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Music Media The Almighty Buck

How Labels And Artists Divvy Up Your Dollar Online 513

Posted by timothy
from the heads-i-win-tails-you-guessed-it dept.
Subliminal Fusion writes "Business 2.0 has an article that breaks down where that $1 goes when you buy a song from iTunes or other online music services. Key figures: the site takes .40, the labels take .30 and the artists get a measly 12 cents for each download."
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How Labels And Artists Divvy Up Your Dollar Online

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  • it should be 50/50 (Score:5, Insightful)

    by ender_wiggins (81600) on Sunday June 22, 2003 @12:28AM (#6265224) Journal
    I would rather give the artist 50% and the site 50%. leave B&M sales to fund the other leaches.
    • by zcat_NZ (267672) <zcat@wired.net.nz> on Sunday June 22, 2003 @01:05AM (#6265399) Homepage
      If it's anything like regular CD sales;

      the site takes .40,
      the labels take .30 and
      the labels take another 12 cents from the artist's share to recoup "production advances" and "independent promotion"

      The artist gets shit until they've sold the first few million CD's. Only then, they get to keep their 12c.

      • by MsGeek (162936) on Sunday June 22, 2003 @11:21AM (#6267174) Homepage Journal
        • the site takes .40,
        • the labels take .30 and
        • the labels take another 12 cents from the artist's share to recoup "production advances" and "independent promotion"

        This is completely and totally true. $0.12 is actually PROGRESS when compared to the status quo. Here's a better breakdown of the whole situation, courtesy record producer Steve Albini:
        http://www.negativland.com/albini.html [negativland.com]

        As far as the whiners about "the death of the album" go, two things wrong with their premises:

        1. Up until the 1970s that's the way radio and records went. Top 40 Radio created a singles-oriented business, with the album as gravy. Even with great albums like Sgt. Pepper the Beatles made sure there was at least one good single on there if not a few. It was only with the popularity of Album Oriented Radio in the 1970s that things changed. The last gasp of the single 45rpm record as a mass consumer good was in the early 1980s.
        2. The primacy of the album has been basically stood on its head in the first decade of the 21st century. The average CD has you back in the '60s again, with albums that have one or two good songs and an ocean of filler. Some of the people complaining on that list are guilty of this crime against the music consumer.
        All that Steve Jobs is doing is levelling the playing field for the consumer. You have never been prevented from downloading a whole album on iTunes...in fact, you get an economic incentive to do so with the $9.99 bargain "album" rate. If a band makes a super-bitchen album, and people hear that the album is great as a whole, they will download the whole album rather than download the songs piecemeal without the advantage of the bulk rate.

        The fact of the matter is that the "album" died years ago. Deal with it.

    • You're fogetting... (Score:5, Informative)

      by cshark (673578) on Sunday June 22, 2003 @01:20AM (#6265465) Homepage
      That figure excludes deductions made by the record label for everything imaginable. Studios charge artists a fortune in promotional costs and touring, limos and so on. But even at 12c per track, that's a much better per track rate than artists have gotten traditionally from prepackaged albums.

      Another thing to remember is that Itunes is an unprecidented success in the industry. Say what you will about it, but they're still only targeting 2% of the computing population...
      • by AndroidCat (229562) on Sunday June 22, 2003 @01:38AM (#6265554) Homepage
        It's about the movie industry, but Fatal Subtraction [littoral.net] is a good look at how these sorts of industries play numbers games. (Coming to America was a $350-million-grossing movie never earned "net profits".)
      • by McAddress (673660) on Sunday June 22, 2003 @03:04AM (#6265787)
        But the two percent of the market they are targeting is the cream of the crop of consumers.
        1.I know this sounds like flaimbait, but Mac users will buy anything Steve Jobs tells them is good. (I admit it, I really want to get a 17 inch powerbook) 2.They are used to paying full price for things having to do with technology, because Apple products and peripherals don't go on sale. 3.They have proven that they like the product, with the iPod being as successful as it was. (Even before the windows versions)

        That is why the iTunes music store was such an unprecidented success. It was not just sheer luck.

        • by Halo1 (136547) <jonas.maebe@NosPAM.elis.ugent.be> on Sunday June 22, 2003 @06:01AM (#6266151) Homepage
          1.I know this sounds like flaimbait, but Mac users will buy anything Steve Jobs tells them is good. (I admit it, I really want to get a 17 inch powerbook)
          That's not just flamebait, it's plain wrong. Or did you forget about the Cube?
          2.They are used to paying full price for things having to do with technology, because Apple products and peripherals don't go on sale.
          Huh? [dealmac.com] Even Apple themselves hold sales every now and then, though they don't advertise them as such most of the time. They simply slash prices of systems that are going to be renewed in the near future. When they do hold an explicit sale, it means their inventory management failed, but I've seen that happen only once since Steve Jobs came back to Apple (Januari 2001, I remember that since I took advantage of it by buying my G4/400).
          That is why the iTunes music store was such an unprecidented success. It was not just sheer luck.
          I completely agree it was not just sheer luck. It was actually listening to the complaints of the consumers instead of trying to convince them that they were wrong (like the music industry does).
      • by chimpo13 (471212)
        12 cents per track, eh? Does Itunes actually pay bands?

        One of my bands has songs up on mp3 [mp3s.com].

        I'm not sure how many plays we've had. It currently shows 4,500 and we probably will never see a dime from them. They used to have an earnings page but the amount of songs played and the amount of money they owe us would change.

        I used to send them the same email every month for a year asking about it. They'd respond "you'll get an answer in 6 to 10 business days". They changed that in a wise decision that you
    • by 0x0d0a (568518) on Sunday June 22, 2003 @02:10AM (#6265661) Journal
      If Joe Sixpack asks for $47k pay for his job, medical benefits, and the ability to leave with two weeks notice, he can't then turn right around and whine that he isn't making $55k and identical bennies. He got what he asked for.

