Posted November 7th, 2007, in: Intellectual Property| Technology

According to the information I can find, the official breakdown of where the money goes, in a typical CD Retail scenario is as follows (I copied this from this page, although there are many more floating around with the same numbers). This breakdown of the cost of a typical major-label release by the independent market-research firm Almighty Institute of Music Retail shows where the money goes for a new album with a list price of $15.99.

  • $0.17 Musicians’ unions
  • $0.80 Packaging/manufacturing
  • $0.82 Publishing royalties
  • $0.80 Retail profit
  • $0.90 Distribution
  • $1.60 Artists’ royalties
  • $1.70 Label profit
  • $2.40 Marketing/promotion
  • $2.91 Label overhead
  • $3.89 Retail overhead

These numbers don’t look that great to me, as an artist. And I believe the reality of the industry is even worse.

The problem is that this set of numbers comes from a selected scenario, not a typical scenario. I’m guessing this is an average or something. Keep in mind that most acts that get ‘signed’ aren’t mega-stars. Perhaps the average makes the typical look a lot better.

EDIT: I have no idea how or why this seems to be the prevailing breakdown of where consumers’ money goes when they buy records.

In addition, t The way I have come to understand it is that the Label keeps the band “in debt” to the label, by spending too much money on their behalf. Also, it is my understanding that one such expense, marketing, is often pooled amongst several bands. So the label often spends all/most of the marketing expenses for many acts on only the few that it believes in most.

It’s hard to find information on this stuff.

Steve Albini wrote an article about the unfair practices of the majors in which he does a case-study of a typical record deal. Be warned, Albini’s article actually takes a few minutes to read, and it actually needs to be read to be understood.

I’m gonna go ahead and paste in the numbers from his article here (It’s long, but that’s the way it is). From Albini:

“There’s no need to skew the figures to make the scenario look bad, since real-life examples more than abound. income is bold and underlined [underlines removed], expenses are not.

Advance: $ 250,000
Manager’s cut: $ 37,500
Legal fees: $ 10,000
Recording Budget: $ 150,000
Producer’s advance: $ 50,000
Studio fee: $ 52,500
Drum Amp, Mic and Phase “Doctors”: $ 3,000
Recording tape: $ 8,000
Equipment rental: $ 5,000
Cartage and Transportation: $ 5,000
Lodgings while in studio: $ 10,000
Catering: $ 3,000
Mastering: $ 10,000
Tape copies, reference CDs, shipping tapes, misc. expenses: $ 2,000
Video budget: $ 30,000
Cameras: $ 8,000
Crew: $ 5,000
Processing and transfers: $ 3,000
Off-line: $ 2,000
On-line editing: $ 3,000
Catering: $ 1,000
Stage and construction: $ 3,000
Copies, couriers, transportation: $ 2,000
Director’s fee: $ 3,000
Album Artwork: $ 5,000
Promotional photo shoot and duplication: $ 2,000
Band fund: $ 15,000
New fancy professional drum kit: $ 5,000
New fancy professional guitars [2]: $ 3,000
New fancy professional guitar amp rigs [2]: $ 4,000
New fancy potato-shaped bass guitar: $ 1,000
New fancy rack of lights bass amp: $ 1,000
Rehearsal space rental: $ 500
Big blowout party for their friends: $ 500
Tour expense [5 weeks]: $ 50,875
Bus: $ 25,000
Crew [3]: $ 7,500
Food and per diems: $ 7,875
Fuel: $ 3,000
Consumable supplies: $ 3,500
Wardrobe: $ 1,000
Promotion: $ 3,000
Tour gross income: $ 50,000
Agent’s cut: $ 7,500
Manager’s cut: $ 7,500
Merchandising advance: $ 20,000
Manager’s cut: $ 3,000
Lawyer’s fee: $ 1,000
Publishing advance: $ 20,000
Manager’s cut: $ 3,000
Lawyer’s fee: $ 1,000
Record sales: 250,000 @ $12 =
$3,000,000
Gross retail revenue Royalty: [13% of 90% of retail]:
$ 351,000
Less advance: $ 250,000
Producer’s points: [3% less $50,000 advance]:
$ 40,000
Promotional budget: $ 25,000
Recoupable buyout from previous label: $ 50,000
Net royalty: $ -14,000

Record company income:

Record wholesale price: $6.50 x 250,000 =
$1,625,000 gross income
Artist Royalties: $ 351,000
Deficit from royalties: $ 14,000
Manufacturing, packaging and distribution: @ $2.20 per record: $ 550,000
Gross profit: $ 7l0,000

The Balance Sheet: This is how much each player got paid at the end of the game.

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

The band is now 1/4 of the way through its contract, has made the music industry more than 3 million dollars richer, but is in the hole $14,000 on royalties. The band members have each earned about 1/3 as much as they would working at a 7-11, but they got to ride in a tour bus for a month. The next album will be about the same, except that the record company will insist they spend more time and money on it. Since the previous one never “recouped,” the band will have no leverage, and will oblige. The next tour will be about the same, except the merchandising advance will have already been paid, and the band, strangely enough, won’t have earned any royalties from their T-shirts yet. Maybe the T-shirt guys have figured out how to count money like record company guys. Some of your friends are probably already this fucked. “

5 Responses to “Arists’ Royalties. CD Sales. Record Deals. Real Numbers?”

 

[…] music lovers, or advocating network filtering by ISP’s, I’m all for this.  Labels get too much for too little while screwing over the fans and artists at almost every turn. […]

Forch Fabalon wrote on October 24th, 2008 7:14 am :

Now its even worst with the new “360° deal”

Featured Artists Coalition Launches | andrewapeterson.com wrote on November 4th, 2008 2:03 am :

[…] music lovers, or advocating network filtering by ISP’s, I’m all for this.  Labels get too much for too little while screwing over the fans and artists at almost every turn. […]

Zeke Iddon wrote on September 9th, 2010 10:48 am :

Great post – do be aware that while Steve Albini’s article is a brilliant read and very insightful, it was written in the early 90s. I’m currently a few hours into a research project on the subject and have based a lot of what I’ve done so far on Albini’s piece, before realising the figures might be outdated. In saying that, I’ve not yet found anything to contradict the figures other than the obvious lack of downloadable music revenue and inflation adjustment.

Anyhow, thanks so much for posting the breakdown info. Really interesting stuff.

SMAP comes to Japan’s aid « theasianedition wrote on August 20th, 2011 8:15 am :

[…] articles give an insight on how much is spent to produce a single CD and where the revenues […]

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