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So, the question I have is: how many of those bands/artists make it? The article mentions an advance of $1M. I think the $20 per CD rate claimed in this album

by mdasen 15y ago

So, the question I have is: how many of those bands/artists make it? The article mentions an advance of $1M. I think the $20 per CD rate claimed in this album (1M CDs sold is claimed to be $20M in sales) is a bit high (then again, I haven't bought a CD in a while). Suffice it to say, I'd lower that to $10-12M gross and maybe $7-8.4M when costs are accounted for. Even with digital distribution, I think the iTMS/Amazon are taking 30% which would lower $12M gross to $8.4M after Apple takes its cut. Correct me if I'm wrong, but from what I've heard/seen an album costs around $10-12 on iTunes and Apple takes 30% of that. I can't imagine physical stores (who have the overhead of real-estate and employees) taking less. I mean, 20% breakage fees are outrageous, but arguing that selling 1M albums equates to $20M gross is also outrageous since CDs don't cost $20 a piece. So, how many of these bands succeed? If I gave a $1M advance to ten bands, would nine of them sell a million albums or only one of them? Thinking of it like an investment, that's an important question. If only one of them sold a million albums (and the rest failed), it would mean that I've put out $10M while the CDs sold grossed $12M (and probably $8.5M after the selling store takes its cut, before any other costs). In this case, there isn't a lot of money for the successful band to be well rewarded. Even though they brought in 8x what was invested, there was only a 1 in 10 chance of them succeeding and a lot of that money is going to subsidizing the investment in the failed bands. However, if 9 out of 10 sell a million records, around $75M is being brought in (after the selling store's cut) while $10M was invested and so there should be plenty of money for the bands/artists to be well-rewarded for their success. I'm not saying that there aren't dirty tricks being used. I simply don't know how often bands that get these advances do well. If the risk is that most ventures are very unprofitable, it means that the ventures that do become profitable don't get well-rewarded because of the risk involved. There's also the issue of the amount of money. In this case, it's $1M. That isn't a sum that most people can come up with and, as such, commands a premium. A lot of the larger VC investment comes after a team has shown that it can get a bit of traction. Places like YC invest early, but it's small amounts. In the end, if you believe in yourself and think there is little risk, it's always best to invest in one's self. However, it can be hard to stomach the risk if the costs are high and the industry failure rate is also high. I'm sure that the record companies are making off with loads of money unfairly, but what's absent from the article is a sense of how many bands that get the advance make it and how many fail. That's a critical piece of information that could turn their whole argument on its head. And without that information, it's impossible to realistically evaluate fairness. I'm no fan of record labels. I think they're an antiquated system in an age where digital recording, editing, and distribution can allow people to create high-quality media. However, if the article wants to convince me of its merits, it needs to offer some statistics about the success/failure rate of the bands/artists getting the advances. If the success rate is 90%, they have a good point. If the success rate is abysmal, it casts some doubt. I'd say it casts more doubt on the system of offering advances (than offering a defense of record labels) and argues for a more efficient initial production, but that's the hacker ethic in me.

krig 15y ago
The key issue is that the advance from the label is neither a gift nor an investment; it's a straight up loan (most likely with interest) that is expected to be paid back, but the loan terms are horrendous. I get the feeling you think that the band receives a $1M investment that the label will recover at a certain rate from the generated profit, but that's not the case. After selling for $1M, the artists are still at $0, and they still owe the record company $1M. If the record company brings in $1M in profit from an album, they have covered their expenses. That $1M wouldn't even begin to repay the loan the artist have, though, so now the label is UP $1M - the artist still owes them most of the advance. At least, that's how I understood the situation, correct me if I'm wrong.
- gallerytungsten 15y ago
  The general outlook I hear from people who are signed to deals that pay advances is this: get as large an advance as you can, because you won't be getting anything else. Sure, if you go double platinum it might be worthwhile to audit the label and squeeze some more money out. Although recoupment provisions make it technically a loan, just like a VC, the label won't come after you forever if you don't recoup. At a certain point, they'll write it off and let it go; they won't be after you forever like a collection agency. As to how bands can earn a living, the answer is of course touring, merch (t-shirts, etc.) and for those with music with mass appeal, licensing to films, tv, and commercials. If you can self-produce, you can also do a licensing deal (P&D - pressing and distribution) for the record as well. The way to stay in control, of course, is to bootstrap it and form your own record company. Anyone curious about how these deals work in more detail should check out "Confessions of a Record Producer" by Moses Avalon (a pseudonym).
  - lawnchair_larry 15y ago
    Worth noting - non-RIAA bands actually lose money touring. Smaller bands signed to RIAA labels still do not do very well with touring. In many smaller scenes, a successful tour is one that breaks even. They sleep on promoters floors, eat shitty food, and play in bars. I hear a lot of "fans" that download all of their music and think that they support the artist by going to their show. This is not the case. The one way to really make money as I understand it - which is noted in the book you mention (though it is kind of dated now) - is royalties. If you are fortunate enough to have your song featured in ads and get into heavy rotation on the radio, you get paid outside of your recoupment costs (which they pull from record sales).

by mdasen 15y ago

krig 15y ago

The key issue is that the advance from the label is neither a gift nor an investment; it's a straight up loan (most likely with interest) that is expected to be paid back, but the loan terms are horrendous. I get the feeling you think that the band receives a $1M investment that the label will recover at a certain rate from the generated profit, but that's not the case. After selling for $1M, the artists are still at $0, and they still owe the record company $1M. If the record company brings in $1M in profit from an album, they have covered their expenses. That $1M wouldn't even begin to repay the loan the artist have, though, so now the label is UP $1M - the artist still owes them most of the advance. At least, that's how I understood the situation, correct me if I'm wrong.

gallerytungsten 15y ago
The general outlook I hear from people who are signed to deals that pay advances is this: get as large an advance as you can, because you won't be getting anything else. Sure, if you go double platinum it might be worthwhile to audit the label and squeeze some more money out. Although recoupment provisions make it technically a loan, just like a VC, the label won't come after you forever if you don't recoup. At a certain point, they'll write it off and let it go; they won't be after you forever like a collection agency. As to how bands can earn a living, the answer is of course touring, merch (t-shirts, etc.) and for those with music with mass appeal, licensing to films, tv, and commercials. If you can self-produce, you can also do a licensing deal (P&D - pressing and distribution) for the record as well. The way to stay in control, of course, is to bootstrap it and form your own record company. Anyone curious about how these deals work in more detail should check out "Confessions of a Record Producer" by Moses Avalon (a pseudonym).
- lawnchair_larry 15y ago
  Worth noting - non-RIAA bands actually lose money touring. Smaller bands signed to RIAA labels still do not do very well with touring. In many smaller scenes, a successful tour is one that breaks even. They sleep on promoters floors, eat shitty food, and play in bars. I hear a lot of "fans" that download all of their music and think that they support the artist by going to their show. This is not the case. The one way to really make money as I understand it - which is noted in the book you mention (though it is kind of dated now) - is royalties. If you are fortunate enough to have your song featured in ads and get into heavy rotation on the radio, you get paid outside of your recoupment costs (which they pull from record sales).