6 ms·

Release day economics

218 points by tbassetto 15y ago

pherk 15y ago
Seems like a very tough business to be in. Guess, how do upcoming bands manage to make it through given that most people on the band are pretty much committed to it full time.
- njharman 15y ago
  I would not consider this a business. In fact, the drive to monetize art is at the root of many problems with copyright expansion, culture privatization, and art quality.
  - gankit 15y ago
    How else would artists get paid?
    - shabble 15y ago
      The usual argument is either through patronage/sponsorship by some entity with the money to spare that enjoys their art, or by working in another field and making their art essentially as a hobby. Whether that is a good thing or not is a much more complicated question, and I suspect we'd have a lot less technically skilled artworks if there was no way for an artist to develop those skills in their primary profession. Sponsorship and patronage may be the way to go, but that risks the possibility of discouraging artists from producing any works that may offend their sponsor. The similarity to academia with grant funding and tenured professorship is quite clear. What is probably a novel approach is essentially the pay-whatever-you-like, or "distributed patronage" movements that have been occurring more and more recently. The problem then is shifted to gaining popularity/mind-share sufficient to fund the artist.
    - lsc 15y ago
      the same way most founders of new companies get paid. Dayjobs.
- leehuffman 15y ago
  Most bands/artists work 40 hour weeks at real jobs. There are very few independent artists that do well enough to play music full time. If you can, it means you're touring constantly.
Valien 15y ago
Now listening to a new band in Spotify. Thanks. Hope the meager cents adds up from hundreds or thousands of users.
- DrCatbox 15y ago
  Don't worry, much more meager cents will add up in the recording labels pockets, and Spotify, than this band!
  - antonp 15y ago
    Very sad, but true : http://www.informationisbeautiful.net/2010/how-much-do-music-artists-earn-online/ http://www.informationisbeautiful.net/2010/how-much-do-music... Having played in a band myself I certainly do end up with a bitter-sweet aftertaste when consuming music on Spotify. I've got a paid subscription and I'm absolutely loving it! It just doesn't make sense: music is such an integral part of our lives yet the people who drive it end up being exploited in a blatant way. "Don't hate the player. Hate the game." comes into mind when seeing the linked infographic... I just hope to see the rules change in my lifetime.
- ctdonath 15y ago
  For the price of one iTunes album purchase you'll save 'em the trouble of persuading enough people to listen to their tracks 200 times.
gravitronic 15y ago
I always like music industry posts showing up on HN as it's my view that the startup industry is in some ways like the music industry of years past. Competition is fierce. Most start out working on their (startup or music) product part-time until the product becomes popular enough that it is a "hit". At that point the entrepreneur may be lucky to end up funded ("signed") which will help their ability to pursue their product full time and spend the marketing dollars to reach a larger audience. Thankfully it's unlikely the VC/entrepreneur relationship will become as twisted and exploitative as the major music industry's relationship with artists as being funded does not suddenly unlock access to an entire set of verticals inaccessible to unsigned artists. Or does it?
- waterside81 15y ago
  I was having this exact conversation the other day with a friend. The similarities between the two are striking. I've been working on a blog post about how my entrepreneurial idol is not Steve Jobs or Zuckerberg, but Anthony Keidis. If you've read his bio, Scar Tissue, you'll know this guy has had more ups & downs and "pivots" than most people could stomach.
- rasmusrygaard 15y ago
  I think the main difference between the two is that entrepreneurs have a viable alternative in working for an established company (if we can forget about the lack of jobs for a minute). Yes, musicians can work day jobs too, but there are hardly as many openings for professional musicians as there are for professional programmers. The startup analogy is valid, but for recording artists, taking the leap is often in direct conflict with whatever pays the bills.
- zcrar70 15y ago
  Definitely agree - it seems like the music business in the early days (Elvis / Sun Studios) where lots of smaller players are trying for the big hit and the market is still fairly fragmented. Also, the success ratio sounds similar to the early days of the music business - a lot of people plugging away, only a few will make it. It'll be interesting to see how it turns out!
burrokeet 15y ago
If the band members are also the authors/composers of their recorded material, they will receive slightly more than what is suggested here, since they will also be due mechanical and/or performance royalties from various services. That being said, it's the best/worst time to be a musical artist - you can distribute yourself online (the biggest music marketplace) and receive a MUCH larger chunk of the revenue than ever before. At the same time, you are only going to sell 24 albums, because it takes a label or label-like organization to sell records, and because of the former point, you are now participating in a marketplace with a selection of products an order of magnitude greater than a decade ago.
- zandorg 15y ago
  Don't forget the cost of making music is much less than 10 years ago. Virtual samplers, synths, mixers, etc. This means far more people making music.
- unohoo 15y ago
  >>it takes a label or label-like organization to sell records with the new digital distribution methods and physical media almost on the decline, record labels hardly 'sell records' any more. They just do a huge marketing push for the artist. If indie musicians can figure out a way to market themselves, they really wouldnt need a record label.
  - burrokeet 15y ago
    sorry but i disagree - that huge marketing push is what sells the records - that is what labels do, whether they are majors or one-person indie labels. "marketing themselves" is a pipe dream that has only worked for a tiny percentage of indie artists - a huge industry has built up around this effort, and just like the major labels made lots of money off of their artists, this industry is making lots of money off these indie artists, just exploiting economies of scale of artists instead of consumers.
