess the main reason why software piracy is so much more prevalent than music piracy is that software brings higher prices.

          But I wasn't thinking about what you can buy in the streets in Indonesia. I was told by someone in the marketing department of a music company that there are pirates that make CDs by the truckload, copies perfect to the last detail, so good that they are sold to major retailers in the USA as the real stuff. And they don't even need to copy a CD, they bribe technicians in the recording companies to get a copy of the original master record, before any sort of copy protection is put in.
      • Re:Stopping piracy (Score:3, Insightful)

        by dirk (87083)
        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.


        I completely agree about the large-scale pirates, but they are continuously going after them. Everyone points to these pirates as if that makes a difference, but the record companies have been going after them for years and years.


        You second kind of piracy is fairly innocent. I think most people would agree that it doesn't hurt the record companies that much. It is very small and innocent. What you leave out is the piracy they are really going after, and that is internet MP3 trading. This goes far beyond making a cd or 2 for a friend. It involves putting a cd (or songs, or whatever) on the net for anyone (potentially millions of people) to download. This is a much larger problem than making a cd for a friend.


        There is no evidence pointing to the fact that Napster/Morpheus/etc have hurt or helped CD sales. It's impossible to tell, since there is no control group to compare it to. Some people say they bought more CDs since file-sharing became big (just ask around /., most people will say that). But the average user (IMHO) does just the opposite. They use file-sharing to avoid buying CDs. The evidence is just a quick look at what is available. For the most part, it is the commercially successful songs. These are songs people don't need to "test out" to see if they like an artist, these are songs almost everyone has heard. The majority of people like the concept of something for nothing. And this is what the record companies are going after. Unfortunately, when they go after the "something for nothing" crowd, they have to go after the "preview" crowd as well, since there is no way to distinguish between them.

        • "But the average user (IMHO) does just the opposite."

          That's begging the question, and I don't agree that is true, but even if it were, it might still be the case that the record company sales go up as a result of Napster and its ilk (and the only evidence I saw showed that Napster increased sales).

          The point about these tools is that they allow more people who might not otherwise have heard the music to listen. If they like what they hear- they are more likely to buy. It's free advertising, and not only that, it's positive advertising (posvertising), rather than force-down-your-throat way (adversising).

          What's better having an audience of 10 people of which 5 buy or 20 people of which 6 buy?
          • Re:Stopping piracy
            by WolfWithoutAClause on 08:30 AM November 24th, 2001 (Score:2)
            (User #162946 Info) http://slashdot.org/
            "But the average user (IMHO) does just the opposite."

            That's begging the question, and I don't agree that is true, but even if it were, it might still be the case that the record company sales go up as a result of Napster and its ilk (and the only evidence I saw showed that Napster increased sales).

            The point about these tools is that they allow more people who might not otherwise have heard the music to listen. If they like what they hear- they are more likely to buy. It's free advertising, and not only that, it's positive advertising (posvertising), rather than force-down-your-throat way (adversising).

            What's better having an audience of 10 people of which 5 buy or 20 people of which 6 buy?


            I agree that Napster may still increase cd sales. There is no real evidence either way. The evidence you saw showed that record sales increased, and Napster existed. There is no way to draw a correlation between the two without a control group (of which there is none). The record companies will show you data that says record sales increased less than they would have without Napster. That is CD sales have been increasing 10% a year, and since Napster they are only increasing 5% a year (the numbers of complete figments, I am just using them as an example). This doesn't prove Napster is hurting CD sales either (for the same reason I stated before).


            My main point is that everything seems to point to the anecdotal evidence of people buying more cds because of Napster, but most of the evidence I see points the other way. This is to say it has to be that way, that's just my opinion. I see as many people, most probably more, getting their music from the internet instead of paying for it. and many people who find new music on the net use the net to get more of it. I know I have done that personally. You find a new band you like, and it's a lot easier to hop online and download the rest of the CD rather than going and spending $20 for it. Again, not everyone does this, but I believe it is a majority.


