how exactly do rappers make money off their albums?

Discussion in 'Hip-Hop Central' started by Hardkore, Apr 2, 2005.

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  1. Hardkore

    Hardkore Blunts@TheBeach

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    i mean...seeing all these rich rappers on t.v., i'm thinking, they must make alot of money off their albums, right?

    yet, this producer who i've been working with in the studio sort of broke it down for me (how rappers make money off their albums) one day, but i'm still trying to understand.

    let's say, mc dookie got signed to interscope, right? the head honcho at interscope gives him a lump sum of $250,000 dollars to make his album with.

    mc dookie starts working on his album.

    let's say, there are 15 songs on mc dookie's album. dookie has to get 15 beats, right? so let's say he wants kanye west to produce his single. bam, that's like, 50 g's right there for one beat. dookie is down to 200 g's. dookie gets about 10 beats from some semi-known produces, and that adds up to 100 g's. dookie only has $100,000 dollars left. dookie then gets a few beats from some somewhat well-known producers, and he is down to $40,000 dollars (keep in mind, he has spent all that on producers alone).

    let's say mc dookie wants fabolous to get on a track. not only does he pay fab $10,000 dollars to get on the track, he has to pay for fab's ticket to get to the studio the album is being done at, fab's hotel stay, and he has to rent a car for fab to come over and record. let's say all that costs 2 g's; dookie is down to 28 g's. dookie pays a local rapper and some local r&b track to hop on tracks with him. he pays them 2 g's each. now dookie is down to 24 g's.

    dookie has to pay for studio time, too, so let's say that was 15 g's.

    finally, mc dookie's album is done, and he only has $9,000 dollars left.

    this is before he copped ice, a car, or a place to live.

    the record company gets his album mastered and all that good stuff, then finally it hits the stores. let's say his kanye west-produced single does pretty well, and the album sells 300,000 copies the first week.

    let's say the company makes $2 dollars off each copy, and mc dookie makes 20 cents off each copy...

    mc dookie has made $60,000 dollars, and the record company has made $600,000 dollars, but, subtracting the lump sum they gave mc dookie, they've only made $350,000 dollars, but that's still profit,

    -----

    so, do you get what i'm saying? very few people make it in the rap game 'cuz of this. most rappers make money off endorsement deals, commercials, and on tour. the most famous rappers can make 10-20 g's a night at just one show.

    add comments below. :tongue:
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  2. Contak617

    Contak617 New Member

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    MC Dookie still lives with his mom and doesn't pay rent.
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  3. rhymes and h0ez

    rhymes and h0ez Twist An "L" For Big L

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    Its about how that label decides to promote that artist as well, a name sells so if mc dookie does a track with 50 Cent, Jigga he's automatically gonna have that confidence from his listeners that this guy is dope.
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  4. Hardkore

    Hardkore Blunts@TheBeach

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    mc dookie will shit on you. [fro]
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  5. hockeys_da_best

    hockeys_da_best New Member

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    You know that rappers generally make their most money from touring.
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  6. Prime Evil

    Prime Evil Registered Abuser

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    they make money offa touring and cd's (which is, like you said, not that much) and other stuff like endorsements, commercials etc.

    but that's what you get when you sign a contract with the devil.

    underground mc's suffer less of course. they make about 50% offa their cd's...plus the touring and other stuff.

    they just don't have that much promotion to earn millions.
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  7. Ice Fluid

    Ice Fluid Flow with the Fluid.

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    Mc Dookie kills a ~~~~~ and thinks nuttin' of it.
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  8. Young_gunna23

    Young_gunna23 New Member

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    a lot of rappers arent as rich as you think.
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  9. Hardkore

    Hardkore Blunts@TheBeach

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    i mean, if you're content with with making most of the profit off your album, but not millions, then stay independent.
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  10. *DowntownStar*

    *DowntownStar* ____________________

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    i'm going to explain this to you in as simple terms as i possibly can.

    when dookie signs a contract, he's agreeing to pay all the costs of making and promoting his album. he also agrees to get paid about 11% of whatever's left over. he can't end the contract until he does both of these things. that's the standard record deal.

    all costs of making the album go on his income statement as expenses. by record company standards, he can add as many expenses as he wants. he has to pay back all of those before he gets his paper. if he doesn't, they OWN him and EVERYTHING he has. again that's the standard record deal.

    if you've ever seen a business budget, you know there is a sheet called an income statement. this is divided into three parts:
    income
    expenses
    net income
    (net income = income - expenses).

    it's that simple, and that complicated. the problem is: dookie doesn't know which category to put his charges in.

    interscope gives him a lump sum of $250,000 dollars to make his album with.

