I hate when the RIAA keeps bringing up how many blank cds are sold per year vs. how many music cds are sold. If blank cds could only be used for music they might have a point but it is now the standard for data backup and transfer as well.
OK. I have some experience in FMCG supply chains, and the key factors to bear in mind are: Design costs (recording the album) Manufacturing costs (duping the CDs, printing covers et al) Distribution costs (getting the CDs to stores) Promotional costs (making you aware that the CD exists) Taking a cut from what's left are: PoS (the shop wants a piece of the action) Artist (including songwriter, performer and publisher) Record Company (obviously) I've excluded agents and the such like, who are getting paid indirectly (I assume), but it's nowhere near as cheap as $.20 to dupe the CD.
"Hi? Yeah, it's us. Doesn't have to be 'guys' or 'five,' m'kay?" "Yeah, A-Train! Oh, we ain't gonna take it! ... uh wait. we are guys, I think. "
I'm making one now so here is my experience (in pop music): A local demo-quality CD: $2,500 - $7,500 A local record-quality CD: $7,500 - $20,000 A regional indie release: $20,000 - $50,000 A national indie release: $25,000 - $75,000 A national first release: $50,000 - $125,000 A national name artist/big seller: $125,000 - $250,000 Understand that this DOES NOT include distribution - pressing the CD's and printing the artwork - which is done by the label. This is simply the hiring of a producer and engineer, recording studio time, photos, artwork, liner notes and independant promotion. I've seen some records made for $200K plus. It is not uncommon. Remember that whatever it cost to make a record will be deducted from all artist royalties until it is paid for. So, if your record cost $20,000 to make, your royalties must equal $20,000 before you collect a single penny of that money. In the biz, they call that "recoup" costs. Some artists have actually been dropped before even selling enough records to pay for it. In one case, well-known session guitarist and producer Dan Huff had a band in the early 90's with his brother called Giant. The record cost a good deal to make and it didn't sell. In a wierd stipulation in his contract, they were dropped BUT STILL REQUIRED TO PAY BACK THE LABEL. He spent the better part of two years doing guitar sessions to pay back the label for the losses. I certainly would never defend the record industry. They suck beyond belief and most musicians hate them with a passion. However, anyone who thinks CD's cost a few thousand bucks to produce are out of their minds. Good producers (Mutt Lange, Daniel Lanois, Rick Rubin, Steve Lillywhite, Don Was) can charge more than $100,000 to produce a single record and that doesn't count studio time. They will bring their own engineer who gets about a third of what the producer gets plus at least two assistants. A good studio in New York might run you $350 per hour if you get a bulk rate discount (though you can get a deal at a good studio for $150 to $200 per hour) and that doesn't include the cost of media - reel-to-reel tape, back up hard drives, CD's, zip disks - which can run into the hundreds of dollars. It also doesn't include renting specialty gear - mics, amps, percussion, preamps, etc. And, unless you live in the city where you are recording (very rare), there is the cost of housing or food for at least two months, possibly more, as well as transportation for yourself and anyone else attending, catering for while you are recording, etc. Then, there can even be the cost of hiring other musicians to come in and do work or hiring different studios and engineers to do specific stuff like editing or sampling. Once you are done, expect to spend at least $5000 on mastering the CD, another $1500 on photography, $2000 on artwork and probably $1500 on the layout of the liner notes. It is freakin' expensive for big-label recordings. Now, my budget is small because I have a studio and the engineering and production skills (not to mention the gear) to handle most of the work myself. I even have help on the artwork and liners as well as the realization that this is only a local release. So, I was able to keep my budget low while producing a good-quality recording, but that is not the case with most.
So how many $12.99 CDs does the band have to sell to recoup say $20,000? Different scenario. What if a band without a contract scraps together $20,000 and pays for the recording/mastering/etc themselves. How many $10 CDs would they have to sell at shows to break even? In this case, would simple math work: 20,000 / 10 = 2000 CDs sold to break even?
