CD Sales: How much does the artist make?

Discussion in 'Audio Help & Tips' started by Arcane, May 23, 2005.

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  1. Arcane

    Arcane Alcoholic Roadie

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    Ok, I posted this at another site, and I figured I might as well drop it here too. AON, this might be something you can add to your site, as it's useful info.

    This is how the money breaks down when you buy a CD from a record store (based on a starting act with a major label record deal [Sony/BMG, Warner, Universal, EMI] or a large indie label):

    The CD Standard List Price (this is the price that all CDs are technically supposed to be listed at, although it never is) is $23.95.

    The record label then takes 25% of that off the top for "Packaging", leaving $17.96.

    Out of that, the artist gets 10% as their royalty, which is $1.796

    From that, the artist pays the producer aprox. 3% ($0.539), which gives the artist $1.257 per CD they sell. Not bad, right? Well...

    On sales of say, 50,000 copies (which isn't bad for a new artist), you only get paid for 90% of them, as record labels take 10% as "free goods". These are to be distributed to radio stations, in store play copies or wherever (and obviously they arent going to be giving out 5000 copies, but they take 10% of all manufactured CDs none the less).

    So your left getting paid $1.257 for 45,000 CD sales. This comes out to $56,565. Not bad for a few months work...but before you get all excited with your "success," you might want to look at how much you owe the record company.

    These are some very basic rates to what making that $56,565 costs, in actuality, its much more expensive.

    CD Production (including studio time, promotion, session musicians, producer [you pay them a % of your royalties + a flat rate, which comes out of this] mixing, mastering, duplication and packaging [yes, you do pay packaging twice]): $150,000
    Video(s)- because its advertising for your artist and generates performance royalties: $75,000 (each, not for like 3)
    Advance- the money you get to live on while making the record: $30,000 (which is really low...this is assuming the record only takes like 6 months to make)
    Tour Support- because you want to go do shows, right?: $50,000 (you have to pay for rental gear, venue space, travel expenses, a place to stay, food, etc..)

    Total that You Owe the Record Label: $300,000

    This gets paid back by your sales royalties (the $56,565 I talked about earlier) BEFORE you get a penny of them.

    So after selling 50,000 copies of your album (getting it halfway to gold), you made a grand total (from record sales) of:

    Negative $243,435

    To break even and start making money off your record sales (in this example), you would need to sell 238,663 copies, which is nearly impossible for a new act (unless of course they're promoted left and right, but that costs more money, which you pay for of course).

    You think that's bad? Well, the record company has already made well over a million dollars off you, and to top it off, on any sales done by mail order (via say, Columbia House), you only get half of that $1.257, same with any Military Sales. On top of all that, your likely going to get dropped from the label because you didn't at least break even, not that its a bad thing, because upon being dropped your debt to the record company "disappears" and you don't owe them anything, odds are you won't get signed again anytime soon though.
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  2. Arcane

    Arcane Alcoholic Roadie

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    So, how do artists make their money? Thats easy, any of the following ways:

    Radio/Television Airplay: The standard royalty rate for Canada/US is $0.02/play, which is payed out 4 times per year by the performing rights society (SOCAN in Canada, ASCAP or BMI in the US).

    Synchronization: ie. getting you songs in ads, movies or TV shows. Typically a flat rate, than depending on the contract, you can get paid a % of the origional amount based on repeat plays of the Ad/Tv show episode. Movies are typically only flat rate + mechanical royalties based on number of copies of the Video/DVD are made.

    Mechanical Royalties: The standard rate for this is $0.071/song, which means if your CD has 12 songs, you get $0.852 per cd minus the 10% free goods which I mentioned earlier. This is typically unseen by the artist as well, because depending on the contract, it usually goes straight to the record label to help make up the money you owe them.

    Publishing: The artist (writer only, in case of bands or acts that don't write their own lyrics) gets directly 50% of all the money made by the publishing company for publishing their record. The other 50% is split 50/50 between the artist (writer only, in case of bands or acts that don't write their own lyrics) and the publishing company. Every dollar they make from publishing your CD you see $0.75 of. NEVER have it in your record deal that the record company can recoup your expenses through publishing. You'll make absolutly nothing that way.