    - ivancdg 15y ago
      No question that this is true. And there are a lot of people making a lot of money on selling 'self-marketing opportunities' to independent musicians. But to compare that industry ('huge'?), in terms of revenue, to what the majors did in their hey-day is an exaggeration. The model of selling services to indie musicians has not yet surpassed the model of selling music to customers. But perhaps that's where we're headed? That's a depressing thought.
spatten 15y ago
I was hoping to see some numbers from emusic in there. I've been paying my monthly subscription for years, and I've always been curious as to how the payout split goes. Does anyone have a link / source / info on this?
- burrokeet 15y ago
  eMusic has a fairly low payout compared to other services offering DPDs (digital phonographic downloads aka an mp3 file) - in the range of 10 to 30 cents a track depending on a number of circumstances. On the other hand, they generally do good volume (often number 3 after iTunes and Amazon) and you can look at not distributing on eMusic as an opportunity cost - i.e., persons have paid already for a subscription on eMusic, so they are unlikely to take additional money and buy your music elsewhere if it is not available on eMusic. eMusic's real fail is that there are one of the very few DSP (internet music retailers) that only account quarterly... almost everyone else is monthly.
frewsxcv 15y ago
If I listen to only non-RIAA signed bands on Spotify (which I do), how exactly am I supporting major record labels?
- 2arrs2ells 15y ago
  The implication seems to be that the major labels get some fixed percentage of Spotify's revenues. I have no idea if this is true or not.
  - frewsxcv 15y ago
    Looks like I'm ditching Spotify at the end of this month
    - zcrar70 15y ago
      If you're in the US, Rhapsody pay artists better rates. An interesting graph illustrating how much an artist has to sell through various platforms (CD, spotify, itunes etc.): http://www.informationisbeautiful.net/2010/how-much-do-music-artists-earn-online/ http://www.informationisbeautiful.net/2010/how-much-do-music...
  - a3camero 15y ago
    They do indeed: http://www.bloomberg.com/news/2011-07-14/spotify-wins-over-music-pirates-with-labels-approval-correct-.html http://www.bloomberg.com/news/2011-07-14/spotify-wins-over-m... In addition to the percentage cut, they're also shareholders.
    - ethank 15y ago
      Yes, the labels get minimums and breakage if they are not reached. Besides, non-RIAA acts often use RIAA companies for catalog management, publishing and/or distribution. Even Radiohead was distributed by Sony.
  - CWuestefeld 15y ago
    Isn't this the same thing as the Microsoft issue, where they were getting paid for every PC shipped, whether or not it had Windows on it? MS got in trouble with the monopoly police for that...
runn1ng 15y ago
"..., it costs us 35 EUR/year to keep an album on iTunes, Spotify, and Amazon" Why is that? How much do you have to pay Apple, Amazon or Spotify to sell/play your music?
- leviathant 15y ago
  Chances are they're using something like Tunecore where you sign up once, and they redistribute to various music services. You still retain whatever rights you have, but you collect your income from Tunecore after they aggregate it from Apple, Amazon, Spotify, et al. IIRC, Tunecore does not take a percentage of each sale, but has a yearly fee to keep your music listed using their services.
- eridius 15y ago
  I imagine it's because there is a non-zero cost to hosting music, even if that music is never played by anyone. It also discourages people from spamming the store with junk.
- burrokeet 15y ago
  you pay them zero, but from the point of view of TuneCore it costs money to store and deliver your content, account to you, run a website, etc.
stevewillows 15y ago
The author paid too much to press those CDs.
- ivancdg 15y ago
  He probably did it in France; it is much more expensive here to do stuff like that than in, say, the UK or Germany. They're way behind the US in terms of competitive pricing for factory-produced goods. I ordered promo CDs pressed in California in 2009. They were pressed in Taiwan with Japanese machines. I received them 6 days later in Mountain View...at half the price of France, great quality. Incredible.
ivancdg 15y ago
Spotify is such a rip-off for musicians; I love the way these guys highlighted that in a light-hearted way. But the economics of the alternatives are not going to make anyone rich, either. For future reference: if you sign-up via CDBaby, there is a one-time fee of $35 (or $55 if they create your bar-code) and you are set-up with iTunes, Amazon, etc, without a yearly fee. Even though Derek's gone it's still a good deal. Also, you should seriously consider contacting Magnatune. If they like your music you can be on all of those platforms for free. And John Buckman is a very nice guy. Et en plus il parle le français comme toi et moi.
- iand 15y ago
  Even though they look like ripoffs with their tiny payments Spotify and other subscription models have a few advantages for the artist over download models. For a start the artist gets paid even if the listener is just trying the track, hates it and never listens again. The main advantage though is the open ended payment model. The OP should compare the 20 year revenue for each track. I listen to some tracks from 1996 every week and spent the period 1996-2001 listening to them multiple times a day. I'm not unusual (just getting old! :)
  - earbitscom 15y ago
    There are definitely albums I have listened to so many times that the streaming payments would outperform the purchases, but I've also bought some albums more than once, too! Most people, and most albums, though, are not going to outperform those economics. Simply put, $5-10 a month for access to 15M tracks is a joke and a big loss for the industry. I look forward to the labels realizing it and walking away.
    - iand 15y ago
      Fair enough, I've bought albums several times (vinyl to cassette to CD to MP3). Don't think I've ever bought an album on the same format twice unless it was by accident. But haven't we all had it with those format switch games? I bought some MP3s, I don't expect ever to buy them again. BTW, most of those 15M tracks are deep in the long tail of obscurity that would never see the light of day without an all you can eat subscription model.