            You are assuming that the majority of people who find music on the net go and buy the CD. I see the evidence pointing the other way. They get their music for free of the net, and when they find a cool new band on the net, they download them also off the net instead of buying it. But there's no way to say for sure, since there is no control group.

            • Actually the evidence I saw was more like two universities. One saw a reduction in the number of people buying CD's of 5%, the other saw a reduction of 0%. The one with the 0% reduction hadn't banned Napster; the other had banned Napster.

              This implies to me that Napster actually increased sales by 5%. Of course to be definitive you'd need to do the study in lots of different places and extend it, but the record companies pointing to Napster and so forth and claiming that they are losing business is by no means proven; and they may well be wrong.
    • "Record companies run a risky, speculative business, and it is a well-known fact that most of the artists they sponsor do not succeed"


      One does not need one minute of radio airplay, any videos, major labels, or really high "promotion costs" to make descent honest living [dischord.com]. Not only that, it is almost always MORE profitable for a band to rely on word of mouth than it is to rely on spending 100K on promotion costs.

  • by jkujawa (56195) on Saturday November 24, 2001 @10:05AM (#2606616) Homepage
    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/ [arancidamoeba.com]
  • he primary source of income for artists who write their own songs is mechanical royalties. Typically, a performing songwriter owns his or her own publishing company. That company enters into a copublishing agreement with a larger publishing company whereby the two companies co-own the copyrights to the songs. Of the mechanical royalty income, the songwriter receives 50 percent, the songwriter's publishing company receives 25 percent, and the larger publishing company receives 25 percent.
    At least that's a good new thing I learned there. The creator of the work gets rewarded.

    What does it have in common with creators of software?

    • The creator of the work gets rewarded.

      Usually a new act signs a contract that forces them to use the record company's publisher. If the artist insists on using their own publishing company, the record company won't promote as much, making it very difficult to get an album out (or just won't sign them).

      Another trick is to sign a 3 record contract that sucks to get your foot in the door, then negotiate a better deal on the renewal. Look to see what happens to Brittany Spears, now that she fulfilled her 3 album deal. If she gets a new contract, they'll give her the world on a platter (including her own publishing company), since she's huge right now. However, they'll also be working on the next Brittany at the same time. If her next album survives against the "neo-Brittany" the record companies are preparing right now, hey, great. Everybody wins. But, don't look for the massive Brittany wave of shamless promotion we've seen during this contract.

    • The whole "co-own the copyrights" thing sounds fishy to me, and I've never heard it anywhere else. Here's a point that (I believe) Courtney Love made: look at a John Updike book: it says something like "Copyright John Updike, A Fawcett Crest Book, Published by Ballantine Books", not "Copyright Ballantine Books". Look at a Monster Magnet CD: it says "Copyright A&M Records", not "Copyright Monster Magnet".

      One of these models is messed up, and I don't think it takes an intellectual property lawyer to figure out which one it is. And you hear neither people complaining about how evil the book publishing industry is nor the book publishers wailing about how hard their lives are, despite the similarities between book and record publishing.

  • by gillbates (106458) on Saturday November 24, 2001 @10:17AM (#2606642) Homepage Journal
    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.
    • 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.


      Yup, but look at their expenses.


      I used to work stock at a Caldor's (defunct discount store). They grossed about $20K per day. I have to guess that, at any time, they had no less than fifteen employees on duty--some at the checkout, some visible in certain departments, and some busy in the back loading stock. Assuming the store is open for 12 hours a day, that means that they have to pay for $600 in payroll. Assume $10.00 per hour (in paycheck, plus employer-side social security taxes, plus benefits packages), and you are spending $6K per day in payroll. With 100% markup, your $20K in sales cost you $10K in merchandise, so now you're down to $4K margin on the day.


      From that $4K/day, subtract the advertising budget, PITI payments on over a million dollars of building, parking lot, and land, consider shrink (missing inventory--often theft from your employees), unsellable returns, and utility bills, and how much is left? Not bloody much.


      Retailers take a lot of gross margin, but not a lot of net margin. When many hands touch the merchandise, all that money goes many ways.


