Why Musicians Get the Short End of Our Money?
Posted on 11. Jul, 2010 by Hector Aviles in Blog
For every $1000 you and I spend in music CDs, the artists we support get only $23 while the record label and distributors share $870. Wow! Talk about not knowing who you work for. Something is wrong with this picture, and I believe this is an unsustainable model that is about to change.
Music Industry’s Funny Money
It just seems strange that the artists that make the art; in this case music, get pocket change will the businesses that “help” the artist get their art out to the public get the big part of the pie. This data was exposed in a recent study published by a Nielsen research and published in an article by The Root titled “The Music Industry Funny Money”.
Nielsen research published by The Root
The research report indicated that record labels get 63% of the music sales, the distributors get 24% and the band gets the remaining 13%. But as you can see from the graph, “the band” includes several people besides the musicians. Based on a rock band with 4 musicians (singer, lead guitar, bassist, and drummer) each of the musicians would get 18% of the 13% part for “the band” (or $23.40 for every $1000.00 in CD sales) with the personal manager, business manager, lawyer (there’s always a lawyer) and producer getting their hand in part of the money.
Will Music Free Agency Emerge?
Baseball as well as other sports experienced a very similar situation back in the 1960′s. The players figured out that the people that made the whole baseball business enterprise possible (that would be the players) were getting the short end of the stick when money was devided, while the owners were getting fat rich. They organized and decided enough is enough, and free agency was born. When I read this report, it makes me think that the same causes that prompted baseball free agency are present in the music industry.
Is a certain form of free agency possible in the music industry? Would musician’s free agency be the solution? I’m not sure “free agency” would apply here, but some sort of an “equalizer” would be. The circumstances that forced musicians to use record labels for recording, promoting, and distributing their music are changing. With those changes, I believe a democratization of the music industry will unfold. It’s not a matter of “if”, but a matter of “when”. And the record labels know this, and are fighting to prolong the “status quo” for as long as they can.
Technology Can Transform Balance between Musicians and Record Labels
The dependency musicians have on record labels is slowly fading away. Technology is part of this change. Among the main function of a record label are to finance recording projects and to help market and distribute the music project once recorded. Technology and today’s strong use of social networks let artists find their “tribe” more easily. Technology has lowered the cost of recording. Yes, its still preferable to record in a nice recording studio, but now musicians can build their own studios much cheaper than before, or record on their garage using a computer and good recording software.
For marketing, you have the internet. Artists that build or join an online “tribe” (something done every day) can market their art. There are small “unknown” artists that have built great “tribes” of followers in the social networking sites.
And distribution has gotten a lot cheaper and easier with the use of mp3′s. Nielsen’s research found that record companies charge a “packaging charge” of 25% of the suggested list retail prices of a CD for the jewel case and liners where the CD goes. It didn’t specify if it includes the CD itself. But mp3′s are changing all that. Applies iTunes is the biggest music store in the world, and as sales of physical CDs continues to fall, sales of mp3 files continues to rise.
There Are New Roles for Musicians and Record Labels
Both musicians and record labels are starting to react to the new music business market realities. Musicians are leaving record labels in droves, to start their own. And I was just reading the Warner Music is starting a new 360 type of contract, in which they offer to manage not only the musicians recordings, but also their other business ventures like concerts tours, social media, sales of accessories and t-shirts, etc, etc. This 360 contract is supposed to balance the distribution more evenly with the musician. I kept a recent article on this, and will be happy to share it with you.
When baseball went to free agency, it didn’t mark the end of baseball or of revenue for the team owners. Some teams are still doing very well. Actually, baseball has been very slow to adapt to the new reality of free agency and the baseball business market. Other sports, like Football and Basketball were a lot quicker to realize that under the new market conditions, revenue sharing was vital to keep a competitive league that will enable teams in both big and small markets to be competitive and have a chance to do well financially.
The music industry and in particular record labels need to realize that the market has change, and the time to for the record labels to make all the money is over. Musicians have been jumping ship due to this, and the new model where they get to make and control their music is emerging. If instead of trying to prolong the status quo, they get ahead of the curve and think of new models that provide more fairness in the distribution of money being made as Warner Music is doing, they will realize that there is still enough pie for everyone. It’s a win-win, and not a win-lose situation.
Do you think musicians should receive a higher percentage of CD sales money?
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