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One of the FAQs about Digital Distribution agreement with CD Baby (online at http://cdbaby.net/dd-faq2 ) is:
Every company is different, but the average is 60 cents per song downloaded, $6.50 per full-album download, and 1 cent per listen or stream (when people listen to your song as if on a radio station, but don't download or buy it).
Which makes me wonder about the "renegotiation" in Al's contract. Is this on a larger scale? Is it causing issues for other people? Are they trying to show that they don't make money on digital sales or something? It's really weird, I totally agree with you.
Most groups I know do a little better on indie labels, but major label deals seem to always be ten to twenty five cents per CD (not counting when they charge you back for "expenses"...)
I dont care for his music, but I do respect Weird Al as an artist... just so no one takes that flame the wrong way.
Let's say you're manufacturing a computer mouse. You expect to sell 5,000 pieces a month, and the product has a lifecycle of a year, so that's 60K pieces. Your box design (photography, film, labor, etc.) costs you $6K. That's a $0.10 cost per mouse sold.
Now, let's say you're producing an album. You expect it to go gold, selling 100K pieces. Half of those -- 50K -- will be online sales. The album costs $50K to produce from beginning to end -- studio time, paying the engineers, session musicians, you name it. There's 10 tracks on the album, so that's $5K per track. If each track is downloaded on average 50K times, that's $0.10 in overhead cost per downloaded track.
I'm pulling numbers out of the air, but I hope the concept is clear. An album costs money to make. The people who make it expect to be paid in cash. That cash is raised by selling the album, either in CD or online form. The amortization method may not seem logical, but it's a very common way of accounting for production costs.
Gross vs. net margin, cost of sale, etc. are very real issues that people in the retail business must deal with. Online distribution eliminates manufacturing and shipping costs, but those are often a small part of the true cost of sale.
The particulars may not match but the concept might be similar:
http://www.mp3.com/news/stories/4310.html
Actually, I'd rather buy his CD than download it. Then I have the cover art and don't have to waste time grabbing all the songs. Its more convienient.
.cp
That only works to a point in the music industry. What would you estimate the current amortization rate for, say, Led Zepplin's 'Houses of the Holy'? Or The Beatles 'Abby Road'? Or how about the album that's been on the charts longer than any other in the history of music - Pink Floyd's 'Dark Side of the Moon'? At this point, none of those albums should have any sort of amortization rate included in their online distributions.
To make it more topical to Weird Al, his first album, orginally released in 1983, sells on iTunes. What part of amortization does either Weird Al or his record company have to pay on that music? Twenty-three year old stuff should be paid for by now. For those, there is pretty much no "per sale" costs to the record companies. They're just operating on pure profit there.
standard artist contract is 11% of retail sales price, which averages about $8 when you factor in promotional sales, record club sales, and other discounted distributions.
Still, it would make logical sense that even these costs would be less than the physical album production and shipment. *shrugs*
As for the costs, the online versions also have costs. Sure, the album is made, but there is a cost to selling music online - someone has to pay the electric bill, the internet bill, the cost of the humans running the servers, the servers, the hardware and os upgrades and the cost of installing those, and more. Those costs have to be paid, so the people providing the service charge the labels, and the labels, in all likelihood, establish a set price that is rolled into the cost of every track to be downloaded. There may even be additional costs for albums - i don't know how the charges go. But salaries have to be paid, advertisements, etc. for the online services have to paid, etc.
So on the one hand that argument holds water, but on the other it totally doesn't. I'd be curious for Al to break down what he does get per album sale via iTunes as opposed to a physical copy. And find out who thought it was a good idea to get shafted on the digital DL. (:
But they don't give us a free iPod when we download the tracks. or even, more room on our iPod to put the music. In the past they gave us a physical CD which required the same R&D AND CD's are also subject to a patent licence fee (i think from phillips). So we recieved so much more and somehow, artists still made the same.
"...major label deals seem to always be ten to twenty five cents per CD (not counting when they charge you back for “expenses”…)"
labels also factor in piracy expenses such as lawyers. so when a label says they lose money paying lawyers, they're lying. The artists pay for it. And when they win a decision in court, it's pure profit for the label.
"...there is a cost to selling music online - someone has to pay the electric bill, the internet bill, the cost of the humans running the servers, the servers, the hardware and os upgrades and the cost of installing those, and more..."
That's true. But those costs have to be lower than the ones of selling in a store. All of the technical costs you mention have parallels in the world of physical sales - there is a lot of database work involved in keeping things in stock and on the shelves in a big-box store, which also has to look pretty and pay employees to do things like run a cash register. Online, that's automated.
Some of these costs are passed on to music labels. Many times, labels pay for good placement in a big-box store - if you want your CD to be really visible, it will cost you.
Then think of the waste costs. If I want to sell my album in physical stores around the country, I have to ship copies to each one, and whatever doesn't sell is either sold at reduced price, thrown away, shipped back, etc. All of that is wasted cost. Online, you keep the servers running and "make" a new copy at the moment someone downloads it. No waste.
Also note: you've been slashdotted.
1. Go on tour, and make money like the rest of the bands on the planet.
or...