      If I'm Jimmy Drummaster, an aspiring upcoming musician, and I don't feel that the promotion and management services provided are worth what current sellers are asking, I'm more than free to set up my own website and sell MP3s. Hell, I'd be selling to a larger market segment than iTunes is (far more people can play MP3s than use Macs).

      I'm not trying to be deliberately callous -- I'm simply saying that if musicians don't like iTunes, they can choose a different route. (Of course, there are those that have sold contracts to put out n albums -- stupid sort of deal IMHO, but such is life -- and they'll have to put out n more CDs before they go freelance. And again, they got what they asked for.)

      Nobody is shedding tears for *other* classes of workers that don't get better deals than they asked for -- computer consultants or plumbers or proctologists aren't getting any love.

      My personal guess is that the people writing the article don't care about the musician *either* and just has some vague ideas that enough undirected protest will somehow result in him getting free music of the caliber he's currently enjoying.
      • I don't think that's the issue. iTunes is paying better than most other deals, and so I don't think anyone is complaining about that. I think that the reason artists choose the indie "I hope I can make it without any help" route or the big5(?) "Hey, they'll help me get started. I hope I sell enough copes to keep up with their quota" is because they either don't know about alternative choices, are afriad of flying completely solo (so to speak), or they get pressured into contracts by smooth-talking salesmen. Sorry for the run on, but does it make sense?

        Stupid analogy time: A smooth-talking salesman could probably talk me into buying whatever kind of car he wants me to buy, because I don't know enough about the technology and the industry. The recording industry is an enigmatic industry to outsiders, and if an artist doesn't have previous expereince or friends on the inside, he must improvise everything. Only the smart, lucky or connected artists can come out on top.

  • by bazabba (669692) on Sunday June 22, 2003 @12:29AM (#6265229) Homepage
    that the artists should be attacking their own labels...not their fans.
  • by Kenja (541830) on Sunday June 22, 2003 @12:29AM (#6265230)
    This is why I only use Kazaa to get my music. That way I know the artist is getting 100% of the 0.00$ I spend.
  • "measly"? (Score:5, Insightful)

    by RLiegh (247921) on Sunday June 22, 2003 @12:29AM (#6265232) Homepage Journal
    They're getting just under half of what the labels are getting.

    IMHO, "measly" would if they got three cents and the labels got fifty seven cents.

    Of course, if they went independent, they'd get 60 [assuming the sites still charged 40 cents].
    • Re:"measly"? (Score:5, Insightful)

      by DavidinAla (639952) on Sunday June 22, 2003 @02:06AM (#6265646)
      Considering the costs of promoting a new group, getting them recorded, producing the CDs and getting distribution, the group almost certainly wouldn't be selling ANY albums or getting ANY money if they weren't working with a record label -- because nobody would have heard of them and no CDs would exist. While labels might have too much power and take too large a cut of the revenue, the truth is that they DO fill several very important functions, which some people don't seem to understand.
  • by cyb0rg (580354)
    40+30+12 ?= $1
  • how is it (Score:3, Interesting)

    by alfredo (18243) on Sunday June 22, 2003 @12:30AM (#6265236)
    divvied up with the writer?
    • If there is a songwriter, they're usually paid in advance, under the table, so nobody knows that their 'artists' are talentless shit.
    • Re:how is it (Score:5, Informative)

      by ktakki (64573) on Sunday June 22, 2003 @01:36AM (#6265541) Homepage Journal
      divvied up with the writer?

      Interesting question. I was wondering that myself.

      Not many people outside the music industry are aware that retail sales are the only revenue stream. For one thing, there's something called mechanical royalties, a fee of 7.5 cents per song per unit that's paid to the songwriter (not the performer, unless they are the same person or persons). BTW, the term mechanical originally referred to player piano rolls, and goes back over a century.

      If a band releases an album of all "cover" songs, all the mechanical royalties go to the songwriters.

      There's also performance royalties, money paid to the songwriter from radio and television airplay (as well as jukebox placements and clubs that employ cover bands). The recent controversy surrounding streaming webcasts involved these. Performance royalties are administered by ASCAP, BMI, and SECAM, organizations that collect fees from radio and television stations (and clubs and jukebox vendors) and disburse these monies to songwriters according to a formula based on the number of plays multiplied by the potential number of listeners.

      Other revenue streams include synchronization rights (the use of musical works in a movie soundtrack) and transcription royalties (use of musical works in advertisements).

      For all but the most popular bands and songwriters, these royalty payments don't amount to much, but even a "one hit wonder" might see a jackpot if their song hits the Top 40 or ends up in a movie or a television commercial.

      The canonical/apocryphal royalty success story is that of Paul Anka, who wrote the theme for Johnny Carson's Tonight Show, and earned over $700 each week from performance royalties simply by having that tune played on every NBC affiliate in the country five nights each week.

      k.
  • by seanthenerd (678349) on Sunday June 22, 2003 @12:30AM (#6265237) Journal
    Why don't artists skip the labels? Go straight to the Apple Music Store or mp3.com or whatever? With that extra thirty cents a song, they don't need support from Universal or Sony or whoever.

    Of course, the hard part is getting started...
    • Why don't artists skip the labels? Go straight to the Apple Music Store or mp3.com or whatever?

