Clay Aiken – Music Industry Woes

It is a changing world for professional musicians today. According to the latest Nielsen research, only 2.1 percent of the albums released in 2009 sold even 5,000 copies – that breaks down to just 2,050 records out of nearly 100,000.  It seems that everyone in the process really takes a big chance and needs to have a back-up plan.  The latest research also shows that the record label still takes less of a risk than the artists.

Did you know that for every $1000 we spend on music CDs, the artist only gets $23?  At the same time the record label and distributors will share $870. Wow! Something is wrong with this picture, and there are many who believe that this work formula is about to change.

It seems strange that the musician that makes the music receives a minor part of the revenue while the business that has the job of helping the artist gets the big part of the pie. This distressing data by Nielsen research was published in an article on The Root titled “The Music Industry Funny Money“.

The research from this report indicates that the record labels get 63% of the music sales, the distributors get 24% and the band gets the remaining 13%. But if you look at the graph at the right, you will see that “the band” includes a whole team of people besides the musicians. Based on a performance group with 4 musicians, each of the musicians would get 18% of the 13% part for “the band” (or $23.40 for every $1000.00 in CD sales) with the personal manager, business manager, lawyer and producer getting their hand in part of the money.

Where does all the money go?  Why do the labels feel they can take so much of the money?  Here are a few of the places the money goes.  The following information comes from Don Passman, the author of All You Need to Know About the Music Business

SLRP: The suggested list retail price of a CD is currently $16.98, but retail stores have a wholesale price that is about $10. Once the retailer gets the CD, they can sell it for however much they’d like – ergo “suggested.” Artist’s royalties are a percentage of the retail price. The musicians get anywhere between 12 to 20 percent of the SLRP.

Packaging charge: Most Cd’s are in a plastic case so the label charges the artist for the case by immediately taking 25 percent of the SLRP.

Free goods: Labels discount the records so stores will buy them.  They do it in a roundabout way.  The label will sell the retailer 100,000 for the price of 85,000.  So, if the store sells all, the artist only gets paid for the 85,000.

Reserves: Retailers don’t want to lose money on the CD so they can return whatever copies they don’t sell and get a full refund.  The label doesn’t want to miss out on the money either so they usually pay the artist for only 65,000 copies out of each 100,000.  If all the CD’s are sold, the label will pay back the musician, but it usually takes years.

Distributor: Music distributors promote and distribute records. The major labels maintain in-house distributors and the distributor can take between 14.2 to 24 percent cut of the SLRP.

Songwriter/publisher: If a musician buys the song, the writer and publisher receives 9.1 cents for every copy of the song sold. They must split that amount.

Personal manager: The manager’s job is to guide the career of the artist. They get about 15 percent of the artist’s gross earnings.

Business manager: A business manager charges 5 percent of an artist’s gross.

Lawyer: Most lawyers charge hourly but some charge 5 percent.

AFTRA and AFM: These are the musicians unions. If an musician makes an album, he is required to join a union, which will then take $63.90 in base dues plus 0.743 percent of the artist’s first $100,000.

Record advance: If the label fronts an artist $75,000 to pay for whatever he or she needs to record an album, the artist then owes the label that initial $75,000, regardless of whether the record is a success or not.

Both musicians and record labels are starting to react to the new music business market realities. Musicians are leaving record labels in droves, to work on their own. Warner Music is starting a new 360 type of contract in which they offer to manage not only the musicians recordings, but also their other business ventures like concerts tours, social media, sales of accessories and t-shirts, etc, etc. This 360 contract is supposed to balance the distribution more evenly with the musician.  This contract idea is getting mixed reviews.  The musicians do not like this contract unless the percentages change in their favor.

The music industry and, in particular, record labels need to realize that the market has changed and the time for the record labels to make all the money is over. Musicians have been jumping ship due to these problems, and they need new models where the musician gets to make and control their music. If instead of trying to prolong the status quo, the record labels get ahead of the curve and think of new models that provide more fairness in the distribution of money, they will realize that there is still enough pie for everyone.

What do you think about the amount of money musicians receive ?

Clay Aiken News Network is an unofficial fansite. We are not affiliated in any way with Clay Aiken or his management. This website was made by fans for fans and makes no impression or impersonation of the official site, which can be found under the domain clayaiken.com.

Comments

    • In an industry that is being ravaged by bogus CDs and ripoffs by patrons who would rather steal than pay I think that music certainly is not the field to be in any longer unless you really hit it big and can eek out a good living. The money now would have to be in promotional items for the artist and perhaps a tour if they can sell the seats. Will this industry ever turn around? Not likely unless all of a sudden today's society goes back to the morals of days gone by, sorry but there are way too few people that are willing to pay for the CD, they would rather rip it off…

  1. Great article with lots of information. I think the greedy music labels should find a way to make the entire procedure fair. I know they are in the business to make money, but being unfair to the artist is awful.

    Thank you for another great blog.

  2. I think most of the record labels are greedy. Without the Artist where would THEY be? I am glad that Clay is in a better deal with Decca Records.