physcab 15y ago
Consider for a moment this alternate viewpoint. What if submitting a song to <insert music distribution service> was kinda like submitting a blog to <insert blog service>. You don't get paid for blogging, but if you produce enough good content, you can create an audience and then sell them other things later on. Smart bloggers give out their content for free, then charge for premium services and products like consulting, books, podcasts, screencasts, merch, etc. Seems like the same model could be applied to independent artists as well. Then the questions become, which platform can you use to stay connected with your fans? Which platform will allow you to upsell other services for which you can make real money on? Which platform allows you to publish your content effortlessly to a potentially limitless audience?
- ctdonath 15y ago
  ...and us not-so-great bloggers? like non-hit bands?
  - tjogin 15y ago
    They make very little money.
- earbitscom 15y ago
  Plenty of artists do that, but some prefer to keep their content behind a pay wall, to use the same analogy. Both are viable models and should be respected.
  - zcrar70 15y ago
    I'm not sure how much giving content away for free is a viable model. It depends on the meaning of viable; it isn't viable financially, but it can be a worthwhile sacrifice if you think that more people reading your content is going to mean more people are going to pay for it. More often than not, that's not the case though; a lot of the content we access is free, and the author won't get remunerated for it. This is great for consumers, but it makes it a lot less interesting for producers. I'm not sure yet what the impact of that is going to be, but I suspect that it could mean a decrease in the quality of content overall, which would be detrimental to everyone.
ivancdg 15y ago
The Earbits guys (frighteningly prolific bloggers) wrote about Spotify recently: http://blog.earbits.com/online_radio/spotify-replaces-piracy-and-purchases/ http://blog.earbits.com/online_radio/spotify-replaces-piracy... "The service may do a good job fighting illegal file sharing but it also does a great job of eliminating any motivation to buy an album that you can listen to through the service." In Europe Spotify's been available for a while. I was in on the beta when their catalog was a lot more restricted, and it was already impressive. With the majors on board, it's hard to see the freight train stopping. How can one reconcile how wonderful it is for consumers with the payment statements that make us musicians cringe? I think of it as all-you-can-eat iTunes for very little per month; the recent competitors/alternatives pale in comparison. They deserve a lot of credit for building a workable model that makes iTunes look like a rip off (I hate that software). But they further dilute the value of recorded music, which is a huge paradigm change for the music industry that will ruin the viability of many musicians. Perhaps we can re-educate the public to value music again by taking a pledge to pay for it, à la pg-patents? Something tells me this new, 'recorded music ~ free' paradigm is here to stay.
- earbitscom 15y ago
  I am actually trying to find it but there is a country in Africa that is having a worldwide day where all radio stations are encouraged not to play music, and to instead play talk radio and other educational broadcasting about the importance of copyright protections and the need to support the arts, specifically music. They believe by taking music away for a day and educating people about the impact their consumer choices are having on the artist community, they can start to create significant public awareness about this issue. I think it's a great idea. Imagine Pandora's site down for a day: "Take this moment of silence to think about how important music is to you." That seems like a win for Pandora anyway, since they have a net loss of about $20,000 a day right now thanks to overpriced royalties.
- robryan 15y ago
  I think one of the issues is not that file sharing has reduced the general perceived value of music to 0 and the best you can sell people now is convenience and ease of use which is what people are really paying for on things like Spotify rather than the music itself.
alex1 15y ago
I didn't see any mention of songwriting royalties, which can be very significant if they also write their own music. The songwriter/composer of a song (not a recording of a song, but the actual melody, lyrics) gets a performance royalty each time a song is played in "public" (internet and broadcast radio, in the elevator, at a bar, etc). This is the royalty BMI, ASCAP, and SESAC collect. If the song is recorded and sold by someone, the songwriter gets mechanical royalties for each unit sold. If memory serves me correctly, the compulsory rate right now is 8 cents per unit sold. If the song in any form (recorded, sung by a drunk dude, etc) is used in something like a movie or a TV show, the songwriter gets a synchronization royalty. I've seen sync royalties range from $5,000 to $250,000. Songwriters are usually signed to publishing companies. Publishing companies are mostly owned by record labels themselves (or their parent companies). Publishing companies take a cut of the songwriters' royalties, but not as big as the cut record labels take from recording artists. I've seen rates ranging from 10% to 30%. On the other hand, the recording artist gets pretty much whatever the record label decides to give them as described in the recording contract. The label will own the song recordings, not the artist. Recording artists (and record labels) do not get any royalties for public performance. Yes, when a song is played on FM radio, the record label doesn't get a penny. The only exception to this is when the song is played on "interactive" services on the Internet. This is the royalty Sound Exchange collects. In those cases, both the songwriter and whoever owns the copyright to the sound recording (the record label) get royalties. The main sources of revenue for the label are from these royalties, and from selling the sound recording in stores and online. They take a large chunk (60-70%) of this and distribute the rest to the song's recording artist, producer, etc.
- ivancdg 15y ago