Knowing the wholesale price the retailer pays would help get a better fix on the number. If the $20,000 is the <i>fixed cost</i> for the recording: Studio time Mastering Liner notes layout Artwork etc and one goes with a <i>variable cost</i> of $1 each for the actual production of the ready to sell CD: Compact Disc media Jewel Case Paper for artwork and packaging Plant production cost of getting the recording onto the CD etc then the sales would have to be a bit higher than 2000 units. $10 Selling Price -$1 Variable Cost ---- $9 20,000 / 9 = 2222.22 units Round up to 2223 units. That scenario doesn't figure a labor cost for someone handling & selling the CDs at the shows for the band. <center> </center> A better explanation: <a HREF="http://www.businesstools.org/breakeven/breakeventut.html">Breakeven Analysis: Tutorial</a>
Mango laid it out nicely. In reality, a band that spends $20K on a record on their own very likely will never recoup that money. Here's why... In addition to recording costs, you have to figure in the cost of pressing the CD (making discs, printing liners, shrink wrap and bar code), appx $1200 per thousand CD's. You also have to figure on the cost of distribution. If you want to sell it in record stores (the only way to sell more than a few hundred CD's in reality), you can go to them on your own and they usually take anywhere from 10 to 20 percent of each sale. If you go through a distribution place, they take about the same amount. Doing the math, let's say you spend $20,000 on the recording and you press 2500 CD's for $2200 (you got a deal on the discs). That's $22,200 for a total cost that does not include ANY promotion whatsoever - ads in local papers, flyers, end cap displays, travel and postage expenses, between 200 and 500 discs to give away to radio stations, promoters, record labels, etc. We'll just say another $1,500 for promotion. That's a healthy enough budget. Ok, so that means approximately $23,500 for everything. Now, the CD is going for $12 in stores and $10 at shows and about 30 percent of them should go at the shows with the other 70 percent going through local stores or online at Amazon.com or CDBaby.com. For each thousand CD's sold, your take is approximately $3300 from live show sales and approximately $7140 at stores if you figure an average 15 percent take for the store meaning you net $10.20 per disc. That's a total of $10,440 per thousand CD's sold. So, you need to sell about 2250 CD's to break even. It is nearly impossible for a local band to sell more than 1,000 CD's without a pretty significant following. Sell 5,000 on your own (within a year of release), and you are guaranteed a record deal with any label anywhere, anytime. So, selling 2250 CD's is something the vast majority of bands just won't be able to do because they just don't have the powerful promotion machines the record labels have and they never get airplay because radio stations don't play local bands. As a result, pretty much everyone who spends that kind of cash on a CD goes in the hole.
Thanks for the detailed replies. When I looked at the numbers, I thought that breaking even was a long shot. I didn't know if there were any hidden costs that my simple math missed. (The reason I picked the low ball number for a regional indie band was that that band might think about doing it themselves to free themselves from their indie label.) So here is the $64,000 question? Why do local, smaller bands ever go into the studio to record a non-demo CD? Are they only looking to pay for a vanity release? If a record quality CD cost $7500 to record and $1200 to get a 1000 CD pressed, you would have to sell ~900 to get out of the red. That seems to be a lot of product for a small band to move by themselves.
Sorry I just missed this until today. Bands do it for a few different reasons: 1. Promotion 2. To pass on to record labels and radio stations 3. Artistic pursuits There is a certain progression to things when you are in a band. You get togehter. You start playing. You get a bunch of songs written. You record them. There is almost always a drive to get into the studio and make something for yourself. Plus, the recording process is completely different from the live playing environment. Often times, the studio is the only place to really hear the song the way the writer meant it. There are very few restrictions. Want an orchestra to back you up? Just pay for it. The practical restrictions of playing live don't give you the same artistic freedom as recording can. By the same token, you just can't get the rush of playing live or the interaction with players in the studio which is why you play live. They are just different worlds.
