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 Subject: CD economics Category: Arts and Entertainment > Music Asked by: keikileo-ga List Price: \$6.00 Posted: 22 Feb 2004 17:25 PST Expires: 23 Mar 2004 17:25 PST Question ID: 309632
 ```Can you tell me who gets the money when I buy a CD: retailers, musicians, songwriters, record companies, etc? I want to know who typically gets what share of CD sales so that I can understand who is being hurt (and to what degree) by downloading and online music sharing.```
 Subject: Re: CD economics Answered By: clouseau-ga on 22 Feb 2004 17:56 PST Rated:
 ```Hello keikileo, Thank you for your question. A page at Bobby Says has an excellent breakdown for you: http://www.bobbysays.org/item/?id=339 Assumming a retail of \$16.98, the costs are as follows: Retailer \$ 6.23 Company overhead, distribution and shipping \$ 3.34 Marketing and promotion \$ 2.15 Artist and songwriter royalties \$ 1.99 Signing the act and record production \$ 1.08 Retail co-op advertising \$ .85 Pressing and booklet \$ .75 Label profit \$ .59 --------------------------- Total \$ 16.98 You might find the following article interesting as well: http://www.rapcoalition.org/label_exec_\$\$_breakdown.htm The Ballad Of The Mid-Level Artist By, Danny Goldberg "...There are, however, still boilerplate formulas called ?packaging deductions" (a 25 percent reduction from the CD list price) and ?free goods" (15 percent). Putting aside the murky origins of such clauses, the practical effect is straightforward: they reduce the value of a point on a \$16.98 CD to between 10 and 11 cents (a point is shorthand for a royalty percentage). For the purposes of this article, I am assuming a point equals 10 cents, and that the royalty rate for our hypothetical mid-sized artist is l4 points, or \$1.40 per album. So let's take our mid-level artist, and say that she managed to sell 200,000 copies of her latest CD. How does the artist make out? Based on a royalty rate of \$1.40 per album, 200,000 CDs sold results in earned income of \$280,000. However, before the artist buys her mom a car (or pays off her college loans), she first needs to deal with the dreaded recoupment. If our artist received a \$25,000 advance and spent another \$115,000 making the record, this \$140,000 is deemed recoupable, which means that the label can collect that amount against royalties. Also, let's assume the artist received \$70,000 in tour support (recoupable) and another \$70,000 in recoupable video and promotional support (this is usually split between the label and artist). That adds up to \$280,000 in recoupable advances, thereby canceling out the \$280,000 earned by the artist on points from her CD sales. Royalty-wise, it's a wash. (There's a holdback for returns of 15-20 percent, but royalties for these ?reserves" are usually paid out in 18 months minus any actual returns.)..." The entire article is illuminating. ASCAP notes the following on royalties - another interesting read: http://www.ascap.com/jam/read_about/mm_cd.cfm "...A major source of income for many songwriters and music publishers are the mechanical royalties due from the sale of CDs, tapes, records, and downloads containing musical compositions. Under the U.S. mechanical rate (known as the statutory rate) in effect in 2002-03 (8¢ per song, but see the next page for further explanation) a million-selling single would be worth a total of \$80,000 in combined royalties to the publisher and writer. For an album, the above royalties would be multiplied by the number of songs on the album. For example, if 10 songs were included on an album and each received an 8¢ royalty, a total of 80¢ in mechanical royalties would be generated from the sale of each album. Thus, if the album sells between 1,000,000 and 10,000,000 copies, the combined writer and publisher royalties for the album would range from \$800,000 to \$8,000,000. Mechanical royalties are paid by the record company to the music publisher or its representative (frequently The Harry Fox Agency), who then shares them with the writer. Simple, right? Wrong... (better read on!)..." Another page at ASCAP notes: http://www.ascap.com/musicbiz/money-recording.html "...This overview is primarily concerned with some of the major sources of songwriter/publisher earnings, but since many songwriters are also recording artists, a brief mention should be made of the contractual factors that affect income in the recording arena. Artist royalties usually range from 10% to 25% of the suggested retail price for top-line albums, with deductions being made for packaging costs. For example, if a songwriter/artist has a 16% royalty, a 25% packaging deduction, and sells one million CDs in the U.S. of a \$17 suggested-retail-priced album, the basic calculations would look like this: \$17.00 CD Retail Price x .25 Packaging deduction rate __________________________ \$4.25 Dollar deduction \$17.00 CD Retail Price - 4.25 Packaging deduction ___________________________ \$12.75 Royalty base x .16 Royalty rate \$2.04 Artist Royalty x 1,000,000 Album Sales \$2,040,000 Artist Royalties And lastly, I'll direct you over to a favorite site of mine, How Stuff Works: http://entertainment.howstuffworks.com/music-royalties.htm How Music Royalties Work by Lee Ann Obringer "...Making money in the music industry is tricky. Recording contracts are notoriously complicated, and every big recording artist has a small army of legal representatives to translate and negotiate these deals. In this article, we'll look into the world of music royalties and see how money is actually made in this industry..." You'll find a great deal of good information in this very extensive article. Search Strategy: music cd cost breakdown music cd artist royalty I trust my research has provided you with the cost breakdown you desired. If a link above should fail to work or anything require further explanation or research, please do post a Request for Clarification prior to rating the answer and closing the question and I will be pleased to assist further. Regards, -=clouseau=-```
 ```Thank you for the rating and tip keikileo. Glad to be able to help. Regards, -=clouseau=-```
 ```just wanted to add a link to a very educating article written by respected indie producer/musician Steve Albini: http://www.negativland.com/albini.html regards, snobo```