      The fact is, it took a lot of people to get you that CD you bought in the store. The artist, the studio techs, the CD burner people, the warehouse jockeys, the retail drones, a couple of OTR truckers--and they all have to eat. So everybody gets a little piece of the sale.


      I'm not saying that one or two people in the supply chain don't get a large piece of the sale, but it's not always as large as you might think.

      • Assuming the store is open for 12 hours a day, that means that they have to pay for $600 in payroll. Assume $10.00 per hour (in paycheck, plus employer-side social security taxes, plus benefits packages), and you are spending $6K per day in payroll. With 100% markup, your $20K in sales cost you $10K in merchandise, so now you're down to $4K margin on the day

        HUH? $6,000 in payroll? Is this some kind of new math?

        15 employees X 12 hours x 10 hours = $1800 not $6000. That margin just went up to $8200!
    • 100% is bullshit. I've worked for Record Retailers before and can assure you that they make far less than that in Gross Margins, never mind after you've stripped out the store and distribution expenses. All a ballpark figure, gross margins might be 25-35%, 5-10% after costs.

      Gross margins are low in music retail because the retail market is very competitive - It's relatively easy to sell CDs since they are standardised products and the purchasers are generally price sensitive and will shop around in their local area.

      High prices in music are all about the *monopoly* power that record companies have. It's monopoly power because they manage to manufacture a "must have" status for their products and they are the only supplier. This means that they can get away with charging very high prices without losing custom. Neat trick, but a complete scam nonetheless.
  • i heared a great deal of really well home recorded music. especially in the electronic sector, but also garage bands.

    do you really have to spend so much for recording? for some plastic music like britney spears and so on (and who's listening to this anyway?) - ok. but there is a lot of good music out there that doesn't need it. if it would, there couldn't be any good life concerts.

    so, according to the figures, 95% of the artists would do fine if they puplished everything on mp3, and made money by touring.
    plus they could still make money by airplay.

    • 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.
  • by Rogerborg (306625) on Saturday November 24, 2001 @10:32AM (#2606673) Homepage

    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.

    • 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?

      I really don't think this is so shocking. I'm amazed that they can make Brity Spear sound good, it's a marvel of modern technology. It's also pointed out that the Union Man, the songwriter, sits in first class while the scabs sit in Coach.

      What they don't mention is that that same expensive technology and marketing engine fails on non-pop bands. Girls vs. Boys was a great punk band, but their major record label CDs sounded like pop, and bombed. Ani DiFranco had to create her own label because the record labels couldn't figure out which shelf her music went on. Pee Shy was a eclectic Florida/NY band that died after their second CD because they were forgotten during one of the music industry mergers. I read about a music store that couldn't figure out whether Patty Smith should go in Folk or Punk, and decided it wasn't worth it to stock.

      The industry is broken, and it isn't just because technology has reduced their natural use to promoters and financiers. They've merged to the point where they don't have enough heads to deal with all the music out there and so are forced to deal with the mass appeal stuff like nSync, Madonna, Spear, etc. Technology is just a catalist, eventually someone would have figured out that better bands don't need as much handholding but still need risk capital and figured out a better business process with lower costs.

      The economy of scale needed for records, cd's, and glossy 4 color prints to make money made the publishers too big to make money for smaller bands (That is where most of money is to be made). Book publishers will have the same problem in a few years when someone figures out how to print a single nicely bound books on the cheap. They were more recently merged so they may be able to undo the problem. I have little hope that most of the record companies will survive however, their only hope is another copyright extension by congress, but at some point the Supreme Court will have to strike that down. (Monopolies can only be granted for limited times under the US constitution. I don't know if Europe has the same restrictions on their governments, but they have fewer lobbyists asking them to hobble their intellect.)
  • Well, these numbers are all well and fine and everything. But the author lost the major point:

    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.

    • making people aware of your music, hopefully to the point of wanting to pay for it, is expensive.
      • Not at all.

        At least half of the cost (to the customer) of the CD is markup by the retailer.

        Roughly half of what's left is physical production (pressing discs, printing inserts) and shipping costs.