      Great idea, now go convince Apple to accept music from unsigned artists.
    • Because 20-30 years ago, back before there was an online to sell music on, artists signed contracts to give the labels the right to distribute their music. Then recently, the online market appeared, and a couple of musicians wanted to sell online, but they were smacked down. A lawsuit over contract law proceeded (did the artists sign away rights/distribution channels that didn't exist at the time of the contract?) and then people quit caring about 20-30 year old songs anyway.
    • by PerryMason (535019) on Sunday June 22, 2003 @01:10AM (#6265417)
      Why don't artists skip the labels?

      The answer is that without the publicity and promotion that the major labels provide, you simply can't get the exposure necessary to really 'make it big'.

      Sure you could go direct to Apple and many people do go direct to MP3.com but you just won't get the downloads without the exposure. I am involved with a few bands in Australia, some signed to big labels and some going it alone and without fail, the servicing that the signed bands get is the difference between the success of the bands. The major factor being that if you aren't signed, you simply don't get airplay on the radio. Even on Australia's 'indie' radio station TripleJ, the DJs themselves get the option to play 3 tracks of their choice in a 3 hour shift. The rest is dictated to them by managament, which in turn is dictated by how much the labels are willing to pay the station. Payola is well and truly still alive.

      So despite the fact that its eminently possible to record your own album at home in small recording studio and produce a product that the 'unwashed masses' couldn't tell from a studio recorded album, you just won't make it big without label backing.
    • by linuxbaby (124641) * on Sunday June 22, 2003 @03:32AM (#6265835)
      That's a side project we're doing at CD Baby [cdbaby.net]: Helping hook artists directly into iTunes and other download services. No record contract. No ownership of their rights. Just acting as a digital distributor.

      Apple iTunes is paying the label 65 cents per download, (as reported many places). Of that we can pass almost all of it to the artist, since we're not a record label, and have no up-front expenses.

      You can see my notes on Apple's meeting with independent record labels here (pt 1) [cdbaby.org] and here (pt 2) [gnutellanews.com].

  • by IronTek (153138) on Sunday June 22, 2003 @12:30AM (#6265239) Homepage
    Afterall, the labels need all of that money to keeping buying the bullets they constantly (and consistently) shoot themselves in the foot with.

    It adds up!
  • by Niahak (581661) <niahak AT hotmail DOT com> on Sunday June 22, 2003 @12:31AM (#6265241) Homepage
    the artists get a measly 12 cents for each download. From all the articles there have been about the artists under the RIAA, 12% is a hell of a lot better than the cut they get normally. Sure, it's measly, but it's probably a step up. Here's to hoping it'll increase.
  • Measly 12%? (Score:5, Interesting)

    by IthnkImParanoid (410494) on Sunday June 22, 2003 @12:31AM (#6265245)
    Is 12% really that measly? I agree it's low (unless the artist is a britney spears/in sync clone, in which case it's too high), but what percent does an artist get from CD's? What percent is standard for authors? My mom is an author, and gets about 25 cents from a 5.99 paperback... Seems like online music is giving artists a bigger cut compared to more traditional methods.
    • Re:Measly 12%? (Score:5, Insightful)

      by nobodyman (90587) on Sunday June 22, 2003 @02:15AM (#6265670) Homepage
      You raise a good point. Here's a quote from Mike Viscelglia (he played bass for Suzanne Vega, I believe). His website has some good insight into the industry from sort of an "everyday joe" perspective.
      When an artist negotiates a contract (preferably through a music attorney) he or she must come to terms as to what share of the price of the CD goes to the artist and what share goes to the company. This is referred to as "points" or a percentage of sales. An industry standard point allocation to the artist is usually 10 to 12. This means that the artist will get 10 to 12 percent of the sale of the CD. But 10 to 12 percent of what number? Is it the retail price? The wholesale price? The manufacturer's price? For this there is no standard and different companies will try to enforce different numbers.

      So, it would seem that the online price is in-line with cd sales. To be honest, though, I find myself torn as to whether this is fair or not.

      In the extreme example, take a band like N' Sync. These bands are obviously manufactured by the record label. They came into existense as a result of casting calls. Their music was written for them. They were provided with singing coaches, dancing lessons, etc. The record company promoted them, booked their concert dates, paid for their recording time, food, lodging, and transportation. The record company also handled virtually every angle of CD manufacturing and distribution. And don't forget the marketing machine that ensured that there would be enough radio play and media exposure such that enough pre-teens would want the CD in the first place.

      So, in this instance most people would agree that the record company did at least 82% of the work (probably more). So is it unfair that some of these artists make 12%? In my estimation, the majority of major label artists fall into this category -- they weren't "discovered" so much as they were developed, honed, and trained by a music executive who knew what people would buy.

      Am I over-generalizing? Yes. Do I think the music industry has become a cartel that will squash independent music and technological innovation? Most definitely. But let's be real. I like REM, but my guess is that Michael Stipe has as much business acumen as a piece of toast, and that without a major lable he'd still be plugging away at some bar in Athens, GA.

      My point? I'm not sure I even have a point other than to say that 12% does sound unfair, buy maybe not THAT unfair depending on a host of other factors. I'm really more concerned about the chilling effect that the industry has on technology and the consumers' access to truly unique and different music.
      • Re:Measly 12%? (Score:3, Interesting)

        by tuba_dude (584287)
        I think you hit it perfectly. A good majority of the top of the heap are probably manufactured, and that's probably why radio and MTV are so homogonized. Every once in a while you get a standout with his/her own talent like Norah Jones, who managed to make it big and sign on with a smaller label, which may be more willing to pay the artist more. (Norah Jones is with Blue Note, a small-ish, Jazz-oriented label, lots of classic jazz too) While I'm not sure how artists are paid by smaller companies, it's pr
      • Re:Measly 12%? (Score:5, Interesting)

        by geekee (591277) on Sunday June 22, 2003 @06:18AM (#6266179)
        This is NOT insightful. REM, for instance, started out on a smaller label (IRS, I believe) and then moved to Warner brothers after they got a couple of hit songs. This is standard practice. Why do you think indie labels are giving artists better deals? An unknown artist is a huge risk. An artist with a hit under his belt looking for more exposure from a major label is a lower risk, so the major label gives this artist a better deal. Knowing this, it is clear that major labels do NOT sqash independent music, they thrive off it, looking for the next big star.
  • BMG, Universal, and Warner have announced plans to do away with such deductions for digital downloads.

