Here's how the money side of the music business works. Artists are paid for several things: Royalties This is a small percentage of sales from the sale of CD's. These are called "points" (as in percentage points) and the artist usually gets 1-3 points from CD sales AFTER the cost of making the CD (recording, production, artwork) is taken out. So, if it cost you $100,000 to make a CD (about average for a decent rock/pop music recoerding today), the record company gets 100% of your royalties until they add up to $100,000, then you start seeing your cut. Publishing This is a fixed amount per song paid to the composer for each CD sale. The amount is fixed at like 7.5 cents per song for songs under 5 minutes and like 9 per song for songs over 5 minutes (haven't checked the rates lately). Every CD sold, the composer(s) of the songs get this amount per CD. So, if you wrote songs on a CD but AREN'T in the band, you are most hurt by downloading because you aren't seeing any other benefits from the recording other than publishing. Performance Royalties These are paid to the performer (band/artist, not composer) based on airplay and are distributed by organizations such as ASCAP and BMI. They track the charts and airplay of songs (and video airplay) and pay royalties to the artist set at fixed rates based on how you rank in the charts and a relatively complex system that I wouldn't begin to try to explain. Performance Revenue This is revenue taken from performing for concerts, etc. The majority of bands break even or lose money on performing until they reach a sort of established place where they can set rates. Most bands just don't get paid enough to tour for long periods of time. They'll go out for a few weeks and then go home. It is becoming more common for bands to literally keep day jobs to fund tours. The reality is that people just don't go to shows like they used to and so bands don't tour nearly as much. The average tour length today is like 4 months - and that is 4 months of dates spread out over 18 months of time. It used to be that you would get on the road for 12-18 months straight, but it just isn't cost effective anymore. Merchandising This is, generally, where artists can make the most money if they are smart - t-shrts, bumper stickers, buttons, clothing, whatever. But, you normally have to be on the road to do it. Alternate Revenue Sources This can be anything from selling your song for airplay on TV shows and commercials to licensing your songs for other purposes like video games. It varies widely. --- Understand, when I talk about POP music, I don't mean Britney Spears. I mean ANYTHING that is trying to sell within the commercial market. That could mean Death Cab for Cutie or Foo Fighters or Paul McCartney or Jessica Simpson or Korn or country music or r&b or whatever. The people who are most hurt by downloading are those who make the least money and those who are the least hurt are the big pop artists. Record labels increasingly sluff off the more artistic or experimental bands (anything from the Beatles and Led Zeppelin to Nirvana and the Dresden Dolls would qualify) in favor of the big pop acts. In addition, labels never give development deals. Deals used to be set up so a band would get some money to essentially practice and record. Then, they would get 2 or 3 albums to prove themselves. Bruce Springsteen was nearly dropped before he finally made Born to Run, his first real hit record. But, he was given a chance to grow and experiment. Today, as Chris Rock once put it, it is "here today, gone TODAY!" I have no problem with downloading in general, but it is adversely effecting a big chunk of the industry. I have no doubt that it will eventually reach an equilibrium as the industry leans further and further towards the indie artist model. But, right now, you can see the effects directly: No more distributors between the labels and music stores Independent music stores are dying rapidly and we are stuck with only 3 or 4 major outlets for music Fewer and fewer independent promoters There are also the new deals being struck to try and prop up the industry and bands that can afford it. Prior to recently, labels did not get anywhere near touring or merchandising. Bands and promoters worked on those things completely independent of record sales. Korn recently signed a deal that puts them, their new label (EMI) and their promoter (an offshoot of Clear Channel) in bed together. Korn gets a HUGE lump sum up front (like $20 million) of which something like half will have to be paid back through income earned. Then, all three take every penny the band earns - royalties, publishing, performance revenue, merchandising, etc. - all into one big pot and divide it amongst themselves. This means that artsist get even LESS control over their art and revenune streams and lables along with promoters can put a stranglehold on every aspect of music revenue throughout the industry choking out independent promoters, non-commercial radio and even venues that don't want to play ball with them. For us, in practical terms, that means the big companies can have even greater creative control over the music that is put out. So, if you don't fit in and sell millions of CD's, you go back to flipping burgers. This has, to a degree, always been true, but not to the extreme that it is today and not with new deals like this. --- Like I said, I have no problem with downloading in principle. I just think that WAY too often we see Metallica complaining and say, "Oh, rock stars make millions. Why should I care?" without really contemplating the way the business works and how the guys who make average wages (songwriters often make less than $50,000 per year even when they write hits) is adversely effected.
Instead of buying cd's to support the artist, you should go to their shows. I wish artists could just have tip jars on their sites instead where you could send them money. That would be an alternative to those folks who don't want to spend money on a cd, or want a early edition or whatever. Even one or two bucks would help them directly. That is what they usually get from the sale of every cd anyways.
Anyone know how much it would cost to start up an independent radio station with enough power to be heard around the greater Houston MSA?