    NO. interscope LOANS him $250,000 to make his album with. that money goes down as an expense. he now owes interscope a quarter of a million dollars. he has to pay interscope $250,000 just so he can be broke again.

    income
    $0

    expenses:
    $250,000 record company advance

    net income:
    -$250,000

    let's say for the sake of argument that dookie made the album already, before he signed the contract. all he does is hand it in. let's say the label took his finished album and spent $250,000 promoting it. at this point, the album is done and it's being promoted but he hasn't sold anything yet. now dookie's income statement looks like this:

    income
    $0.00

    expenses:
    $250,000 record company advance
    $250,000 promotional costs

    net income:
    -$500,000

    so now dookie owes the label $500,000. he has to sell $500,000 worth of records just to be broke again. if he wants to make money, he has to sell %500,010 worth of merchandise to make $1.10, which is 11% of profits after expenses.

    ok, now people are buying his shit. say he sells 500,000 records and each record costs $10. that's $5,000,000 in sales.

    income
    $5,000,000 retail sales

    expenses:
    $250,000 record company advance
    $0 cost of making the record (it's done already)
    $250,000 promotional costs

    net income:
    $4,500,000 total profits

    dookie gets 11% of the net income. but the math doesn't end there. there's more.

    dookie has to pay the label 88% of profits. he only keeps 11%.
    then dookie has to pay the IRS 50% of his 11% because now he's in the highest income tax bracket. this is how it works out for him:

    net income
    $4,500,000 total profits
    net expenses
    -$4,005,000 interscope expense
    new net income
    $495,000

    invisible expenses
    $247,500 to the IRS
    actual money in the bank profits
    $247,500


    dookie makes $495,000 profits while interscope makes $4,005,000. he made over $4 million for his label but he only takes a quarter mil home. not even.

    it doesn't sound fair, does it? that's because it ISN'T.
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  11. MrBiggums

    MrBiggums New Member

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    Wow very nice post. Very informative. Thank you.
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  12. *DowntownStar*

    *DowntownStar* ____________________

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    in real life there are a LOT more factors i didn't mentionm some due to record company scheming, and most of them due to dookie's own stupidity when it comes to spending other people's money. if i wanted to be realistic, this is how i'd have it:

    dookie does what everybody would do and spends all his money on cars and fast women. he got gear, got a ride, got hoes, and a deal. his street rep is flawless.

    dookie calls timbaland to produce his album. tim runs up bill of $900,000 and does 9 beats.

    dre hears tim's beats and he wants to add to it. dre costs $200,000 and does 2 beats.

    kanye wants in. he does one beat for $100,000.

    the label sees tim, dre, and kanye are involved. they think they can make the album go 5x platinum easy. they increase their promotion costs to $10 million hoping for a blockbuster smash.

    dookie hires little x to make 3 videos. each costs $1 million to make.

    dookie hires ki toy, gloria velez, and vida guerra to be his videyhos. they each ask for $50,000 to be in the videos and in photo shoots for the magazines.

    dookie and the label ask mtv and bet to play the video during prime time and give the videos 80 plays a week for 3 months so he can go straight to #1. the program directors at mtv and bet charge the label $250,000 each to do this.

    the day after the first video premier, all 3 singles are leaked. people are only feeling one of them so they go on bit torrent and download it. now evreyone has his one good tune. the label thinks they're going to lose money so they rush the album out before bootleggers upload the full rip.

    the album comes out a month later. by then everyone who wanted it already downloaded. the lames in the suburbs who buy everything they see on tv and the nerds who remember dookie's former days as a backpacker go out and buy his album, but it only sells 125,000 copies. at $10 each, this is $1,250,000 profit.

