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Truths About The Industry: From An Insider On The Outside

Published: November 7, 2010 in Tech N9ne by

Many fans may have seen the recent post from Tech to a disgruntled fan.  I read the article and realized many fans don’t know the ins and outs of the music business like many of us do who live it every day.  People are generally not aware of the massive amounts of money being lost and that due to these losses many labels are not signing new acts.  As a person who struggles in music and who keeps a very close eye on the trends and the profits, I wanted to give you a little Music Industry 101 so that you can see what an artist makes and doesn’t make.  The bell has rung and class is now in session.

The music industry is hard and the road is cold.  Many sing about it for a good reason.  Tech says “Fuck the Industry” because it always has its hand out waiting for a payment.  The reality is that labels are losing millions of dollars due to free downloading and pirate sites.  Artists used to make the majority of their money on touring and CD sales.  Now CD sales are nearly a thing of the past. Rolling Stone recently put out an article that I read page to page about how the music industry is declining due to people downloading free music as well declining show attendance due to the poor economy.  The article quotes:

Our prediction that the U.S. music market will shrink in five years from $10.2 billion to $9.8 billion also seems like a conservative estimate.  We’re not taking into account some of the new models that are coming into play. We haven’t predicted what the licensing revenues are going to be for something like a Nokia Comes With Music. This is purely based on revenues from direct sales or services to the consumer.”

This is a trend that is being seen by all artists from the top-of-the-charts-people like Madonna to the selling-on-the-streets-people like my team.  We have not seen such hard times in years and everyone is hurting to find ways to make revenue.  A lot of people don’t know how much it costs to make an album, release it, tour, and just live.  I’m gonna give you a small estimate of what many of us shell out for these expenses.

From an outsider looking in this is what I know and see from experience.  Let’s say that you are just a little underground band. You want to print a CD and do a show.  To record the twelve tracks you are looking at minimum of $10,000 (which includes tracking, mixing, and mastering) if you want something good and not poor quality.  To print you are looking around $1,600 (for 1000 discs) if you want a nice book and a cd shell with plastic wrap.  So you are in $12,000 and your CD is ready to go out.  Then you need a show to showcase your CD and hopefully sell some.  You are looking at $1,500 to $3,200 for a venue and security, $60 to print tickets, $200 for minimal flyers, and $200 for posters.  Don’t forget the set up fees to start printing which would be $100. So now you are in it $15,700.  Now you need to hire good acts to draw people into your venue.  You are looking at anywhere from $200 to $5,000 a group depending on their level as well as hotel rooms, food, and any extras they require to play.  So let’s say you get three acts to play for a total of $3,000 and you have a couple free openers.  Now you are in $18,700 before you even get a show on.  You would have to sell tickets for at least $15.70 to break even, assuming you have sold out the whole 1,000 capacity venue. At this point you have made no money at all.  Artists generally make pennies on the dollar for the CDs they make.  The cheaper the CD is, the less money they get in return.

Many artists are forced to tour more and more to make up costs.  Imagine this on a much larger scale for artists like Tech N9ne who have much more cost: producers, managers, lawyers, roadies, other artists they work with, business fees, office costs, etc. This adds up to a lot of money going out.  So when an artist releases an EP for $6 he/she is not making much of anything on it. Something like that is very much for the fans.

I hope you can get an idea of what is involved and I hope this gives you a new look into artists of all kinds that you love and why they make the choices they do.  The bell is about to ring and class will be dismissed for today.  Any questions?  Make sure and do your homework and I hope you walked away with a little knowledge of Music Industry 101.

  • http://www.facebook.com/Kmass982 Kmass-Keith Gray

    Yo can i repost this on my Blog? .. and who wrote it so i can show credit ?

  • http://www.facebook.com/gsbirk Gurpz ‘Wee-bey’ Birk

    Support your motherfuckin artist.

    STRANGE MUSIC TAKING OVER.

  • http://www.facebook.com/people/Rocky-Flats/100001095163241 Rocky Flats

    Technology and file sharing of any degree are what will ultimately bring down the record industry as we know it. It is inevitable, but that does not mean just because the record industry sinks, it can be re-manned by smarter, more innovative, and less classically greedy companies and people. I say “fuck the industry” because its all wrong and cannot keep up with emerging trends. It will take a collapse of the power structure in the music industry now to create a much more ideal and innovative system for the future. Strange music is bordering on these techniques and as an underground cat I give them serious props. This article is a great explanation of all the intricacies and some of the flaws of the current system in place for the record industry. Keep rockin Strange Music!!