  All of this is true. However, the implication that an outsider might draw from your comment is that, say, the band that wrote the original post might hope to make those kinds of royalties since they (presumably?) wrote the melody and lyrics to the original song. If they sign to a major label and have a hit that continues to rake in those royalties, that is wonderful. If one of their songs is used in a big Hollywood film, and for covers, etc, great. But that's a lot of ifs. Even non musicians know the truth now, they've all read "Courtney Love Does the Math" on Salon. The reality of most musicians, even those signed to major labels, is far from a rosy economic picture. It seems to me that to imply otherwise is disingenuous. Didn't mean for that last part to sound like an attack, it's just that reading your (very well written) comment does not solve the problem of the musicians who wrote the original post.
neeleshs 15y ago
Zero knowledge about the music industry here, how about a subscription based startup? I even have a name for it - asongamonth.com. Any signed up solo artist/band promises at least a song per month and you as a listener pay half a dollar or a dollar a month as subscription per solo artist/band. You can chose to pay for only the bands you like, switch them whenever you want to.
- ethank 15y ago
  So.... Columbia House?
ChuckMcM 15y ago
I like these posts as well, as its a window on the economics of their information content (in this case music). They didn't mention how long it took them to come with this album, but since the web site says they added a drummer at the end of 2010 and this album was done in April of '11 we will call it 4 months work of three gentlemen best case, and if they really only finished it here at the end of August it would be 9 months. If we use the outside estimate of 9 months, and these guys had 'regular' jobs, lets say they would have earned $60K/year each with benefits, so call it $67.5K/year each for 9 months at an annualized pay of $90K. Note the numbers here are just guesses, I know they are in Europe and may have access to other healthcare options. So had they worked at this mythical job they would have earned $67.5K * 3 or $203K. They opted instead to spend that time making an album so now, 9 months later instead of $203K in value they have this album with 9 songs on which they own the copyright for the next 75 years. Its an interesting exercise to compare that 'foregone' revenue for the possible future value of the album. They can make as many copies of this album as they want and sell it for what ever they can get. Now they state that Spotify pays them .003 euros/play, Deezer .006 euros/play. Lets say it averages out to .0045 e/play. To keep everything in dollars, 1 euro => 1.43$ according to google, so .0045 E => 6.4 cents. The question one can ask is this "Would they have been better off working for 9 months? Or making this album?" We can assume that as soon as they release the album they gave up music forever and went back to a 9-5 job at $60K/yr. (or not but that would be one way to look at it). In financial terms, when does this album they created give them 203K $ of value back? A 6.4 cents/play That is 3.2M plays. Over the life of the Copyright of 75 years, that is 42K plays per year on average or 115 plays per day. So if they had 115 Spotify/Deezer fans who played one of those nine songs every day, they would earn back exactly as much money as they had 'not made' by not working 9-5. Conversely they would have to sell 29,000 albums on Amazon or 22,500 albums on iTunes to earn back the same amount of money they would have made. So a couple of things that are also important. First, they don't have to do anything to manufacture copies of the album. And secondly, their time is available to add another album to this 'stream'. (if the financial analysis of making the this one pans out). What this illustrates is that music is about the long tail, not the up front. If you make back all your investment in making an album in the first year, then your 10 year rate of return will be better than any other investment you could possibly make. What is more you can keep feeding albums into the system at what is your marginal cost of living (eating, thinking, composing, recording). This multiplies your revenue stream going forward. The record companies used to play an interesting game with musicians, it worked like this: Give us the 75 year rights to this music and we'll pay you a big chunk of change right now. Now the criminality was that the record companies created accounting systems which obfuscated additional revenue to the point of not paying the artist anything. However in this world its quite different. If these guys turn into a 'huge success' and sell a million copies of their album on Amazon their are going to make nearly $5M on a $270K investment. In the past they might get $50K in 'upfront royalties' and then never see any of that $5M. One thing they might do is sell the 'rights' to this album for $203,000. They are revenue neutral at that point and if the album does poorly they are protected from 'losing' money but if it does well they don't stand to gain from that. Risk arbitrage, its what VCs do, it is what music companies do, its what you and I do when we fill up our gas tank at half full rather than wait until the car is empty. Being a musician is hard work. And early on when you are finding your voice and your fans, its not very profitable (in fact if you don't love doing it you shouldn't because if you die early all you will have to show for it will be memories of creating that music.) However on the flip side, down the road, it can be hugely profitable with little if any additional investment. You develop a following and your numbers get better, no need to go out can cut down additional vinyl trees :-) or schedule another "pressing" of your album. It is this sea change that musicians need to understand, if you don't 'sign' with a label you are keeping control of your profits and managing the risk yourself. If you do sign with a label you can probably get more money up front but you don't benefit from the upside. Distributors make money on leveraging things like PR where it costs the same to promote 5 different albums at radio stations as it does to promote one. They work to amp the distribution so that they make more money. As a musician/owner you can do that but its not as efficient. The better news for musician is that the long tail money ends up in their pockets if they keep the rights, people underestimate that but it can get to be serious cash. It will be interesting to follow these guys as they develop to see how it works out.