    Sheet Music (yes, they still make that stuff): Produced by the publishing company, but not the same as "publishing", the artist gets anywhere from 10-15% (whatevers in the contract) of the selling price of a book of sheet music. A $10 book would therefore get the artist anywhere from $1 to $1.50.

    Live Shows: The artist typically makes a % of the ticket sales, or gets paid a standard rate by the promoter. Whatever is worked into the contract.

    Merchandise Sales: The main source of income for artists. It's simple, you take a $2 TShirt, slap your bands logo on it and sell it for $20 at your show. Take out a small % to pay the venue, promoter and sales person, then the rest is profit.

    CD Sales at Live Shows: Different from CD sales in general, the artist typically is allowed to buy X copies of their album from the record label at a reduced rate to sell at their shows. These CDs are royalty free, but whatever the artist makes, they keep. Ie. The artist buys 1000 CDs from the label at $5 each, then sells them for $15 each at shows. They dont get their sales royalties for those CDs, but do net $10,000 directly + their mechanical royalties for the CDs being made in the first place.

    Other forms of Income:
    Endorsements (I'll wear your shoes for a doller!!), Paid Interviews, Working a 9-5 (haha, but its true)

    Also, I forgot to add in the managers cut of all this, which is typically anywhere between 15 and 25% of any income that comes in.
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  3. Mr. Verbalist

    Mr. Verbalist How am I doin?

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    You said video's and studio time cost the artist money ... Shouldn't the label pay for that shit? lol kinda pointless in being signed if they don't even pay for your studio time ...

    Arcane your basically saying the artist pays for promotion, videos, mastering, mixing, studio, the A&R's Coffee ... haa are u sure ur right?

    what the FUCK does the label pay for!!??
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  4. Arcane

    Arcane Alcoholic Roadie

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    the label doesnt pay for shit

    its all recoupable, which means you have to pay it back

    record deals are basically like loans, except you get your record promoted and distbuted in whichever territories you sign your deal for

    this was told to me by my music industry teacher, who was the senior A&R for warner music up until 1991, who now runs his own management company

    i doubt its incorrect
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  5. AllOrNothinEnt

    AllOrNothinEnt Retired from Rapmusic.com

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    It's true, about the label not paying for your recording, YOU do.

    But when I had my label open, I gave the artist 15% of total album sales, and he didnt pay for production .
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  6. AllOrNothinEnt

    AllOrNothinEnt Retired from Rapmusic.com

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    That's why I stress, before kids start this "I wanna get signed" shit, you better go to an indie label, you'll make more money.
    Oh, and those cars, the jewelry you see, those artists don't own that shit 50% of the time, the label owns it.
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  7. Arcane

    Arcane Alcoholic Roadie

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    ehh, the label rents it for the video/whatever the artist is at, or they get it on contract from the jeweler as a promotional thing, see: endorsements

    they still dont own it though :p
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  8. AllOrNothinEnt

    AllOrNothinEnt Retired from Rapmusic.com

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    Pac, now that's a different story, he made so much money shit aint even laughbale, but he still didnt get it all.

    But kids, wake up, the industry is out to FUCK YOU, start your own label, or head to an indie label, don't accept this pennies shit.
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  9. Mr. Verbalist

    Mr. Verbalist How am I doin?

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    What about big ballers like 50 cent and Eminem? lol THEY OWN THEY SHIT!

    Plus I'd cut a hole in my stomach and rip my intestines out before I'd ever make a video with "ice" and "rims" and "cars" in it ....

    It's fuckin pointless ... fuckin homo's ... bwahhahahahahah


    So getting signed to major label is useless ... I mean I can promote my own shit for free and make a video on my mom's sony video camera ...

    Go INDIE! wheew!
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  10. Jae Little

    Jae Little DJ - Producer

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    My 2 cents....

    Royalties vary according to the strength of your bargaining position, but 10-14% of retail selling price is about average for a new artist. RSP is the selling price in the shops, minus VAT and a percentage Packaging charge companies require artist to contribute. Towards marketing costs. The end result is that, if a CD retail for $12, a artist could earn between 70 cents and $1.00 per CD sold. The cost of recording and other advances you have received will be subtracted first from any royalties due.