    awwwww, that's so thoughtful of them...kinda like a yacht salesman saying to you..."and just for you, I won't charge you for the tired"....wha tha?
  • by Peter Cooper (660482) on Sunday June 22, 2003 @12:34AM (#6265262) Homepage Journal
    Microtransactions have failed up to now because of the extreme costs involved in processing them. The credit card companies like to take a small flat rate fee and then a percentage on top. On amounts of a few dollars and up, the retailer can swallow this.. but on a buck? Regular deals with the credit card companies could end up with them getting about 40 cents out of the dollar.

    Clearly Apple and chums have made some sort of special deal with the credit card companies, but there's no doubt there's a percentage coming out for the credit card companies.. and their chart just doesn't address it.

    You could argue that it's the 'middlemen' section, but this is listed as going to subsidaries such as AOL and Amazon (in the case of certain retailers).. and I seriously doubt as if they'd fork over their whole share to VISA!

    Someone with some real knowledge of merchant accounts in this capacity.. please fill us in :-)
    • Clearly Apple and chums have made some sort of special deal with the credit card companies, but there's no doubt there's a percentage coming out for the credit card companies.. and their chart just doesn't address it.

      Generally, credit card fees come out of the retailer's piece of the pie. How do they afford it? We're only talking about 2-4%. Yes, 2-4%. What about the transaction fees? While many internet merchants do pay per transaction fees for credit cards, this is not a "requirement" of the deal.

  • Suprised? No. (Score:3, Insightful)

    by Anonymous Coward on Sunday June 22, 2003 @12:35AM (#6265266)
    This is why the record companies churn out the music they do. All they need is an ``artist'' willing to sing some and dance a little to bring in money. They recording industry money machine encompasses the studios, engineers, musicians, distribution, etc, and the money flow chart has no money going out of that process. They take in new money and recycle what they already have.

    That's why I don't understand the tone of some people here. They seem to be waiting for the record industry to propose an acceptable solution to the filesharing fiasco before welcoming them back. The record industry, as a whole, exists to take money from you and me. If they have to destroy the computer industry to do it, they will. Instead of trying to work with the record industry, the nerds should be preparing lines of retreat. Versus the money we're facing, I don't believe we can win. Instead, we need to be working now on software tools and hardware tools that can be used without inserted DRM, etc. The hardware is especially important.
  • Same as album sales! (Score:5, Informative)

    by sould (301844) on Sunday June 22, 2003 @12:35AM (#6265267) Homepage
    According to this [mikevisceglia.com] guy, artists only get 10%-12% of the cost of the CD.

    And thats after paying for promotion. Depressing stuff.
    • It's usually less than that. Think MAYBE a dollar a CD. You have to remember, artists have to pay back their advance and all recording costs. Record labels will fuck bands out of anything and everything they can get away with, the greedy cunts. "I have no talent, no ambition, and wear a shitty suit. I deserver 80% of what you earn." Fuckers.
  • Always get burned! (Score:2, Insightful)

    by UcensorMe (651996)
    When you make a deal with the devil, you will always get burned. Most artist are stupid about the deals they make and then bitch about gettin screwed. Look how these fools give away thier publishing rights.
  • by 00Monkey (264977) on Sunday June 22, 2003 @12:37AM (#6265276) Homepage
    I'm a rapper and if I made it big, 12 cents wouldn't be enough...that's for damn sure.
    • well, first off, there is your problem, you're a rapper. second off, if you made it big, and and got 12 to the dollar, then you would have plenty. do the math
    • Re:I'd be pissed (Score:5, Insightful)

      by Graff (532189) on Sunday June 22, 2003 @12:53AM (#6265343)
      I'm a rapper and if I made it big, 12 cents wouldn't be enough

      Oh really?

      Well, let's say that you album only goes gold. That's 1 million albums sold, if you really made it big you'd most likely sell more. 1 million albums at $0.12 per song at let's say 10 songs an album equals $1.2 million in your pocket. Sure you have to pay tax, yadda yadda yadda but so does everyone. Do that once every 2 years or so and you'll make $600,000 a year. This is not counting other sales such as concerts, commercials, product endorsements, book deals, celebrity freebies, and all the other perks of being a star.

      So is 12 cents sounding a little better now?
      • Re:I'd be pissed (Score:3, Insightful)

        by heli0 (659560)
        Courtney Love does the math [salon.com] ...The record is a big hit and sells a million copies.

        So, this band releases two singles and makes two videos. The two videos cost a million dollars to make and 50 percent of the video production costs are recouped out of the band's royalties.

        The band gets $200,000 in tour support, which is 100 percent recoupable.

        The record company spends $300,000 on independent radio promotion. You have to pay independent promotion to get your song on the radio; independent promotion is a sys
      • Re:I'd be pissed (Score:4, Interesting)

        by happyhangone (599849) on Sunday June 22, 2003 @01:45AM (#6265576)
        IF the album goes gold, and they got to pay for the promotion and music videos... and those videos doesn't come cheap...

        Courtney Love wrote about it (ok... is a b&$@#! but that is not the issue here...)

        Courtney Love does the math

        The controversial singer takes on record label profits, Napster and "sucka VCs."