218 points by tbassetto 15y ago

pherk 15y ago

Seems like a very tough business to be in. Guess, how do upcoming bands manage to make it through given that most people on the band are pretty much committed to it full time.

njharman 15y ago
I would not consider this a business. In fact, the drive to monetize art is at the root of many problems with copyright expansion, culture privatization, and art quality.
- gankit 15y ago
  How else would artists get paid?
  - shabble 15y ago
    The usual argument is either through patronage/sponsorship by some entity with the money to spare that enjoys their art, or by working in another field and making their art essentially as a hobby. Whether that is a good thing or not is a much more complicated question, and I suspect we'd have a lot less technically skilled artworks if there was no way for an artist to develop those skills in their primary profession. Sponsorship and patronage may be the way to go, but that risks the possibility of discouraging artists from producing any works that may offend their sponsor. The similarity to academia with grant funding and tenured professorship is quite clear. What is probably a novel approach is essentially the pay-whatever-you-like, or "distributed patronage" movements that have been occurring more and more recently. The problem then is shifted to gaining popularity/mind-share sufficient to fund the artist.
  - lsc 15y ago
    the same way most founders of new companies get paid. Dayjobs.
leehuffman 15y ago
Most bands/artists work 40 hour weeks at real jobs. There are very few independent artists that do well enough to play music full time. If you can, it means you're touring constantly.

Valien 15y ago

Now listening to a new band in Spotify. Thanks. Hope the meager cents adds up from hundreds or thousands of users.

DrCatbox 15y ago
Don't worry, much more meager cents will add up in the recording labels pockets, and Spotify, than this band!
- antonp 15y ago
  Very sad, but true : http://www.informationisbeautiful.net/2010/how-much-do-music-artists-earn-online/ http://www.informationisbeautiful.net/2010/how-much-do-music... Having played in a band myself I certainly do end up with a bitter-sweet aftertaste when consuming music on Spotify. I've got a paid subscription and I'm absolutely loving it! It just doesn't make sense: music is such an integral part of our lives yet the people who drive it end up being exploited in a blatant way. "Don't hate the player. Hate the game." comes into mind when seeing the linked infographic... I just hope to see the rules change in my lifetime.
ctdonath 15y ago
For the price of one iTunes album purchase you'll save 'em the trouble of persuading enough people to listen to their tracks 200 times.

gravitronic 15y ago

I always like music industry posts showing up on HN as it's my view that the startup industry is in some ways like the music industry of years past. Competition is fierce. Most start out working on their (startup or music) product part-time until the product becomes popular enough that it is a "hit". At that point the entrepreneur may be lucky to end up funded ("signed") which will help their ability to pursue their product full time and spend the marketing dollars to reach a larger audience. Thankfully it's unlikely the VC/entrepreneur relationship will become as twisted and exploitative as the major music industry's relationship with artists as being funded does not suddenly unlock access to an entire set of verticals inaccessible to unsigned artists. Or does it?

waterside81 15y ago
I was having this exact conversation the other day with a friend. The similarities between the two are striking. I've been working on a blog post about how my entrepreneurial idol is not Steve Jobs or Zuckerberg, but Anthony Keidis. If you've read his bio, Scar Tissue, you'll know this guy has had more ups & downs and "pivots" than most people could stomach.
rasmusrygaard 15y ago
I think the main difference between the two is that entrepreneurs have a viable alternative in working for an established company (if we can forget about the lack of jobs for a minute). Yes, musicians can work day jobs too, but there are hardly as many openings for professional musicians as there are for professional programmers. The startup analogy is valid, but for recording artists, taking the leap is often in direct conflict with whatever pays the bills.
zcrar70 15y ago
Definitely agree - it seems like the music business in the early days (Elvis / Sun Studios) where lots of smaller players are trying for the big hit and the market is still fairly fragmented. Also, the success ratio sounds similar to the early days of the music business - a lot of people plugging away, only a few will make it. It'll be interesting to see how it turns out!

burrokeet 15y ago

If the band members are also the authors/composers of their recorded material, they will receive slightly more than what is suggested here, since they will also be due mechanical and/or performance royalties from various services. That being said, it's the best/worst time to be a musical artist - you can distribute yourself online (the biggest music marketplace) and receive a MUCH larger chunk of the revenue than ever before. At the same time, you are only going to sell 24 albums, because it takes a label or label-like organization to sell records, and because of the former point, you are now participating in a marketplace with a selection of products an order of magnitude greater than a decade ago.

zandorg 15y ago
Don't forget the cost of making music is much less than 10 years ago. Virtual samplers, synths, mixers, etc. This means far more people making music.
unohoo 15y ago
>>it takes a label or label-like organization to sell records with the new digital distribution methods and physical media almost on the decline, record labels hardly 'sell records' any more. They just do a huge marketing push for the artist. If indie musicians can figure out a way to market themselves, they really wouldnt need a record label.
- burrokeet 15y ago
  sorry but i disagree - that huge marketing push is what sells the records - that is what labels do, whether they are majors or one-person indie labels. "marketing themselves" is a pipe dream that has only worked for a tiny percentage of indie artists - a huge industry has built up around this effort, and just like the major labels made lots of money off of their artists, this industry is making lots of money off these indie artists, just exploiting economies of scale of artists instead of consumers.
  - ivancdg 15y ago
    No question that this is true. And there are a lot of people making a lot of money on selling 'self-marketing opportunities' to independent musicians. But to compare that industry ('huge'?), in terms of revenue, to what the majors did in their hey-day is an exaggeration. The model of selling services to indie musicians has not yet surpassed the model of selling music to customers. But perhaps that's where we're headed? That's a depressing thought.