2. Quit, and disappear ... like the rest of the bands on the planet.
A per-sale cost is not development. If say I'm going to sell 100K widgets, and it costs me $50K to develop the widgets, I don't have a per-sale cost of $.50 per widget to cover development. A per-sale cost is based on the production or sale, not the development of a product. Because if I need 100K boxes for widgets, at $1 each, then the total per-sale cost for packaging is $100K. But if I sell 150K instead, my per-sale packaing costs increase to $150K. But no matter how many of the widget I sell, my development only cost $50K.
IMO, if you're a real fan of his music, then you should have all of his albums sitting on your cabinet or shelf, as I do. Even though I can easily access his songs on iTunes, they don't have some of his older songs and that's when I go to used CD stores and get it.
And don't knock Al if you have not listened to him. Some of his original songs would surprise you and still provoke smiles or laughter. It sounds like some of the other commentors could use some.
How do I know ? My wife has two CD's on CD Baby..
Chris
Amortisation is a bookkeeping mechanism for calculating the real nett profit of a sale based on expected sales, it is not a cost. Plus, it is not fixed. If the sales figures flop then the calculation has to be redone, which obviously can't happen in the case of a true per-sale cost.
The only per-sale costs are: bandwidth and storage (too small to measure expect in bulk) and royalties.
When the Net removed the distribution costs the RIAA stepped in and blasted lawsuits around in order to prevent anyone else taking those segments of the retail price for themselves. Being an organisation for record companies rather than artists, they made sure they wound up with the money in their pockets, not Apple, not the artists. That was the WHOLE idea of the RIAA's massive move against Napster. It had to be stopped before it (or someone similar) started to make deals with artists directly.
The world has moved on and record companies are now largely pointless, their business model is being supported entirely by the law because they know that a free market would annihilate them.
And...the artists are not making as much money. In the business world this is called win-win. Apple wins twice. Consumers and artists lose.
I think more and more artists are going to be turning to sites like http://www.tunecore.com (TuneCore) to handle their digital distribution -- sites that don't take a penny of the artists' profit, so folks like Weird Al can actually make *more* money digitally than they would on physical CDs.
By the way, Weird Al not only graduated first in his class he also was going to school for architecture when he happened on his music career. He is also a director and producer in the industry. Kurt Cobain received a phone call from Weird Al while he was doing a late night talk show and said yes to Weird Al's question of doing a parody. He later said that he knew Nirvana had finally "made it" because Weird Al did a parody. Yep, nobody likes Weird Al at all and nobody, but Nirvana, listens to his music. He also asks each artist personally before doing a parody. Have you ever had a personal talk with Michael Jackson? Coolio is the only one he didn't ask directly and the producers told him yes even though Coolio was opposed. Oh, and Prince is the only artist who has ever, ever, said "no" to Weird Al.
Sure, it's a parody, and that means it's not 100% original material (Not original music), but he sticks with good parodies and belts 'em out at a pretty good clip. He's been doing this for quite a while (23 years of albums), so if you can find another artist which is able to do, essentially, 23 years of comedy and STILL be a hit, good on 'ya!
Regardless, the artist typically gets the sh** end of the stick when it comes to how much they see from a track / album sale, they make up for it by concerts, swag (Shirts / mugs / whatever), endorsements, whatever... He's doing good for himself, and good for him. Intelligent artists (as opposed to the "just a pretty face with some talent") just deserve more.
You don't think that the RIAA wants to encrouage it's artists to like digital distribution do you? If they did, they'd all come out and say in the press that they loved MP3s and digital distribution. They'd also encourage their fans to buy nothing but downloads. Then where would the RIAA be when they don't have control of the the distribution channel any more.
You see without the distribution channel they loose a lot of their relevence. You might find an innovative online music distribution company all of a sudden actually becomes the recod company and signs the artists themselves. ;^)
Just an idea but I think in the future if the RIAA doesn't embrace digtial distribution fully they might find themselves completely irrelevant.
So true.
#4 - the costs you refer to are production costs.. artist is usually fronted this money by label... and money is taken from their profits... what is at question, is why artists get lower rate when there is virtually no "distribution costs" i.e. packaging, shipping, warehousing....
#41 - think you missed the point... he is not comparing an album sale to a single song sale... its a question of rate. how much per song or per album... he is saying that he earns a lower per song/album rate via the web download vs. retail store sales of physical album/single.
to me this is just more record industry rule #4080 for those that know the language.
Yes. We’re all winners with iTunes. Consumers have less control over their music (in fact, I just had to deauthorize and reauthorize my computer just to be able to play songs I had already bought on iTunes - and the nice software bot happily told me I had 1 of my allotted 5 computers authorized - they wanted to let me know I hadn’t tried to step out of the box I was in).
Go buy a cd and quit whining? Was there a gun to your head?
"And…the artists are not making as much money. In the business world this is called win-win. Apple wins twice. Consumers and artists lose. "
What world are you from?
The record company takes the remaining 64 cents. How much of that 64 cents goes into the artists' pockets depends on the terms of their recording contracts. If the artists are getting reamed on on-line sales they are, as usual, getting reamed by the record companies. Same as it ever was...
The only way an artist will ever make big money through on-line sales is to cut out the record company and either host the songs themsleves (and pay for the infrastructure) or deal directly with Apple/Napster/eMusic etc.
So you sell 60k, and make a nice big profit on the last 10k copies. Nopw, what's the profit you talk about?