    now dookie is the mufuckin MAN. he's all over the magazines with ki toy and gloria wearing lingerie and touching him up. his video is on tv so much it makes you sick. back home, he got a phat ride, enough ice to make a penguin jealous, and dre and kanye say they want to work with him again on the next album.

    meanwhile, dookie's accountant does the math. this is what he sees:

    income
    $1,250,000 retail sales
    $20,000 mechanical royalties from being played on mtv and bet
    total income: $1,270,000.

    expenses:
    $250,000 record company advance
    $25,000 his manager's 10%
    $25,000 his lawyer's 10%
    $900,000 for timbaland's beats
    $200,000 for dre's beats
    $100,000 for kanye's beat
    $3,000,000 for little x
    $50,000 for ki toy
    $50,000 for gloria velez
    $50,000 for vida guerra
    $250,000 for mtv to play his videos
    $250,000 for bet to play his videos
    $10,000,000 label promotional costs
    total expenses:
    $15,150,000


    net income:
    -$13,780,000

    HE OWES THE LABEL $13 MILLION DOLLARS BECAUSE HE WAS AN IDIOT ABOUT HIS PAPER.

    now dookie is world famous, but he has to make himself a multimillionaire just to be broke again. he STILL hasn't earned a cent.

    next april, the IRS notices that he hasn't declared any income but he's got a phat ride and jewelery. they want him to declare his income so they can tax it. when he says he got $250,000 from the label, they charge him $125,000 against that loan because he registered his belongings under his own name. now not only does dookie owe tens of millions to the label, the IRS is killing him with back taxes.

    soon his car and jewelery is reposessed. except for the chain. some stickup kids jooked him for that in the club last week.

    dookie's video stops playing and that's the last you hear from dookie until he gets arrested for whatever he gets arrested for.

    my example is very simplified, but that's basically how it works in real life.
    test
  13. Dee-Zy

    Dee-Zy Free Willy!!!

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    That makes alot of sense ^^^


    I've heard alot of shit how music labels rip artists off, the only way you gonna be making money as an artist in the hip-hop industry is producer or if you own a label (although that's not artistic).

    I like how you explained it in terms of "to be broke again".


    I have heard alot of different versions though. (although they all have the same principle)
    State your source?
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  14. Offbeat

    Offbeat New Member

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    well

    some people, like cam'ron and jim jones

    dont even make their money from rap

    mostly from selling crack
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  15. *DowntownStar*

    *DowntownStar* ____________________

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    all you need to know about the music business by don passman.

    alt.rock producer steve albini wrote a similar article called 'the problem with music.' his numbers take touring and merchandising into account as well, which i didn't do. you can read it here
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  16. Dee-Zy

    Dee-Zy Free Willy!!!

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  17. tony silas

    tony silas New Member

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    they make the most money on merchandising
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  18. -Oz-

    -Oz- ^^^^^

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    None of you are rappers so you have no idea what they are making. Most rappers now a days are signed by rappers, so they are getting decent deals.
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  19. -Oz-

    -Oz- ^^^^^

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    LMFAO @ 900 thousand for a Timbaland beat. HIGHLY inaccurate. Most rappers that say they charge 200k for a beat are lying as well.

    Just so everyone knows, Dios one of them guys who thinks he knows what he is talking about, but really just chalked up A WHOLE LOT OF BS.

    Rappers make lots of money off albums or they wouldnt put them out, simple as that. Its their main function of income for most.

    Independent rappers like Cormega are making 6 bucks a pop on an album. Jim Jones did the same, so whoever says he makes money selling crack is a fucking fool. Jim Jones sold 180 thousand and made more than most rappers with that.
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  20. -Oz-

    -Oz- ^^^^^

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    $50,000 for ki toy
    $50,000 for gloria velez
    $50,000 for vida guerra
    $250,000 for mtv to play his videos
    $250,000 for bet to play his videos

    More idiotic statements. A model charges 1k to 2k tops for a fucking video. Thats why you never see the same ones in more than 3 or 4 videos, cause they cant get their price up. It aint hard to find hot girls to shake their ass for rappers. Id be surprised if alot of them didnt get paid at all.

    It dont cost no quarter million dollars to get a video played either. I dont think it cost anything. smh. If that was the case NO new artists would have videos, and people like Common couldnt afford one either.

    Nios is a complete idiot.
    test
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