        By Courtney Love

        June 14, 2000 | Today I want to talk about piracy and music. What is piracy? Piracy is the act of stealing an artist's work without any intention of paying for it. I'm not talking about Napster-type software.

        I'm talking about major label recording contracts.

        I want to start with a story about rock bands and record companies, and do some recording-contract math:

        This story is about a bidding-war band that gets a huge deal with a 20 percent royalty rate and a million-dollar advance. (No bidding-war band ever got a 20 percent royalty, but whatever.) This is my "funny" math based on some reality and I just want to qualify it by saying I'm positive it's better math than what Edgar Bronfman Jr. [the president and CEO of Seagram, which owns Polygram] would provide.

        What happens to that million dollars?

        They spend half a million to record their album. That leaves the band with $500,000. They pay $100,000 to their manager for 20 percent commission. They pay $25,000 each to their lawyer and business manager.

        That leaves $350,000 for the four band members to split. After $170,000 in taxes, there's $180,000 left. That comes out to $45,000 per person.

        That's $45,000 to live on for a year until the record gets released.

        The record is a big hit and sells a million copies. (How a bidding-war band sells a million copies of its debut record is another rant entirely, but it's based on any basic civics-class knowledge that any of us have about cartels. Put simply, the antitrust laws in this country are basically a joke, protecting us just enough to not have to re-name our park service the Phillip Morris National Park Service.)

        So, this band releases two singles and makes two videos. The two videos cost a million dollars to make and 50 percent of the video production costs are recouped out of the band's royalties.

        The band gets $200,000 in tour support, which is 100 percent recoupable.

        The record company spends $300,000 on independent radio promotion. You have to pay independent promotion to get your song on the radio; independent promotion is a system where the record companies use middlemen so they can pretend not to know that radio stations -- the unified broadcast system -- are getting paid to play their records.

        All of those independent promotion costs are charged to the band.

        Since the original million-dollar advance is also recoupable, the band owes $2 million to the record company.

        If all of the million records are sold at full price with no discounts or record clubs, the band earns $2 million in royalties, since their 20 percent royalty works out to $2 a record.

        Two million dollars in royalties minus $2 million in recoupable expenses equals ... zero!

        How much does the record company make?

        They grossed $11 million.

        It costs $500,000 to manufacture the CDs and they advanced the band $1 million. Plus there were $1 million in video costs, $300,000 in radio promotion and $200,000 in tour support.

        The company also paid $750,000 in music publishing royalties.

        They spent $2.2 million on marketing. That's mostly retail advertising, but marketing also pays for those huge posters of Marilyn Manson in Times Square and the street scouts who drive around in vans handing out black Korn T-shirts and backwards baseball caps. Not to mention trips to Scores and cash for tips for all and sundry.

        Add it up and the record company has spent about $4.4 million.

        So their profit is $6.6 million; the band may as well be working at a 7-Eleven.

        Of course, they had fun. Hearing yourself on the ra
        • Re:I'd be pissed (Score:4, Insightful)

          by Graff (532189) on Sunday June 22, 2003 @03:20AM (#6265815)
          That leaves $350,000 for the four band members to split. After $170,000 in taxes, there's $180,000 left. That comes out to $45,000 per person.

          That's $45,000 to live on for a year until the record gets released.

          Let's put this in perspective. $350,000 divided by 4 is $87,500. Now, I don't know about you but that is a lot of money to make in a year. There are people out there who earn $20,000 a year and live just fine on it. Maybe to Courtney Love that's chump change because she won't be able to support her coke habit but for the rest of us we could live pretty good off of $87,500 pre-tax.

          So, this band releases two singles and makes two videos. The two videos cost a million dollars to make and 50 percent of the video production costs are recouped out of the band's royalties.

          I'm sure that music videos can and do cost that much to make, but let's look at this a different way. Music videos are what, 5 minutes each? So we are talking about spending one million dollars on 10 minutes of video. There are independent film makers out there that make pretty damn good two-hour movies for well under a million. How about you hire someone young, hungry, and promising who doesn't cost you an arm and a leg to produce your movie rather than hiring Steven Spielberg to do it? Sure sure, you gotta spend money to make it and the video is an advertisement for the artist but either cut the cost or stop crying about how expensive it is.

          Another thing I noticed in analyzing this piece written by Ms. Love. Her numbers don't add up. Take a look:
          The band gets 2 million (20% of $11 million in sales) and then gets charged:
          $2,000,000 - royalties
          - $ 500,000 - 50% of 1 million for videos
          - $ 200,000 - for the tour, which is really an investment for
          the artist since tours MAKE money for artists
          - $ 300,000 - for radio promotion, again an investment
          that drives up their record sales
          ------------
          $1,000,000 - leaving them basically with their original
          advance of $1,000,000

          The record company makes 11 million and has to pay out the following
          $11,000,000 - her numbers for record company gross
          - $ 500,000 - manufacture CDs
          - $ 1,000,000 - band's advance
          - $ 1,000,000 - video costs
          (wait, didn't the band pay 1/2 of this?)
          - $ 300,000 - radio promotion
          (again, didn't the band pay for this?)
          - $ 200,000 - tour support
          (band paid, right? or maybe Ms. Love is just
          incoherent at this point)
          - $ 750,000 - music publishing royalties
          (to who? the artists? the record company? very odd...)
          - $ 2,200,000 - marketing
          -------------
          $ 5,050,000 - profit. wait, didn't she say they made $6.6 million?
          by her numbers she is off by $1.55 million
          I would say that the entire article is suspect, since it's clear that Ms. Love can't even do simple arithmetic. I'm sure that she feels slighted because she isn't getting 100% of the millions her albums make, but the fact is that she is living the rock star lifestyle and she has a lot more money and other advantages that most people don't enjoy. Sure, I agree that artists should get a decent cut of the profits from their music but I really hate to hear them cry about how they just aren't getting that extra million or two past the millions they have gotten. They should try working minimum wage scrubbing floors for a while and we'll see how much they cry about being a celebrity.
          • Re:I'd be pissed (Score:4, Insightful)

            by clambake (37702) on Sunday June 22, 2003 @03:49AM (#6265861) Homepage
            How about you hire someone young, hungry, and promising who doesn't cost you an arm and a leg to produce your movie rather than hiring Steven Spielberg to do it?