But, that won't help. Major artists who tour have to pay huge expenses to make tours worth seeing. There are people who have to be paid and venues have to make money. Ticket sales go to promoters who try and make the show visible. The cost of tickets has gone up exponentially because of it. And, music IS personal. You guys may not think so, but it is a LOT of work. If I pour $10,000 of MY OWN hard-earned money into making a CD, you can damn sure bet I am going to be PISSED if you download it for free because you don't want to have to pay for it. Plus, how much do you think bands make at shows anyway. Even decent national bands make less than $1000 for club dates. After paying their sound guy and crew for the show, paying travel expenses and food, what do you think they have left? Artists RELY on money from CD sales. It is, was and always will be their bread and butter. If they can't make money from it, they will stop playing or labels will drop them. And they aren't going to drop the big, crappy pop artists who always make money either. They are going to drop all the cool, innovative bands that struggle to earn income, but drive the creative part of the industry. I'm always amazed at people who say that artists don't need CD or sales from legit downloads to survive. I'm guessing most of you know very little about how the business actually works or you wouldn't bother saying that. By the way, if you think the cost of CD's is high, try the cost of a show when CD sales dwindle to nothing. If a band is going to make money, they will have to make it up somewhere. That means instead of $10 for a club show, you'll be paying $20 or more.
The cost for the application and transmitter fees run over $100,000 and the cost of renting transmitter time runs $50,000 per year or more the last time I read about it. It's expensive.
Nice explanation, Jeff. In my case, I'm being exposed to music via iTunes (checking out groups I hear about on this forum, for example, or from other places, as well as "set lists," etc., on iTunes itself) that I may have missed, otherwise, and certainly wouldn't have paid the cost of a CD for. Back when LPs cost me $3.99 new, and an expensive concert ticket was $6 bucks for the first few rows, center, music was the passion of my life. I got away from that (having kids, responsibilities, ad nauseam, will do stuff like that to you), but this is an easy way for me to get back into it. In my case, I never did the free downloading thing, because I felt it was unfair to the artists involved in making the music. The music business has always been screwing the groups making the music, in the main. Those who made a killing have always been the exception, rather than the rule. That was my experience when I was hangin' with those in the business, or on the fringes of the business, years ago. I doubt if that's changed. The "big business" types in the industry get little sympathy from me. People are always going to make music and get it heard, one way or another.
By the way, this whole thing about not being able to back up a song from computer to CD is a bunch of bull****. Everyone knows that. And iTunes rocks. It's where I get most of my music. It is great.
Just wanted to say thanks to Jeff for explaining the music business a little. Big music fan and I am pretty much against illegally copying CDs and downloading music for free (unless there is no reasonable commercial way of getting the music), so I like hearing what artists especially the non-big name pop artists have to say about this issue. Appreciate your views and info.
So, I don't have to delete Another Lame Semi-Tragedy from this computer? I know a lot of people like iTunes, but I want to put in a good word for www.emusic.com. They focus on indie labels, and at 25 cents a track, I'll take chances on artists that I might otherwise pass up. The funny thing is that the message boards have a bunch of trolls bemoaning the lack of Britney Spears and Eminem (sp?).
If/when no one can make any money in the music business anymore the paradigm will shift. I don't know what the future is but the international internet is a genie that can't be put back in the bottle and counting on guilt and loyalty is denying the nature of people. It may be that something like small time bands making their own music on home systems, offering their own cheap downloads from their own sites depending on Myspace type networks to generate their buzz. If they could net $.02 a download and get 500,000 downloads doing it themselves it might create a whole new cottage industry with a lot of innovation and creativity. That type of thing would get music back to a more personal expression instead of the calculated packaging of megabands. More passioned if less polished. Or new music as we know it could just die and everyone will have to listen to Led Zepplin forever.
its really hard to go to their shows and on top of that, they are at clubs most of the time. It's not like Paul Oakenfold, Dj Tiesto tour constantly. They do, on special occasions and I do go see them.
I'm one of those people who likes music (from rock to electronica to classical to jazz to country) but who isn't going to spend a bunch of money on it. I will not download music, other than through a fee-based service like iTunes; but I've purchased fewer than 100 songs to download. I have a 2 GB iPod Nano, but most of the music on it comes from my CDs. I went through a period of time when I didn't really listen to much music, and I rarely bought CDs. It wasn't until I could rip songs from CDs to listen to on my computer that I really started buying music again. Burning ripped songs to a CD with the songs I want and transferring them to an MP3 player just makes music all the more interesting to me. These things just fit the way I enjoy listening to music. Apparently, the RIAA isn't going to be satisfied until I go back to buying no music at all. If they make it too expensive, I won't buy it. If they make it too inconvenient, I won't buy it. It's as simple as that. Yet, everything the RIAA does seems to be focused on making music more expensive and more inconvenient to listen to. Great job, guys. If the RIAA managed to make it illegal to rip music from CDs to either burn on another disk (for personal use) or to transfer to an MP3 player, I would probably just get rid of my CDs --and buy no more. I have no other use for them. The last thing I want to do is insert a CD to listen to the one or two songs I actually like, and then switch it out and do the same with the next CD. That is about as appealing to me as hand-cranking a phonograph. And I'm too cheap to purchase all of these songs again from iTunes. Why can't the RIAA see that the RIAA is the problem?
Because they are seriously some of the most near-sighted people ever. They think as if it is 20 years ago and the CD format will never die, which, of course, it will. It's already dying. The "mix tape" is the staple of every music fan. Music fans have been making them as long as it has been possible. Mix CD's have taken their place and, eventually, we'll just have playlists like they have in iTunes everywhere. Just like they were absolute morons for going on the Grammy's a couple years back and railing against downloaders calling them petty thieves, they followed it up with stupid ass lawsuits and now this. I wonder what they'll do when the last of the major labels finally caves and we're back to the indie system. I'm guessing they'll be broke and finally shut the hell up.
