Most people work hard at
their music, their playing, songwriting, performing and recording. In their mind,
the plan is to develop their talent and let their music be somehow magically
"discovered" by some national record company. In their mind this company
will give them mega-bucks and take care of any other action needed to make them a star.
The chances of this happening, are so small that you need a microscope to see them.
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But let's say you are one of
the unlucky handful that did have this happen. What would be next? Well the
record company would spend somewhere near $100,000 to get your release ready and then put
it out. You would be signing a "standard" new-artist contract.
Under this contract, you would be paying for all of the production expenses out of
royalties earned from record sales. You would get a new artist royalty rate,
maybe half or two-thirds what an established artist would receive. In other words
you would receive no royalty payments until the production costs were
paid for and you would be paying them out of a reduced rate. Even more maddening would
be the fact that you would have little or no say about how the production
budget was spent. |
Lets say that you get a rate
of 10% of sales. Doesn't sound too bad, does it? A CD sells for $15 so you get
$1.50 for each one sold, right? Wrong. First of all, you're
being paid off wholesale, which brings the figure down to $0.75. But then the
company deducts a "packaging charge" bringing the amount per record sold down to
57 cents. But, also, the record company sells on consignment and those
"sold" records can come back; to protect itself from "returns" the
company will withhold another 25% to cover these costs - bringing your net down to 42
cents per copy sold. This means you have to sell about 235,000 copies to break even.
But Record Companies sell lots of records - even off the flops - right? Wrong
-read on. |
Record Companies have two
stacks of releases. The first stack (we'll call it stack A) are the top 5% of their
releases. These releases are hugely "successful." The second
stack (we'll call it stack B) are the rest of their releases (95%). These
releases are not successful. According to a recent article in EQ Magazine, major
companies average about 750 unit sales per release for this B stack. |
| So how does one get a hit record with all of
these odds stacked against you? The answer is to test market. A
successful test marketing in a local region can result in the record company being
convinced that your release belongs in the "A" stack. So you should put
out the record yourself and attempt to sell 5000 to 10,000 units, keeping records of the
sales. If you achieve this level, you have "proven" to a record company
that you deserve the "established artist" royalties and contract terms.
You should at this point be able to show them that you can direct the expenditures
in production, and you should get the production budget to spend on the next release.
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| That Was 2000 - How Is It In
2002? |
| I wrote the above almost 2
years ago. Today the industry sells less records by a factor of
40%. The large companies are now more interested in regional
records that sell as few as 2500 units. It's harder to get into
that elusive "A-Stack" that I mentioned. But on the bright side,
there are more independent labels interested in signing acts and there
are many more effective alternate distribution methods, via the web,
than there was 2 years ago. |
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