  3. Unfortuntely thats the fact of life in the music business, it is nothing new. Artists even if they go on their own, will face many financial commiments to marketing they're music.

    It's a catch 22 situation, if you go Indie, you can go broke, if you get a chance to go major, you can at least claim a loss on your income tax. http://musi-source.blogspot.com

  4. This is why labels are all about product rather than the music. This is why we get formulated pop, formulated country, formulated rock, etc. They only want to put out what is a "known" seller.

    There was a time when innovation was encouraged in the recording industry, but those days are now gone. They don't want the next "sound" they want the next "version" of the same old same old. You hear it on the radio (on the radio, on the RADIO *sorry*) everything sounds the same. OR it sounds like something that was done before, whether it's the glam rock of the 70s or the new wave/punk of the 80s or the grunge of the 90s.

    You see this all over the industry and has seeped into reality shows like American Idol. Idol is no longer about finding the best "singer" but it's about finding the best "product". They've now lowered the age to 15 – it's my guess so that they can find the next Justin Bieber. I do believe that Idol tried to get back to its roots, finding the next "diamond in the rough" but their viewership has changed – that viewership wants the pre-packaged rock god, not the kid who sings in the subway.

    Oops, rambling again – better submit comment before I go off on yet another tangent 😀

  5. I'm glad Clay is a good businessman and believe he has smart, knowing people working for him. The music and recording business is undergoing a major change.

  6. The labels would argue that without them where are the artists. Just sayin'

    "Did you know that for every $1000 we spend on music CDs, the artist only gets $23? "

    This is not strictly correct and misleading if someone lits if from your analysis without realizing that you have divided the artist's share among the members of a band. The "artist," be it a band or a solo performer receives $93.60 of each $1000 in CD sales.

    • I guess that is why I have the graph on the side and the explanation in the next paragraph.

      And, of course, not every contract is the same. This is just the norm.

    • In theory, the artist would be nothing without the label, but with the advent and popularity of social media outlets artists can (and do) create and distribute their own material. They may not sell the same number of units, but at least they keep the profit.

  7. I don't know what the answer is, but I learned alot from the article. I had read that singers make their money by touring yet that is down also. I too think Clay has probably managed his money quite well. I am especially happy to see him 3 times this summer on tour.
    Thanks so much for this interesting article.
    Patty

  8. I had no idea that artists were treated so unfairly. It's past time for change. I'm anxious to see what will happen next. Clay Aiken has a good business head and has surrounded himself with good people, so I feel sure he will be OK.

  9. I need to correct myself after looking at The Root's article. The percentages used in their graphs are percentages of the label's revenues, which omits the retailers share of the gross sales. So, the artist does not receive $93.60 of $1000 in CD sales; the artist receives $93.60 of each $1000 in the label gross revenues. It's a more complicated and iffy calculation to guess at what an average artist receives of gross retail sales.

  10. Have read much the same before this, and I am so happy Clay has the drive and opportunity to tour, as I always felt this is where he could make the most money.
    Record companies will have to adjust their thinking sooner rather than later, as these artists are losing their shirts on cds, while any money made seems to go to them.
    Wish Clay had radio hits, as his sales would triple and more, but this doesn't seem to be a goal for him at all. Don't think any cd he makes, no matter how fabulous it may be, will ever do as well as pop music.
    Glad to have him touring, frankly, as I have never missed one, and enjoy seeing him as much as possible. He's a smart guy, and knows we will be filling the seats!

  11. I think the whole business surrounding the music industry is undergoing a drastic change. I believe that in a short time it will be impossible to purchase a "hard" copy of a CD. Everything will be through downloads. And when that happens, it stands to reason the artist will get more of the cut. The cost of packaging and distributing CDs will go down to almost nothing when customers are required to download music to their computers or other media devices.

    I also firmly believe that Clay is not looking at the recording of CDs as the main focus of his career. He's always said he wanted to diversify and that he's interested in all forms of entertainment. He's also said, although I can't quote him, that he's very interested in television. His singing will still be all important to him but he'll make his living more from touring and personal appearances than the sale of his recordings. I expect to see him back on Broadway within the next 2 years!!! I think he's wise to the changes in the industry and is planning and moving in the right direction. Decca is the perfect label for him at this time.

    Nice article!!

    • Not sure the artist will get more of a cut, if people download the tune from online and mass produce it as they do now, the sales will be diminished by this abuse. Of course if they could figure out how to make the download encoded so it could not be reproduced that would work until someone figured how to go around the encoding, LOL…

  12. Forgot to mention in my comment that I think that the important of radioplay in this day and age is much overrated. Unless Clay gets on the Sirius playlist I don't see that being heard on a local radio station would do much for his sales. I know very few people who even listen to the radio anymore what with iPods, Sirius and other music media delivered without annoying deejays and interminable commercials.

  13. The thing in this blog that sticks with me is it seems this is about to change. I want to know for a fact that it will change and now.

  14. I've known that the artist makes very little money from the actual recorded product and that most of the income comes from touring. With concert ticket sales down, a lot of artists aren't making the money they could have several years ago. The record industry, therefore, should help out these artists by giving them a larger share of the profits.

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