spatten 15y ago

I was hoping to see some numbers from emusic in there. I've been paying my monthly subscription for years, and I've always been curious as to how the payout split goes. Does anyone have a link / source / info on this?

burrokeet 15y ago
eMusic has a fairly low payout compared to other services offering DPDs (digital phonographic downloads aka an mp3 file) - in the range of 10 to 30 cents a track depending on a number of circumstances. On the other hand, they generally do good volume (often number 3 after iTunes and Amazon) and you can look at not distributing on eMusic as an opportunity cost - i.e., persons have paid already for a subscription on eMusic, so they are unlikely to take additional money and buy your music elsewhere if it is not available on eMusic. eMusic's real fail is that there are one of the very few DSP (internet music retailers) that only account quarterly... almost everyone else is monthly.

frewsxcv 15y ago

If I listen to only non-RIAA signed bands on Spotify (which I do), how exactly am I supporting major record labels?

2arrs2ells 15y ago
The implication seems to be that the major labels get some fixed percentage of Spotify's revenues. I have no idea if this is true or not.
- frewsxcv 15y ago
  Looks like I'm ditching Spotify at the end of this month
  - zcrar70 15y ago
    If you're in the US, Rhapsody pay artists better rates. An interesting graph illustrating how much an artist has to sell through various platforms (CD, spotify, itunes etc.): http://www.informationisbeautiful.net/2010/how-much-do-music-artists-earn-online/ http://www.informationisbeautiful.net/2010/how-much-do-music...
- a3camero 15y ago
  They do indeed: http://www.bloomberg.com/news/2011-07-14/spotify-wins-over-music-pirates-with-labels-approval-correct-.html http://www.bloomberg.com/news/2011-07-14/spotify-wins-over-m... In addition to the percentage cut, they're also shareholders.
  - ethank 15y ago
    Yes, the labels get minimums and breakage if they are not reached. Besides, non-RIAA acts often use RIAA companies for catalog management, publishing and/or distribution. Even Radiohead was distributed by Sony.
- CWuestefeld 15y ago
  Isn't this the same thing as the Microsoft issue, where they were getting paid for every PC shipped, whether or not it had Windows on it? MS got in trouble with the monopoly police for that...

runn1ng 15y ago

"..., it costs us 35 EUR/year to keep an album on iTunes, Spotify, and Amazon" Why is that? How much do you have to pay Apple, Amazon or Spotify to sell/play your music?

leviathant 15y ago
Chances are they're using something like Tunecore where you sign up once, and they redistribute to various music services. You still retain whatever rights you have, but you collect your income from Tunecore after they aggregate it from Apple, Amazon, Spotify, et al. IIRC, Tunecore does not take a percentage of each sale, but has a yearly fee to keep your music listed using their services.
eridius 15y ago
I imagine it's because there is a non-zero cost to hosting music, even if that music is never played by anyone. It also discourages people from spamming the store with junk.
burrokeet 15y ago
you pay them zero, but from the point of view of TuneCore it costs money to store and deliver your content, account to you, run a website, etc.

stevewillows 15y ago

The author paid too much to press those CDs.

ivancdg 15y ago
He probably did it in France; it is much more expensive here to do stuff like that than in, say, the UK or Germany. They're way behind the US in terms of competitive pricing for factory-produced goods. I ordered promo CDs pressed in California in 2009. They were pressed in Taiwan with Japanese machines. I received them 6 days later in Mountain View...at half the price of France, great quality. Incredible.

ivancdg 15y ago

Spotify is such a rip-off for musicians; I love the way these guys highlighted that in a light-hearted way. But the economics of the alternatives are not going to make anyone rich, either. For future reference: if you sign-up via CDBaby, there is a one-time fee of $35 (or $55 if they create your bar-code) and you are set-up with iTunes, Amazon, etc, without a yearly fee. Even though Derek's gone it's still a good deal. Also, you should seriously consider contacting Magnatune. If they like your music you can be on all of those platforms for free. And John Buckman is a very nice guy. Et en plus il parle le français comme toi et moi.

iand 15y ago
Even though they look like ripoffs with their tiny payments Spotify and other subscription models have a few advantages for the artist over download models. For a start the artist gets paid even if the listener is just trying the track, hates it and never listens again. The main advantage though is the open ended payment model. The OP should compare the 20 year revenue for each track. I listen to some tracks from 1996 every week and spent the period 1996-2001 listening to them multiple times a day. I'm not unusual (just getting old! :)
- earbitscom 15y ago
  There are definitely albums I have listened to so many times that the streaming payments would outperform the purchases, but I've also bought some albums more than once, too! Most people, and most albums, though, are not going to outperform those economics. Simply put, $5-10 a month for access to 15M tracks is a joke and a big loss for the industry. I look forward to the labels realizing it and walking away.
  - iand 15y ago
    Fair enough, I've bought albums several times (vinyl to cassette to CD to MP3). Don't think I've ever bought an album on the same format twice unless it was by accident. But haven't we all had it with those format switch games? I bought some MP3s, I don't expect ever to buy them again. BTW, most of those 15M tracks are deep in the long tail of obscurity that would never see the light of day without an all you can eat subscription model.