  • http://www.facebook.com/profile.php?id=1045166037 Berwa ‘Bromotion’ Mahmod

    Just credit the strange music blog

  • http://www.facebook.com/profile.php?id=1045166037 Berwa ‘Bromotion’ Mahmod

    Very very very VERY true! Tech should even do a song like this.. For real

  • http://www.facebook.com/profile.php?id=100000944670479 Paul Sanchez

    File-sharing isn’t the reason the industries going down. It’s all these labels stuck on there old ways. CD’s are a thing of the past, digital downloads is and will be the new era. The riaa spend millions of dollars fighting ” piracy” acting like every download is a lost sale. It’s not, its bad economy and just plain bad music. If your music is good people will buy it. If your shows are good people will see it. Perfect example would be non other than tech n9ne. So don’t blame the downfalls of the music industry on piracy blame it on riaa and mpaa and all other labels.

  • Fuzzys420

    word

  • Jeff Nelson

    Yes feel free to repost this and give credit to Terra Buchanan.

  • Sweeks

    Yeah just like the cassette did lol The only thing technology has killed is the cash cow major labels control over people with talents money and careers.

  • Dukecityspecialist

    The thing that ppl dont understand is that you have artists in 3rd world countries that are 10x poorer than the u.s. and going multi plat. They have computers to so we cant really blame pirating for the entire downfall of the mainstream music sales. Artists along with the owners of the music labels have exploited hiphop and turned the culture into a walmart. The owners exploit one sound and sign 20 copycats while older artists think they to have to go along with the status quo and sacrifice thier artistic integrity because they think they can sell records if they put out songs for 13 yr olds like the rest of the artists. The quality of music has really took a turn for the worst among many mainstream artists along with thier common sense and work ethic. Artists along with the owners have become slow ,lazy and stupid over the years. Its getting harder to find “timeless music’ now a days and these artists do more twittering/video blogging instead of rapping and connecting with thier fanbase. Artists drop 3 million mixtapes a year to keep thier buzz instead dropping a classic album. Fans download 120 gigs of music in a month and wonder why n the fuck thier music has no replay value. Its because of quantity not quality. The fans too are over stimulated like a whore who uses a tree trunk for a dildo. Now a days these record labels will sign any1. I disagree with what the writer said about labels not signing anyone. Labels sign artists but they do not know how to market worth a shit. Artists like jay rock, joell ortiz ,crooked I , and saigon have all been signed to majors but were kept on the shelves. These dumbass labels are literally throwing millions of dollars away on dusty contracts that never get used.

  • Anonymous

    A good read. Thank you.

  • Lettanina

    I wrote it. My name’s Lette.

  • Lettanina

    Well I wasn’t exactly blaming it all on music downloading, its just a small part of the whole problem. I was more trying to explain to people who were mad about the EP the truths about how little is made off a $6 cd. What cost is really like in music, and how many hands are out to be paid from one project.

  • Fuzzys420

    YA, and damn! Alucard……..the talent never ends. Tech, can we get a lost script from every album?? I would spend my milk money on em! haha Peace

  • Monoxboogie6002

    For the record every music file i Download i buy a copy,if the cd is up for DL a week before its Street Release date I will DL it then once it hits the stores i go buy a copy i do support the music i listen to but in a bad economy where its tough to even find a job how can you go out and buy something when your pockets are empty and your wallet echoes from emptiness.Digital downloads or piracy are not the cause of the music industries downfall.If ppl want ur music bad enough they will buy it and if they cant afford it then they will DL.

  • T1prod

    Some Artist dont seem to understand this

  • DJ

    I speak as a 19 industry veteran, who has seen the growth of the business during the 80′s and the downward spiral of it during the 90′s on into the new millennium. I’ve held positions at several major companies, music buyer, VP of urban music, etc., and am a professional dj, music producer, artist manager, and music business consultant.

    I always encounter sites and discussions k this where so many “consumers” who have NO CLUE about the industry and what the infrastructure of it is, are always trying to point fingers at the RIAA and other unions inside the business like the performance rights agencies ASCAP, BMI, SESAC. and Sound Exchange, as well as the mechanical rights agency Harry Fox. Just like any industry in this country they have unions that employees join to help protect and defend them from the companies they are employed by. The UAW protects and defends the rights of automobile employees, but I don’t see anyone raising sand about cars and parts being stolen off of lots at the automobile factories, or raising ire at the UAW. The TEAMSTERS protect and defends the rights of truck drivers nation wide, yet I don’t see anyone raising sand about merchandise being hi-jacked off of these trucks as they sit at truck rest stops or other places.

    Unfortunately in this industry, not only do artists (employees) need protection from the companies they are employed by, but from the consumers as well. This is one of the most highly visible industries in America, because of the product that these companies offer to the market place, that are some of the most sought after products in any industry. Because of that fact, artists find themselves fighting not only their employers, but their fans as well. This is a cents against dollars industry. It may cost the distributors a few dollars to manufacture a cd, let’s say 7.99 a cd, but then you need to account that to sell it to a retailer, they wholesale it for let’s 9.99, and earn a few dollars off of the cd from the retailer , and the retailer turns around and makes a few dollars off of the consumer by selling it for 11.99. Where does this leave the artist? Fighting for their musical life, if like most artists, they don’t take the time to find out about the business before signing any contracts that may not be in their best interest, all for the pursuit of infamy over money.

