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 ?