February 15, 2012

The way the music died

Spurred by the assault on the Internet by the recording and film industry, here is the first of several posts on music, money and politics. 
How the recording industry pirates musicians’ income

Illegal downloaders are far from the only pirates in the music industry. In fact one of the biggest collection of rogues is the very recoding industry that is causing so much trouble as it attempts to censor and control the Internet on behalf of its ill-gained profits. 

Tech Dirt, 2010 - An article from The Root that goes through who gets paid what for music sales, and the basic answer is not the musician. That report suggests that for every $1,000 sold, the average musician gets $23.40. Here's the chart that the article shows, though you should read the whole article for all of the details: 

Source: TheRoot.com

Of course, it's actually even more ridiculous than this report makes it out to be. Going back ten years ago, Courtney Love laid out the details of recording economics, where the label can make $11 million... and the actual artists make absolutely nothing. It starts off with a band getting a massive $1 million advance, and then you follow the money:

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.
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.

And that explains why huge megastars like Lyle Lovett have pointed out that he sold 4.6 million records and never made a dime from album sales. It's why the band 30 Seconds to Mars went platinum and sold 2 million records and never made a dime from album sales. You hear these stories quite often.


Courtney Love, Salon, 2000 - Now artists have options. We don’t have to work with major labels anymore, because the digital economy is creating new ways to distribute and market music. . . 

How can anyone defend the current system when it fails to deliver music to so many potential fans? That only expects of itself a “5 percent success rate” a year? The status quo gives us a boring culture. In a society of over 300 million people, only 30 new artists a year sell a million records. By any measure, that’s a huge failure. . . 

Here, take my Prada pants. Fuck it. Let us do our real jobs. And those of us addicted to celebrity because we have nothing else to give will fade away. . .  Since I’ve basically been giving my music away for free under the old system, I’m not afraid of wireless, MP3 files or any of the other threats to my copyrights. Anything that makes my music more available to more people is great. 

Sam Smith – One way to deal with this problem is for musicians to organize themselves into cooperatives to produce, perform, market and distribute their music. Cooperatives seem strange to Americans, in part because they don’t realize that when they go to Ace Hardware, or buy Welch’s grape juice, Land O Lakes butter,Sunkist oranges, Cabot cheese or REI sports equipment, they are doing business with a cooperative. 

The cooperative model is especially good for musicians because the complex nature of their business makes them so easily taken advantage of as some of stats above suggests. 

With cooperatives, the relationship between the musicians and the consumer might change as well. For example, fans - in return for an annual fee – could get discounts on performances and products, and attend special events for members only. Knowing that a higher percentage of the money they spent on music was actually going into the musicians’ bank accounts - and feeling as participants through their membership - might change the audience’s reaction to the whole business. In the end, music might tend to become once again more of a cultural event supported by its real participants rather than a commercial rip off by a tiny number of corporate leaches.


Anonymous said...

I have a big issue with the title of this piece. "The way music died" ? Music has arguably BEEN dead the past few decades while the RIAA cartel controlled everything; If there is any commentary on what technology and "pirates" are doing to the music industry, it is breathing life back into it and destroying the vulcan death grip held by the cartel, not digging deeper and sending music into a deeper sleep of more killing.

Music will NEVER die, and what you are seeing now is a RESURRECTION. Your premise is FALSE, PROREV.

Anonymous said...

Independent radio promotion is payolla ... which is/was illegal, right?

Anonymous said...

The Great Divide graphic is at best simplistic, and as seen from this writer's experience, dubious and misleading.
There exists considerable overlap between the 63% 'record label' sector and the 13% allocated to the 'band'---assuming one even actually accepts the percentages as valid, which I do not.
For one thing, more often than not the 'band' on record is actually not the band, but is instead session players who may or may not have contracts tied to 'points'---they are however, essentially employees of the label.
A sizable percentage of royalties or fees that seem to be categorized as 'record label' actually are, in fact, directed towards the song's composers, arrangers, and publishers, who, in many cases are the band, or at least some members of it.
Then there are the producers, writers,arrangers, and even technicians outside of the band who, all too often, are the true creative forces behind a particular project. They, too, fall into the category of 'record label'. How does this graph even acknowledge their contributions?
Reconciling these basic contradictions and omissions certainly seems to invalidate the data and exposed its skewed perspective.

Anonymous said...

Payola is not illegal. But, it is a form of deception, if fans are unaware that the song was played because someone’s pocket was lined – paid to be played. I believe that's how rock and roll got its start! The audience generally assumes the selection was made according to a song’s popularity or artistic merits.

Anonymous said...

Payolla still, this explains the popularity of Bieber, Gaga and the like.

Capt America said...

Where is the songwriter/composer in this? Your rant gives no consideration to the copyright holder at all. That says more about you than the industry.

TPR said...

Mike Podwal, product manager at Amazon, wrote: "In the U.S., the Record Label is responsible for paying the songwriter a fixed rate of $0.091 for each song sold. A simple example: Bob Dylan releases a new 10 song album, which sells an even 1MM copies. The Label owes Bob $91,000 for letting them "publish" his 10 songs." In the example cited by Courtney Love that would be less than one percent of the total revenues.