    Simple cut and dry, how would you like to be at your job, and then have someone who doesn’t work there. show up on a Friday, and then take half of your earnings from you, with no reason, no explanation, yet the company that you are employed by still earns the same revenue, but takes a miniscule loss because of theft at places where their merchandise or products are being offered for free?

    This is current state where artists now find themselves while employed at the 4 major distributors SONY/BMG, WMG (Warner Music Group), UMG (Universal Music Group), and EMI.

    They have to fight against being cast into a non-recoupable status, where millions of dollars are spent on developing, producing, promoting and marketing the artist, only to be levied against the artist, and before one single record royalty can be earned by the artist, the company must “recoup” what has been spent to put the artist’s music products out to market. The majority of artists today in this business find themselves in this non-recoupable status, because album after album release the company never does recoup what was spent from the original album, and the balance is passed onto the next album.

    They also have to fight against what was formerly their largest earnings, which is performance rights (music publishing). They are payed a royalty fee of 9.1 cents each time their music is performed on radio, tv, in a commercial, for a movie trailer, in a video on (MTV, BET, VH1, etc), if it’s being streamed on radio or played on traditional radio, or if it’s composed into sheet music (per copy). But this is only for those for artists that compose and write their music, and they still must insure that this negotiated and placed into their contracts. Unfortunately most don’t and the distributors and labels retain those rights, and even if they do keep those rights and give up some of them, it is much harder to earn publishing these days because of all of the generic digital mediums that launch monthly it seems, and the fall of traditional radio (where the most publishing has always been earned). Michael Jackson today owns most of the music publishing of some of the biggest artists in the business, and I’m not just talking about the Beatles either. Check it out for yourself.

    They must also fight against piracy, which in a sense is truly destroying their earning power. if they are already losing money from record sales, and music publishing, imagine them now having to fight against consumers pirating their music for free. So you think you are sticking it to the mean old nasty RIAA when you do, but essentially you are directly hurting these artists, who are already struggling to make it in their chosen field. Yes it is fact that the MAPS agreement from the then 6 major distributors had a direct affect on the change of the business model, and they were found guilty of price gouging, but piracy across the globe has placed a significant dent in the industry. This MAPs agreement caused the rise of the thousands of file sharing sites now that launch daily. The 6 majors had an opportunity to lead the charge into the digital age, but totally refused to because of their insane greed. Now that they are playing catch up to the rest of us, they want to shut it all down, so they can reap from their “birth child”.

    Artists are not making off of mechanical rights what they were making in the 80′s either. Mechanical royalties are earned at the end of manufacturing. So if a distributor manufactures a million copies, the artist is automatically due earnings of 1,000,000 x 9.1 cents per copy at the end of manufacturing, and this is not held against them for advances and is non-recoupable. Unfortunately most artists do not know this among many other things, because they don’t take the time to find out about the industry they are in. It was pretty normal for a good album whatever genre it was to be pushed to a million sales in the 80′s, now it’s considered good to sell a half a million. This has tremendously cut into the mechanical royalty earning of thousands of artists.

    They fight against “ticket touting”, where artists today, literally earn their most money from concert bookings and revenue. These ticket touters are now offering tickets at sites like E-bay, etc. that look like they are authentic but are fakes of the original tickets. So if the artists has worked out a deal where they share in the revenue of the “gate”, to suffice for their ” booking fee” to perform, they are losing along with the promoter, because people are showing up and expecting to gain access to these venues, but have no authentic ticket. These tickets are not traced back to the promoter’s chosen ticket merchant, and therefore they lose out on that ticket sale, shared by the artist.

    These artists also fights against the thousands of online music “distributors”, that usually charge a fee to upload and sell their products, and they accept just about anything from anyone. In fact Tommy Mottola just recent spoke at a conference about these same online companies that have raked in millions of revenue, while thousands of these artists will never break even. Where does this leave artists who have good music? They have to fight through millions of “real bad” albums that never would have been picked up by any of the majors any way. This has caused the quality of music to go down, and now the majors are willing to also sign anything to survive and compete with these online distributors.

    So to wrap it up, consumers today need to know the business model of the industry before they complain and think they are just hurting the RIAA, they hurt the artist the most, and in turn ultimately hurt themselves in getting good quality music.

  • Jeff Nelson

    Thank you for adding this! We appreciate the knowledge you took the time to drop for everyone.

  • Lettanina

    The post from DJ is great and an excellent addition to the article. I didn’t always work in the music industry and I never understood until I started working into it how many hands are out to be paid before a CD even hits a shelf. Every tiny aspect of the CD has a price and there are artists out there that sell 50000 copies and are broke. How sad to have sold albums and have nothing to show for it. Then they sign deals by record labels who are looking to make a buck and cut them bad deals, and many of these kids are poor working kids who can’t afford a lawyer to check it out before. Then they get a horrible deal, stuck in it, and sometimes even lose their name when they leave. Its cut throat, but if you know how to survive it can be the experience of a life time.

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