physcab 15y ago

Consider for a moment this alternate viewpoint. What if submitting a song to <insert music distribution service> was kinda like submitting a blog to <insert blog service>. You don't get paid for blogging, but if you produce enough good content, you can create an audience and then sell them other things later on. Smart bloggers give out their content for free, then charge for premium services and products like consulting, books, podcasts, screencasts, merch, etc. Seems like the same model could be applied to independent artists as well. Then the questions become, which platform can you use to stay connected with your fans? Which platform will allow you to upsell other services for which you can make real money on? Which platform allows you to publish your content effortlessly to a potentially limitless audience?

ctdonath 15y ago
...and us not-so-great bloggers? like non-hit bands?
- tjogin 15y ago
  They make very little money.
earbitscom 15y ago
Plenty of artists do that, but some prefer to keep their content behind a pay wall, to use the same analogy. Both are viable models and should be respected.
- zcrar70 15y ago
  I'm not sure how much giving content away for free is a viable model. It depends on the meaning of viable; it isn't viable financially, but it can be a worthwhile sacrifice if you think that more people reading your content is going to mean more people are going to pay for it. More often than not, that's not the case though; a lot of the content we access is free, and the author won't get remunerated for it. This is great for consumers, but it makes it a lot less interesting for producers. I'm not sure yet what the impact of that is going to be, but I suspect that it could mean a decrease in the quality of content overall, which would be detrimental to everyone.

ivancdg 15y ago

The Earbits guys (frighteningly prolific bloggers) wrote about Spotify recently: http://blog.earbits.com/online_radio/spotify-replaces-piracy-and-purchases/ http://blog.earbits.com/online_radio/spotify-replaces-piracy... "The service may do a good job fighting illegal file sharing but it also does a great job of eliminating any motivation to buy an album that you can listen to through the service." In Europe Spotify's been available for a while. I was in on the beta when their catalog was a lot more restricted, and it was already impressive. With the majors on board, it's hard to see the freight train stopping. How can one reconcile how wonderful it is for consumers with the payment statements that make us musicians cringe? I think of it as all-you-can-eat iTunes for very little per month; the recent competitors/alternatives pale in comparison. They deserve a lot of credit for building a workable model that makes iTunes look like a rip off (I hate that software). But they further dilute the value of recorded music, which is a huge paradigm change for the music industry that will ruin the viability of many musicians. Perhaps we can re-educate the public to value music again by taking a pledge to pay for it, à la pg-patents? Something tells me this new, 'recorded music ~ free' paradigm is here to stay.

earbitscom 15y ago
I am actually trying to find it but there is a country in Africa that is having a worldwide day where all radio stations are encouraged not to play music, and to instead play talk radio and other educational broadcasting about the importance of copyright protections and the need to support the arts, specifically music. They believe by taking music away for a day and educating people about the impact their consumer choices are having on the artist community, they can start to create significant public awareness about this issue. I think it's a great idea. Imagine Pandora's site down for a day: "Take this moment of silence to think about how important music is to you." That seems like a win for Pandora anyway, since they have a net loss of about $20,000 a day right now thanks to overpriced royalties.
robryan 15y ago
I think one of the issues is not that file sharing has reduced the general perceived value of music to 0 and the best you can sell people now is convenience and ease of use which is what people are really paying for on things like Spotify rather than the music itself.

alex1 15y ago

I didn't see any mention of songwriting royalties, which can be very significant if they also write their own music. The songwriter/composer of a song (not a recording of a song, but the actual melody, lyrics) gets a performance royalty each time a song is played in "public" (internet and broadcast radio, in the elevator, at a bar, etc). This is the royalty BMI, ASCAP, and SESAC collect. If the song is recorded and sold by someone, the songwriter gets mechanical royalties for each unit sold. If memory serves me correctly, the compulsory rate right now is 8 cents per unit sold. If the song in any form (recorded, sung by a drunk dude, etc) is used in something like a movie or a TV show, the songwriter gets a synchronization royalty. I've seen sync royalties range from $5,000 to $250,000. Songwriters are usually signed to publishing companies. Publishing companies are mostly owned by record labels themselves (or their parent companies). Publishing companies take a cut of the songwriters' royalties, but not as big as the cut record labels take from recording artists. I've seen rates ranging from 10% to 30%. On the other hand, the recording artist gets pretty much whatever the record label decides to give them as described in the recording contract. The label will own the song recordings, not the artist. Recording artists (and record labels) do not get any royalties for public performance. Yes, when a song is played on FM radio, the record label doesn't get a penny. The only exception to this is when the song is played on "interactive" services on the Internet. This is the royalty Sound Exchange collects. In those cases, both the songwriter and whoever owns the copyright to the sound recording (the record label) get royalties. The main sources of revenue for the label are from these royalties, and from selling the sound recording in stores and online. They take a large chunk (60-70%) of this and distribute the rest to the song's recording artist, producer, etc.