        So 3/4 of the cost of a CD (again, roughly) is useless physical disks and the distribution of such.

        That means that marketing, even when done in an expensive fashion, isn't the biggest cost.

        Marketing by word of mouth via free MP3s and a decent website, that's free.

        You might as well advertise by giving music away. Real fans will support you, and everyone who hangs onto the MP3 without paying ... they wouldn't have paid anyways, so it's no skin off your nose.
  • Oh, cry me a river for the poor record industry. I don't suppose their problems with making a profit have anything to do with the huge number of totally hopeless acts they sign (anyone who's ever been in the promotional mailing list for a label has to wonder about what they didn't sign after seeing all the obvious stillbirths that did make it), the huge amount of money they spend at ever step of the process (refer to the famous Albini article for an account). And what about all those mob ties detailed in the book "Hit Men"? And to add insult to injury, if a band does manage to recoup on the myriad costs foisted upon them by the industry, the label still owns the master. This is like the bank owning your house AFTER you've paid off the mortgage.
  • by flacco (324089) on Saturday November 24, 2001 @10:44AM (#2606694)
    Remember that statement? That pretty much says it all.

    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.

  • by RNG (35225) on Saturday November 24, 2001 @10:46AM (#2606696) Homepage
    Disclaimer: I'm not a professional musician and am not involved in the music industry. At the same time I don't think I'm 100% clueless about the music business.


    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 ...

    • 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.

      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

  • Apparently, Konqueror renders this page funny. At least on my machine. Here is a link [industryclick.com] to the printer-friendly version.
  • by WhyteRabbyt (85754) on Saturday November 24, 2001 @11:13AM (#2606749) Homepage
    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."
    • I can build my own electric guitar too, but that doesn't mean it'll sound as good as a Fender. I think you are underestimating what GOOD recording equipment can do for you.
    • You seem to be assuming that the software you write is going to make money. Don't forget 95% of software/music never breaks even.

      If it doesn't make money, who gets to eat the debt? Not the artist- the record company. In effect the record company has given you an unsecured loan, and if you don't pay it back, you don't go bankrupt. Try getting an unsecured loan like that from a bank.

      The record companies have to pay for the advance out of the successful bands- they mathematically HAVE to take more of the profits than the band to stay in business.
  • This article seems like a good argument for bands pressing and marketing their own CDs, given that this is now pretty cheap & easy
  • by Zero__Kelvin (151819) on Saturday November 24, 2001 @11:21AM (#2606763) Homepage

    " Unfortunately for them, the Napster unpleasantness has merely exacerbated that characterization."

    Unfortunate for them? Yes ... I have a friend who recently poked his own eye out in hopes of winning a lawsuit. It was very unfortunate for him ;^}
  • by Sloppy (14984) on Saturday November 24, 2001 @11:23AM (#2606765) Homepage Journal

    A typical recording budget for an artist's first album is between $250,000 and $1 million. The record company will also spend approximately $250,000 to $500,000 to market a new artist to the public. A typical recording budget for an artist's first album is between $250,000 and $1 million. The record company will also spend approximately $250,000 to $500,000 to market a new artist to the public.

    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...

    • It's time to get rid of CDs. Vorbis (or, *sigh*, MP3) or even wav/aiff, combined with HTTP or FTP can do that

      So you have to not only have internet access, but preferably broadband, just to get a CD? Sounds kinda discriminatory to me. :)

    • Tom Schultz did the first Boston album on a 4-track.

      Parts of Sgt. Peppers were done with two 4-tracks linked together.

      Can anyone tell me that the production quality achieved by spending $1M on Britney-in-a-box compares? If you want sound quality, get someone who understands sound, not a bunch of expensive equipment which you don't know how to use.

      You really can make professional quality music on very simple equipment. In addition, your mix doesn't end up sounding exactly like every other song on the radio.

      • 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.
    • 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.


      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-

  • Eric Leach is an intellectual property and business law attorney at the firm of Goodman and Leach.

    Talk about an unfortunate name for a IP lawyer.

