Thursday, September 21, 2006

The Problem With Music

Ever wonder why bands hate the record companies? Ever wonder why the artists never complain about losing out on royalties but the RIAA always does? Ever wondered why bands are increasingly using the internet to distribute their music in order to get fans to come to their concerts? This article explains why. And the numbers speak for themselves.

So next time you buy a CD and think your favourite artist is getting a chunk of the money, think again. If they composed the words and the music, and produced the album, and played all the instruments, they'll get 4%. The rest goes to the record company, the distribution company, and 20% goes to the shop that sold the CD. And the cost of manufacture is typically 2%. Now you know why record companies don't like MP3 files. It's got nothing to do with the artists, and everything to do exploiting musicians to make money.

1 comment:

andy said...

Steve Albini’s article is not all it’s cracked up to be. Do the math on the figures he presents… but you have to put it in the right order and from the right bank account.

The record company pays out 1.2 million in expenditures to make the album, including the band’s advance royalty payment of 250K and the producer’s points. At a sales level of 250 units the record company grosses 1.6 million. That leaves them a net profit of 400k. Then they take the recoupable monies from the bands earned royalties and get an adjusted net profit of around 6.5K. At 250 units the band’s royalty account is at -14k… But they have 250 dollars in advance money (minus manager and lawyers fees)in their personal bank acccounts! As long a they don’t snort it or shoot in their arms… they’re doing alright.

If the band sells 300K units (at 12 bucks retail) then they get money in their royalty account that the record comany puts there from the 6.50 dollars wholesale that they earned selling the CD to Wal-Mart. The more units that sell, the more money everybody makes. Set up a spreadsheet and fill in the numbers and watch the royalty statements grow as you enter in 400k units sold, 500K, 1 million!!!

The profits ad up… no wonder we all want to be rock stars (or record companies!!!) But it is a gamble. How many bands do you know that don’t sell any records even though they are on a major label and have product in retail outlets?

A record company is a business and intends to make money. If I invest 1.2 million dollars to put out your record I certainly hope I get my money back and a healthy profit!!!!

The band is a business and hopes to make money. If you copy a bands CD from your friend they can’t make money. If you download and fileshare… the band can’t make money.

What is Steve Albini trying to argue in this article? This business model can leave a band that underperforms in a precarious position if they want to get out of their contract. What looks so bad is if the band sells 25000 units then they owe the record company for all of the 1.2 million in expenditures. The reocrd company tries minimize the risk on their investment. That seems odd. So Steve feels that they don’t deserve the largest payday because they cushion their exposure to loss. But If the band fails will the record company ever recoup its money while the guys are flippin burgers?

Record labels aren’t necessarily evil… they are a necessary evil. You can stay indie, do it yourself and rake in the lions share of the profit. But will you be able to compete with a 1.2 million dollar budget… or bigger (or even smaller)? But getting that support and getting that record into the mainstream music channel is winning the lottery! Whether or not you should “steal” music from some major lablel band or some “used-to-be-indie but-finally-got-their-break” band is a whole other matter. But I think the economics that Steve Albini attempts to lay out here show that if your rooting for a favorite band to succeed then you ought to pay for their product so they have a chance to make another album!

cheers


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