ivancdg 15y ago
All of this is true. However, the implication that an outsider might draw from your comment is that, say, the band that wrote the original post might hope to make those kinds of royalties since they (presumably?) wrote the melody and lyrics to the original song. If they sign to a major label and have a hit that continues to rake in those royalties, that is wonderful. If one of their songs is used in a big Hollywood film, and for covers, etc, great. But that's a lot of ifs. Even non musicians know the truth now, they've all read "Courtney Love Does the Math" on Salon. The reality of most musicians, even those signed to major labels, is far from a rosy economic picture. It seems to me that to imply otherwise is disingenuous. Didn't mean for that last part to sound like an attack, it's just that reading your (very well written) comment does not solve the problem of the musicians who wrote the original post.

neeleshs 15y ago

Zero knowledge about the music industry here, how about a subscription based startup? I even have a name for it - asongamonth.com. Any signed up solo artist/band promises at least a song per month and you as a listener pay half a dollar or a dollar a month as subscription per solo artist/band. You can chose to pay for only the bands you like, switch them whenever you want to.

ethank 15y ago
So.... Columbia House?

ChuckMcM 15y ago

I like these posts as well, as its a window on the economics of their information content (in this case music). They didn't mention how long it took them to come with this album, but since the web site says they added a drummer at the end of 2010 and this album was done in April of '11 we will call it 4 months work of three gentlemen best case, and if they really only finished it here at the end of August it would be 9 months. If we use the outside estimate of 9 months, and these guys had 'regular' jobs, lets say they would have earned $60K/year each with benefits, so call it $67.5K/year each for 9 months at an annualized pay of $90K. Note the numbers here are just guesses, I know they are in Europe and may have access to other healthcare options. So had they worked at this mythical job they would have earned $67.5K * 3 or $203K. They opted instead to spend that time making an album so now, 9 months later instead of $203K in value they have this album with 9 songs on which they own the copyright for the next 75 years. Its an interesting exercise to compare that 'foregone' revenue for the possible future value of the album. They can make as many copies of this album as they want and sell it for what ever they can get. Now they state that Spotify pays them .003 euros/play, Deezer .006 euros/play. Lets say it averages out to .0045 e/play. To keep everything in dollars, 1 euro => 1.43$ according to google, so .0045 E => 6.4 cents. The question one can ask is this "Would they have been better off working for 9 months? Or making this album?" We can assume that as soon as they release the album they gave up music forever and went back to a 9-5 job at $60K/yr. (or not but that would be one way to look at it). In financial terms, when does this album they created give them 203K $ of value back? A 6.4 cents/play That is 3.2M plays. Over the life of the Copyright of 75 years, that is 42K plays per year on average or 115 plays per day. So if they had 115 Spotify/Deezer fans who played one of those nine songs every day, they would earn back exactly as much money as they had 'not made' by not working 9-5. Conversely they would have to sell 29,000 albums on Amazon or 22,500 albums on iTunes to earn back the same amount of money they would have made. So a couple of things that are also important. First, they don't have to do anything to manufacture copies of the album. And secondly, their time is available to add another album to this 'stream'. (if the financial analysis of making the this one pans out). What this illustrates is that music is about the long tail, not the up front. If you make back all your investment in making an album in the first year, then your 10 year rate of return will be better than any other investment you could possibly make. What is more you can keep feeding albums into the system at what is your marginal cost of living (eating, thinking, composing, recording). This multiplies your revenue stream going forward. The record companies used to play an interesting game with musicians, it worked like this: Give us the 75 year rights to this music and we'll pay you a big chunk of change right now. Now the criminality was that the record companies created accounting systems which obfuscated additional revenue to the point of not paying the artist anything. However in this world its quite different. If these guys turn into a 'huge success' and sell a million copies of their album on Amazon their are going to make nearly $5M on a $270K investment. In the past they might get $50K in 'upfront royalties' and then never see any of that $5M. One thing they might do is sell the 'rights' to this album for $203,000. They are revenue neutral at that point and if the album does poorly they are protected from 'losing' money but if it does well they don't stand to gain from that. Risk arbitrage, its what VCs do, it is what music companies do, its what you and I do when we fill up our gas tank at half full rather than wait until the car is empty. Being a musician is hard work. And early on when you are finding your voice and your fans, its not very profitable (in fact if you don't love doing it you shouldn't because if you die early all you will have to show for it will be memories of creating that music.) However on the flip side, down the road, it can be hugely profitable with little if any additional investment. You develop a following and your numbers get better, no need to go out can cut down additional vinyl trees :-) or schedule another "pressing" of your album. It is this sea change that musicians need to understand, if you don't 'sign' with a label you are keeping control of your profits and managing the risk yourself. If you do sign with a label you can probably get more money up front but you don't benefit from the upside. Distributors make money on leveraging things like PR where it costs the same to promote 5 different albums at radio stations as it does to promote one. They work to amp the distribution so that they make more money. As a musician/owner you can do that but its not as efficient. The better news for musician is that the long tail money ends up in their pockets if they keep the rights, people underestimate that but it can get to be serious cash. It will be interesting to follow these guys as they develop to see how it works out.