    But you can try to increase your rate of royalty throughout each new year of the contract. Or aim for payment on 100% of salees and not lower figures such as 90% as some companies will offer. Insist on a full royalty for 12" CD singles, as they are no more merely promotional records.

    Advances are a financial sign of good faith for the record company, and the money you will live on until your roaylties arrive. They should always be non returnable (i.e. on recoupable from future record royalties). They may be paid at the beginning of each contract year, of half at the beginning and half after delivery of your record commitment for that year.

    There is no such thing as a standard advance. However, if the contract is a long term one: an advance should be large enough to provide the artist with a reasonable living wage until initial cost have been met and royalty income is being received. It should also be commensurate with the exclusive right to your recording service that the record company will demand.

    I think I might have mention some of the same information. I don't know, if so sorry about that.
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  11. Arcane

    Arcane Alcoholic Roadie

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    my examples are based on what was given to me in class haha...

    anyways, odds are you arent going to ever get more than a 15% royalty from a high profile label, and from an indie, you'll likely get even less than that
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  12. P Grizz

    P Grizz PGrizz.Com

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    this shit looks like it came str8 out of "All About The Music Business" by Passman lol

    GO INDIE...make noise...if your whole plan is to "Get signed"...keep in mind that the more popular you are BEFORE labels come at u...the more power you'll have when it comes to negotiating.

    But a lot of artists arent even worried about getn signed anymore. they just get distro deals.
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  13. Mr. Verbalist

    Mr. Verbalist How am I doin?

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    I just got signed to an indie label and my albums dropping next week.

    P grizz buy my album, everybody ... buy my album. See I'm my own promoter.

    yay
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  14. Arcane

    Arcane Alcoholic Roadie

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    lmao...whats your royalty % like? (if you can give that info out)

    actually, i wouldnt mind taking a look at your whole contract if thats aight, and of course if your able to give the info out
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  15. War Machine

    War Machine Sam Antics

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    yeah...its lovely when u have ur own studio an make ur own beats then..

    all u gotta do is pay to get it mastered... an let the label promote an sell ur shit

    still no easy way to fortune, but u get fucked less
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  16. War Machine

    War Machine Sam Antics

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    oh by the way.. while everything arcane said was true, it doesnt go for all labels..for a short time i was signed to a sister label of sony... i had a 15 track cd i had sent them, and we were still negotiating the deal, but in the mean time, i was getting a few G's to re-record the single and do a b-side, clean version, and remix. they were also gunna pay me about 20 gs to do the video, and then even more dough to perform it at club exit. shit fell apart before i got the video dough, but, the point of me tellin yahl that, was, shit is wierd, u could always end up wit differnet details in ur deal and lil other stupid shit along the way to make dough
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  17. P Grizz

    P Grizz PGrizz.Com

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    they werent paying u anything fam. That is a budget...and they woulda recouped it on the back end. gotta read the fine print. be VERY happy you didnt get that money because you woulda had to pay back every cent.
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  18. AllOrNothinEnt

    AllOrNothinEnt Retired from Rapmusic.com

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    Exactly, you weren't paid anything, you were getting a budget.
    They would have taken that shit right back.

    And how does 50 afford what he does?
    He sells millions of albums, he got a 1 million dollar plus pendant sign on bonus, he does tours, shows, videos, you name it.
    He gets paid for all of that, plus he jumps on EVERYONE elses shit, and gets paid for that, he's got his hands in every sugar pot out there he can.

    He made $40,000,000 last year, but you can believe not everything has been paid off.
    Noone buys Tysons house in cash.
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  19. A-Twizzie

    A-Twizzie New Member

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    me and my homegirl was arguing...about this the other night...is jadakiss a millionaire...i dont think he is she kept on saying look at his ice lol is he a millionaire?
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  20. Arcane

    Arcane Alcoholic Roadie

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    heh, its more of a generalized idea, numbers are subject to change

    anyways, when negotiating a contract (in particularly a record contract), get THE BEST entertainment/contract lawyer money can buy, not just the best you can afford, get THE BEST, PERIOD

    it'll be worth it in the long run because you'll have a way better edge as far as bargaining goes, especially if your working out a deal with a major

    a-twizz: probably not, but then again you never know...he probably has a few thousand in the bank though
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