  • by Dr. Awktagon (233360) on Saturday November 24, 2001 @12:13PM (#2606882) Homepage

    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!!

  • by thumbtack (445103) <thumbtackNO@SPAMjuno.com> on Saturday November 24, 2001 @12:15PM (#2606889)
    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 [mosesavalon.com]. The Future of Music Coalition has an excellent document that analyzes [futureofmusic.org] 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 [riaa.com] 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."
  • or make that old, old news....

    First of all, there is more than one way to skin a cat... the production costs (as has already been pointed out) cited in the article are outrageous. No "new artist" receives this level of money unless it is a totally pre-fab act (the type that "fronts" for a producer).

    As a musician, I've entered into several "licensing agreements"- which are either exclusive or non-exclusive rights to use my material on CDs or in soundtracks... granted I perform electronic music, where artist development is rather non-existent, but I write what I want to write, and if the label wants it, they pay me- simple as that. I owe them nothing, there is no advance, and I am responsible for all production costs (which I do myself anyway). A licensing agreement allows me to be on multiple labels at once. Granted I'm dealing with a niche market, and full-length electronic CDs are not exactly best-sellers, and there are a handful of touring acts in this genre- but -imagine if everyone operated in this manner, that the artist assumed the "risk" and directly reaped the rewards. Would we be listening to the Backstreet Boys, Brittany Spears, etc..?

    It is old news that labels pay for placement on playlists and for video exposure... sure, the videos may be wrapped around the myth of a groundswell such as "Total Request Live"- but songs are "top 40" for good reason (and this is legal- NOT payola).

    I seriously DOUBT that labels assume much risk at all with new artists. They have lower budgets, and labels often recoup money through overseas sales or tours. The risk comes with taking an AGING star such as Mr. Jagger, who sells less than a thousand copies of his solo venture on "opening day." Or the risk comes with a huge deal to lure a "star" with dubious appeal away from another label. Labels carefully hedge their bets by stripping away any artistic license from artists who are unknown quantities.

    There were some jabs taken at retailers in this thread. I take issue: retailers are in an excellent position when selling music. There is practically NO RETURN POLICY and very little in the way of demoing a CD. If the CD sucks, "too bad!" Combine that with the fact that many folks want a song or two off an otherwise sucky CD and we see why Napster was what it was. This has less to do with the nature of digital media and more to do with marketing. If a record label actually added something of value to a CD (other than the music itself) maybe people would be less inclined to burn a copy of a friend's CD.

    Finally, there are really only FOUR big labels in existence (if my memory serves me). This is as close to a monopoly as it gets. Try establishing a decent distribution and product placement network with your startup label, and you will quickly see what an uphill battle you face. There simply isn't room in retail outlets for all the tiny indie labels- yet you can find the entire Nazareth or Black Sabbath library at most retail stores?! It makes no sense.

    There will always be top-40 radio. But changes in technology have drastically reduced production expenses for the do-it-yourselfers and small labels. I have hope that distribution will eventually be decentralized from the big four (who will likely dig their own hole as they try to show hi-res surround sound DVD audio down our throats by re-selling us the music we already own on CD). At the rate they are going, I wouldn't be surprised if they tried to charge the consumer on a "per-play" basis in their own home! I can't help but feel that the high markups on CDs are there to punish us all for all those Napster tracks on our hard drives. You can buy a movie for about the save cost as a CD. Explain that one to me!
  • 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.
    • Not to sound nitpicky, but where do you think the money from the advance came from? That's like saying if a friend gives me $100,000 to buy a house and I pay them back with no interest, I somehow got cheated out of $100,000 and they somehow made $100,000.

      • That's the point. The artist is paying back that $250000 so the record company doesn't have to. The repayments don't have to come out of the record companies share unless the artist doesn't earn enough to pay it back.

        Essentially the deal is.

        We lend you $big_sum.