            Saying this kind of thing just shows that you "don't get it". Ok, so the record company says, you need to hire MR Bigshot for $10 mil for 5 minutes of video... you have no choice it's in your contract...

            Or, ok, mr smart guy, you were smart enough to have some artistic control added into your contract, well, WE always have to aprove your albums before they are officially sanctioned to go on sale, so we just don't approve. Sorry. All your money spent on no name directort is wasted now.

            Oh, and since you signed a contract that says you MUST publish 5 albums and 8 videos before you get out of the contract, you are stuck with us until you put out an album that we "approve" of. You can't legally work another day of your life in this business with our say so... You can't really even sing in the shower, we own your voice forever, bitch. And if you piss us off enough with your fancy college student directors, maybe we'll just NEVER approve any more of your albums... Of course, w'll make sure, before we do, you'll be on our "solo" contract so even if you try to form anothe rband you cant.

            So, in conclusion, ha-ha, fuck you. Sincerely, The recording company.

    • by groundpig (583981) on Sunday June 22, 2003 @01:37AM (#6265548)
      I'm a rapper and if I made it big, 12 cents wouldn't be enough...that's for damn sure.

      If you're a rapper and you're reading slashdot at 11:30PM on a Saturday, chances are you don't have to worry about making it big.
  • Mesaly? (Score:4, Insightful)

    by Devil Ducky (48672) <slashdot@devilducky.org> on Sunday June 22, 2003 @12:39AM (#6265284) Homepage
    Considering that if you went to a store and bought an overpriced CD, the artist would get somewhere around 1-3 cents per CD; I don't think that 12 cents per song is a bad deal. I was quite surprised by how often, from Apple's claims, people are downloading whole CDs from them. Then I thought it out. $1 per song, 15 songs: $15 from iTunes; $20 from a store... plus I don't have to get up and walk to the car to drive to the store. Anything that saves you money while making you lazier will be a success.

    I know a lot of people here are going to be mad that the record company is getting anything, but I also dont see a problem with that as long as it is the record company that's doing the work of recording, advertising, listing with iTunes, etc. It's what record companies are for, after all.
    • Re:Mesaly? (Score:4, Informative)

      by black mariah (654971) on Sunday June 22, 2003 @01:12AM (#6265431)
      It's closer to a dollar a CD. Just keep in mind that out of that dollar the band has to pay for paying back it's advance from the label, pay back all recording costs, and pay for any and all touring they do. I don't know any other business where the employees get fucked over so much.
  • by Anonymous Coward on Sunday June 22, 2003 @12:41AM (#6265287)
    When you buy a car, how much of that money do you figure goes to each engineer who was involved in designing it? Probably much less than the profit margin of the dealer or the car company. Now think about the modern popular music industry: It truly is built on huge economies of scale, and just like that car, every track of music you buy is the result of the work of many different people. The task of the "artist" themselves varies depending on the particular group, but as a general rule, they are more replaceable than a highly-trained engineer, and each has unique value mainly because of their public image, which is itself crafted by record company marketing departments. Nonetheless, probably no one person receives a larger share of this money than the "artist" involved, which is in many ways unfair considering the amount of effort put in by producers, recording engineers, and of course the marketing department, but obviously the market viability of the work depends to a certain extent on the presence of the artist, so the market rewards them with a greater share. These figures, in short, are simply proof that free markets are working well.

    (of course, I leave it as an exercise for the reader to determine the share of the revenue from each song you pirate on Kazaa that goes to the artist)
  • by mechaZardoz (633923) on Sunday June 22, 2003 @12:44AM (#6265295)
    billboard article [billboard.com]

    Despite the major labels' success in clearing hundreds of thousands of tracks for purchase online through services like Apple's iTunes Music Store, some top artists continue to resist authorizing the dismantling of their albums for Internet consumption as a la carte singles. Some acts are requiring that their music be sold exclusively in album bundles. For example, Linkin Park recently pulled its music as a singles offering from digital services. Sources say the band has expressed concerns about undercutting album sales. Other acts with similar stipulations about their work include Radiohead, Madonna, Jewel and Green Day, sources say.

    Now, from an artistic standpoint I can see where they are coming from, there are certainly albums that must be experienced as a whole, or at least in the order that they were laid down. Still, I have to wonder whether they're not just shooting themselves in the foot; if the concern is over money lost to piracy, wouldn't 12 cents in the hand be worth it to an artist rather than 0? Eventually, they'll make the money back on volume; it seems they're too obsessed with immediate returns.

  • by ejaw5 (570071) on Sunday June 22, 2003 @12:46AM (#6265305)
    is this Business 2.0 "Full Speed" or "High Speed"?
  • by gad_zuki! (70830) * on Sunday June 22, 2003 @12:46AM (#6265306)
    The article states that 12% is average. Only high-successful acts can do better and they are completely free not to opt-in to Apple's music store like Radiohead and Linkin Park have decided to do. [billboard.com]

    Secondly, these are growing pains. 12% is excellent for a non-MTV/Clearchannel down your throat 24/7 mega-pop band. As diversity in the catalog continues and less money is funneled into four or five pop sensations, but instead funneled into exposing more artists then smaller advertising and word of mouth will produce more varied sales. Bands that start as nobodies and end as nobodies will be getting 12%. That's pretty good.

    Personally, I think moving to singles and a diverse selection is a step in the proper direction to satisfy both fans and artists. We're going to look back to the days of big radio and MTV and not believe our rampant fandom and misplaced loyalties, not to mention taste.
  • Royalty payements on albums for artists range from 5% to 15%. But the real bitch is how much of that 5-15% doesn't even get to the artist's pocket.

    You see, after the recoupable costs (which are mighty, and include a "packaging deduction" which is around 15 to 20% of the royalties), then a good portion (half, according to some sources) of what's left is held as "reserve" to account for returned merchendise, etc! The "reserve" is (allegedly) paid back over 2 to 4 years, minus the expenses of returned CDs an

  • Seems about right (Score:3, Informative)

    by Billly Gates (198444) on Sunday June 22, 2003 @12:49AM (#6265316) Journal
    First off 30 + 40 + 12 != 100.

    Anyway, 12 cents a song for a 12 track cd = $1.44.

    I believe most artists make anywhere from $.75 to $1.50 per cd depending on the popularity of the artist. Yep you read that right.

    Infact they get a bigger share because the RIAA does not have to go through a greedy retailer which charges $5-7 per cd, and no shipping or manufactoring costs are considered. Its the retailers and not the RIAA who make the majority of the outrageous prices. If the RIAA sells a cd for $11.99, the retailer will bump up the price to $18.99 and pocket the difference. Infact I believe they already do this. They only discount if the product does not sell well.

    That is unless the artist is really big and has their own record label after their contract expires. That is difficult because most contracts require that the RIAA own the first 5-6 cd's. Mostly the big artists can afford to outsource to a small or indie label after many hits when the contract runs out. Metallica for example does have such a deal which explains why they sued Napster. They have alot more vested interest and their newer albums make a shitload more money for them. They do not have to have a huge record label to market for them.

  • by ukyoCE (106879) on Sunday June 22, 2003 @12:50AM (#6265320) Journal
    Does the label really do nothing more than provide $$ in advance (ie: an EXTRAORDINARILY high interest loan) and provide some of the contacts (advertising means, etc.) for the artist to spend the advance on?

    Or now that all the radio stations and TV stations are owned by the same companies that own record labels, is it hard/impossible for an artist to get a decent deal on advertising without the media conglomerate's support?
  • by dekashizl (663505) on Sunday June 22, 2003 @01:04AM (#6265394) Journal
    I think that instead of a flat $1 per song, you should be able to have a payment form like a restaurant bill with a flexible tip, like:
    $[1.00] Song
    $[0.05] Service Bonus
    $[0.20] Artist Bonus
    $[0.00] Label Bonus
    ===
    $ 1.25 Total

    Thank you for using iTunes and have a nice day!
  • by b17bmbr (608864) on Sunday June 22, 2003 @01:12AM (#6265429)
    very few artists, except for metallicunt and a few others, bitch about file trading. artists make their money on the road. in fact, most don't even own the music. they are treated like 2 dollar vegas whores, get paid for shit, and are turned out like a sorority girl in the morning when their records stop selling. file trading helps the artists by giving them more exposure, and generates fans which go see them live. in fact, i'm actually surprised the in the IP sense, they don't get a dime.

    the music "industry" has lost far more due to artisits being able to produce their own albums and generate their own music. technology has hurt the music industry. iut has freed the artist to bypass the studios and go stright to the people. all the music industry has to do is look at the crap they are pushing and see they are dealing with a more discerning clientele. how many teeny-bopper, perky breasted teenagers and tatooed, skinny, psuedo-punk wannabee bands do they think we're gonna buy?
    • by Sheetrock (152993) on Sunday June 22, 2003 @01:40AM (#6265559) Homepage Journal
      I've seen this argument a great deal, but it sounds much more plausible that the artists are mum about file trading because they don't want the backlash from P2Pers that 'metallicunt' suffered when they went on the offensive. I can't imagine that many of these artists that are getting screwed by the music industry are thrilled to find their songs being traded via P2P -- after all, when they actually collect royalties they aren't that hot, so every bit they miss out on hurts.

      I agree that file trading increases exposure, and would not be surprised to discover that a great number of people who enjoy it actually increase their purchases of CDs (a net good for the industry). However, the music isn't there by the will of the artist and/or copyright holder. Silence doesn't always indicate acquiescence, and again if an artist is just scraping by they're probably not in a position to take risks on the goodwill of the file trading community.

      There are artists that willingly allow taping/trading of concerts, and places online to download their stuff (with BitTorrent even). Why not give them a listen?

  • by istartedi (132515) on Sunday June 22, 2003 @01:13AM (#6265439) Journal

    Why don't you show us...

    ...how Linux distros divvy up their dollars, and what percentage the programmers get.

    ...how work-for-hire proprietary software houses divvy up the dollars, and what percentage their programmers get.

    It's gotta be far less than a penny on the dollar for Linux, and I'd be surprised if it was more than a nickel on the dollar for all but the smallest proprietary software houses (where the coders are probably the owners anyway).

    So, if artists can make 12% of the gross online, that's sweet compared to a lot of other situations.

    • by Vellmont (569020)
      Unless they're employed by RedHat or IBM or similar, linux coders aren't expected to be paid. The software is also free, so I don't think anyone is too upset missing out on 12% of $0.