        You spend $big_sum making an album etc.
        Of the money that the album makes we take 3x the money you receive. Out of your share you have to repay all of the costs for making the album apart from the few we haven't managed to foist upon you yet.
    • Re:Double Counting (Score:2, Informative)

      by moregan (538728)

      Lots of things to get confused about in the Electronic Musician article beyond the obviously wrong break-even point for the label. I'd look elsewhere for music biz education. Perhaps there's more in the print version? Off the top of my head:

      Initially they refer to the "$250,000 advance" but later to the "$500,000 advance". They imply but don't state that promotion costs are also recoupable from artist royalties.

      The assumed $2.25 per unit payment to the artist becomes $1.80 (down 20%) without explanation. The 3% producer's cut they mention leaves the artist around $2.18.

      We seem to be talking major label here, so it's silly to ignore who bears the cost of video production.

      No mention of the reduced royalties, both artist's and mechanical, for foreign sales. I hear figures like 50%.

      No mention of half royalties for record club sales--zero royalties if your record is a 13-for-one-cent selection.

      • Well, one correction (although I mainly agree with you) - the 3% producer cut was 3% of the retail album, $14.99, or 45 cents. $2.25 - .45 = $1.80


        tune

  • by corr (534645)
    This may be slightly offtopic...
    But without empty threes and the internet, I'd never have discovered one of my favorite bands - [minus] [minusmusic.com]

    I originally found out about them because my friend (who owns a cd burner) made me a cd with them on it. It was amazing, and I personally think they are one of the best bands out there. As soon as I found out who they were, I went to their site and found the link to where to buy the real CD. Sure - it doesn't have some of the tracks that I have, mostly 'cause I have underground ones, but at least it gives the band money.

    Just goes to show that maybe all that rambling about Napster and Morpheous actually helping the bands isn't just rambling afterall.
  • can actually be used by the bands to bypass the evil record companies and sell their music themselves online.


    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.

  • 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 [geocities.com] to my rebuttal, and a hope that people will still respond.

    Warning: that rebuttal is *long*.

  • Twice in this article, it is stated that the artist sees no royalties until the record company recoups its recording costs. Why then do the authors subtract artists' royalties from the record companies profits when discussing how many disc sales it takes for them to break even? The results in the article go something like:

    $500000/($8.00-$2.25) = 86957

    whereas the result of not paying the artist before recouping your investment goes something like:

    $500000/$8.00 = 62500

    I would guess that a significantly larger percentage of albums sell this many copies, probaby more like 20%, as opposed to the 16% number quoted for the article's figures.

    In any case, this is a much better return rate than, say, veture capitalists get. They can only expect 10% of their investments to make money. VCs are an entirely different group of money grubbing bastards though...
  • 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.

    .
    .
    • Your best bet is to advertise traditionally while keeping your product on the web. Put out a 'single' of two (good) songs and advertise with posters, magazine/zine ads, radio time, whatever, then, cash in on cd's, t-shirts and gigs.

      Expensive? You bet! Wanna make money, gotta spend it.

      Also, when you advertise your single, don't snare the user in any 'please register and submit us your name and address first' bs, as a good 60% of your potential listeners will turn tail cold at this point. If the songs are free, give them away, free. Period.

      You can win on two fronts here. The advertising will give you credibility in the glitzy/larger-than-life sense, while the no-nonsense presentation of your single/whatever will keep visitors feeling good about you and eager to hear more.

      The songs have to be good, by the way, and well-produced. Lot's of us can make recordings on our PC's, but you're still better off hiring someone else to do it right, even if it's on 8-track analog tape. No one wants to hear your mildly interesting but otherwise crappy 20-minute bedroom demos unless you've already hooked their attention with something real.

      'Real' also means REAL drums and a REAL bass. The techno slum (and the home-recording 'industry' at large) is full to bursting with ACID droppings and one-man bands. Real music happens when real people get together and make it happen.

      But that takes work...

      Good luck to ya!
  • 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.
  • Double counting (Score:4, Insightful)

    by Viadd (173388) on Saturday November 24, 2001 @05:17PM (#2607892)
    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!!!
  • Here is a rebuttal I just send to the authors of the article:


    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

"A great many people think they are thinking when they are merely rearranging their prejudices." -- William James

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