      As far as the rest of your comparison, most commercial software is produced by large teams of people, built up from libraries written by even more people, etc. Music is produced by the singer and/or band and a producer. Yeah, there are sound engineers and what not, but I'd argue that the band and maybe the producer are the
  • by zakezuke (229119) on Sunday June 22, 2003 @01:17AM (#6265455)
    ...how long before we start seeing cd burning terminals at music stores where you can either buy full licensed albums, or pick and choose tracks ala cart? I imagine that such a service could be provided at similar cost to itunes and still make a buck or two.
  • by lord sibn (649162) on Sunday June 22, 2003 @01:30AM (#6265508)
    Let's put this in perspective here. I work for a large retailer that grosses $60,000 per day or more (per store, not company-wide). How much of this money do I make in this same day? typically between $28 and $40. That's about 0.25% (give or take) of the gross revenues, for those of you not mathematically inclined. To put this in perspective, they're grossing about 50 times as much as I am, per dollar earned.

    Granted, the record labels do not have the recurring expense of having to continually refill stock, while my store does, but nevertheless; Record Labels are small fish in the big pond of economics. Sure, they may be making out like bandits as far as this is concerned, but in the grand scheme of things, not many people invest in record labels today, because they just don't make as much money as other industries do.
  • People should keep these rates in perspective with comparison to how much a writer makes off book publishing: A 12% royalty on paperback sales is much higher than normal, and 12% for a hardback is toward the high end of normal. 12% would be a more than respectible rate for a beginning-to-midlist author. (Stephen King and other bestsellers, of course, can get considerably more.) Also, a beginning writer usual gets between $3000-$5000 dollars as an advance on royalties (granted, the ways to screw writers after the advance have been given are far less numerous than in the recording industry...). Usually, there will be escalator clauses that bring higher rates after X number of books have been sold. Anyway, these are ballpark numbers for the science fiction field. Source: The SFWA Handbook, 1990, p. 62-69. (Note: Since 1990, if anything, rates have gotten worse, especially for midlist writers.) I am given to understand that advances in the Romance genre can be as low as $1000 for all rights (i.e., no royalties).

    While it is true that recording (and other artists) get screwed by media companies in many ways, the 12% discussed is not at all out of line with current reality in other fields.
    • by Not The Real Me (538784) on Sunday June 22, 2003 @03:07AM (#6265793)
      In the book "All You Need To Know About The Music Business" by Donald s. Passman, an attorney in the music industry, royalties are extensively discussed.

      SLRP: suggested retail list price minus 20% for packaging. ex: CD retails at $14.99, minus 20% for the packaging ($3.00), SLRP is $11.99.

      New artists signing with an independent label get between 9% to 13% of the SLRP.

      New artists signing with a major label get 12% to 14% of the SLRP

      Midlevel artists get 15% to 16% of the SLRP

      Superstars get 18% to 20%+ of the SLRP.

    • That may be true, but in book publishing, there are substantial costs for the publisher. Paper really isn't cheap, and shipping thousands upon thousands of pounds of it across the country is not cheap either. Contrast that with CD or online distribution. With online distribution, there is a tiny cost for each copy downloaded... No more books need to be printed, no more shipping needed. So, the label is taking almost half for themselves, but how much did they put in? Only the biggest artists get the am
  • by leviramsey (248057) on Sunday June 22, 2003 @02:22AM (#6265691) Journal

    ...than current arrangements.

    What does an artist get from an album? 50 cents, tops. That's for approximately one hour of content which wholesales for about $10.00 and retails for anything from $10 to $18.

    Here, the artist gets paid $0.12 for approximately 4 minutes of content which wholesales for $0.60 and retails for $1.00.

    If an artist sells an hour of content online, he gets $1.80, which is 3.6 times what he gets from the CD. Looking at it from wholesale to wholesale, if content with a total wholesale value of $10.00 is sold, the artist gets $2.00, which is 4 times what he was getting previously. If you go for $18.00 at retail, the artist is now getting $2.16. This is about 4 times better than what the artists were getting before.

  • Who cares???? (Score:3, Interesting)

    by Cyclone66 (217347) on Sunday June 22, 2003 @02:46AM (#6265747) Homepage Journal
    I really don't get it. You guys always bitch about how the artists are getting ripped off, after all, it's there work that makes the record companies the cash, but no one seems to fight for your own wages. You do all the work at your company, be it programming, hardware design or anything else. YOU do it, and someone else is making millions, but fair is fair right? Same should go for the music industry!
  • I can't quote it (Score:3, Interesting)

    by squarefish (561836) * on Sunday June 22, 2003 @02:53AM (#6265766)
    but I've heard that apple charges 34 cent per song and their agreement leaves the rest of the division and responsibility up to the label.

    another slice of info that was rejected by /.'s editors:
    I received an email from bloodshot records with the following- 'As the music business heads off into uncharted territory we are feeling the effects first hand as stores close, media consolidates and users have no qualms about stealing music from the web. After a fun business trip to Apple HQ in California, we have decided to cast our lot with Appleâ(TM)s new iTunes store. By the end of the summer (hopefully) youâ(TM)ll be able to download individual tracks or albums from nearly every Bloodshot artist (including comps). Weâ(TM)ll let you know when our catalog is ready to go.'
  • by chris_sawtell (10326) * on Sunday June 22, 2003 @03:11AM (#6265800) Journal
    And that's why it's almost impossible to buy a decent book these days, unless the author happens to be a J.K. Rowling or such.

    The whole bit of authoring books, particularly technical ones, is such a gamble for everybody concerned that authors churn them out as quick as humanly possible these days and doesn't it show.

    It's just not worth spending the time to do it properly.
  • by gelfling (6534) on Sunday June 22, 2003 @10:36AM (#6266938) Homepage Journal
    As I've said for years - changing the distribution channel changes nothing for the artists. The system is rigged to not pay the artists.

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