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I Am the 99%... Of Musicians

January 23, 2012

 

 

I've been seeing a lot of these types of pictures around for years now (see picture on left). Most recently I saw this one commented on by our illustrious drummer Fudge on his Facebook page. More often than not the message is something resembling this. "Look how much money the faceless record labels are making? So, it's not really stealing because it's a faceless corporation and the artist is getting very little anyway!". Well, not to burst your bubble or anything buuuuttttt I kinda disagree. Fudge did. He was very outspoken about this portrayal of funds in the music industry and as he should be. Because, unfortunately, this is what contributes to that lack of monies going to the artist and more directly the independent artists. As sorry as it is to say the support for stealing music and the myths behind it are fueling a lot of why the music industry is failing to make ends meet in a lot of ways.<!--more-->

 

Imagine if you will .... You have an older sibling and anytime you need money for something when you've run out of allowance (what? chocolate and diet coke is expensive now!) you go to them to ask them for money as they're always happy to oblige. They're your older bro/sis and they're happy to help. But, say their supply line (mom and dad) cut off their funds one day. So you go to your sibling and ask for money and they say "Sorry. I have none today". Now, imagine that a record label is basically the same thing and you, the consumer, are that parent who's just cut off their funds. The band goes to their record label asking for money and the record label turns around and say's "I'm sorry. There's no money to be had". Well shitty. How'd that happen?!?

 

The pie chart is very deceiving. It looks like the record company is making profit hand over fist in this whole deal. But keep in mind that the pie chart is really showing the money made from gross revenues and how it's divided among the given parties. What it's not showing you is how much money was spent in the first place by the record label to support that artist.

 

As of 2010,

- US, $5 billion a year invested in artists by record companies worldwide

- Around 30% of revenues spent on artist development and marketing

- US$1 million to break a new artist in major markets

- US$160 billion "broader" sector employing two million people

 

Stolen from: http://www.ifpi.org/content/section_news/investing_in_music.html

 

That's a hell of a lot of money, but it's naive to believe that a corporation can do things not for profit. Of course there has to be profit! They have shareholders and investors to answer to as much as any other company, which also includes the "broader" sector employees they speak off on that last line there. Including anyone who works for the labels, any companies they employ for marketing and campaigning, recording, producing, mastering, reproduction, distribution, publishing, lawyers, accountants, video directors/producers/editors, secretaries, coffee getters and go-fers. If you had a prospect (band) and invested about $300,000 in them to make them successful and well known to see a return profit of $750,000 how much, as a band, would you expect in return? Watch Dragons Den sometime and listen to the deals they make. Venture Capitalists and Record Labels are basically the same thing in different industries. Venture Capitalists expect a significant return on their investment to make a business prosperous often taking 15% to even 50% of a companies profits and/or sometimes controlling how the business is run until their investment is paid back in full (which, the business may not be successful without that investment/partnership). But, because it's art, record labels are supposed to operate differently? Are they supposed to be a benevolent entity that throws money at artists for the sake of making the general population happy?

 

Rihanna has sold to date over 20 million albums, not including single sales. She's the most successful selling artist since Michael Jackson. Lets look at some basic math shall we? Let's assume that for every album sold there's a profit of $12.

 

$6.50 per album (realistic) x 20,000,000 = $130,000,000

 

Of that money a very large portion went into videos, allowances, legal, etc. the artist advances and everything else. Of that, 44% is profit for the record label.

 

$130,000,000 x 44% approx. = $57,200,000

 

Score right?!? Woot! Wait,... how much did the record label spend to make her profitable in the first place? Well, the label spent approximately a million dollars in marketing and promotion for every million albums sold. So, $57.2 million subtract $20 million we're down to $37.2 million. Still accounting for business operating expenses (networking perks, travel, employees, legal and accounting etc.) they're probably making closer to $20 million. Divide that by the total number of albums sold... So, for every million albums sold they can expect a million in profit. A good haul overall. But, keep in mind this is also in respect to Rihanna and that the profits seen are <strong>MUCH</strong> less on most bands and artists and that the deals are vastly different. Think about buying things in bulk. The price goes down the more you buy or in manufacturing the price goes down the more you have made. The same applies here. Smaller artists are going to cost more to do all the basic stuff (album reproduction and distribution and so on) so a higher capital investment on the artist, for less profit, is likely.

 

Now, given that 90% of recording acts a record label invests in fail to make a profit, who do you think pays for that? If the bands don't make a profit then it's the profitable artists who end up funding the unprofitable artists. It's not fair for the successful performer to pay for someone that failed to succeed, but everyone deserves a break and this is the only way to do it. I mean, tax payers every year pay for government to fund start up businesses, through federal and provincial loans and grants, and 90% of them fail. How's this any different?

 

The performer takes about half a percentage point (.0056%) of the profit overall. So, out of the $130 million dollars Rihanna makes $728,000 dollars profit over ten years and has the majority, if not all, of her living expenses paid for to keep up a good image and good living circumstances (perception being extremely important in the entertainment industry). The average independent artist makes about 35% approx. of their total profit, but has significantly less sales and attendance at their shows making for a more modest income, but barely over the poverty line. Most times not.

 

To check my math have a look at this article about band profit margins and spending (<a title="http://www.negativland.com/albini.html" href="http://www.negativland.com/albini.html" target="_blank">http://www.negativland.com/albini.html</a>) or do some of your own research. There's certainly no shortage of resources. Just keep in mind which side of the coin you're seeing. Most are about the artist and the money they make not about the money record labels spend to get them that profit in the first place (again, a small percentage is still better than zero).

 

Lets look at Canada's own Nickelback (dun dun dun!!). While I'm personally not a huge fan of all their music (Fudge is. And proud of it) I certainly would never take away anything they've earned in terms of success. They're great players, great guys and know their business. I personally think Chad Kroeger should write a book on music business. He should call it "How to Make a Successful, Self-Made Man in the Music Industry". If that book didn't turn out to be a best-seller I'd be shocked. Chad spent YEARS pushing the band, booking shows, doing his own radio tracking and negotiating contracts to the point where he, along with his lawyer, eventually started 604 Records and now supports acts such as Marianas Trench, Thornley, Theory of a Dead Man, Faber Drive and My Darkest Days to name a few. All of which bring in a small profit for him and help perpetuate the brand name that is Nickelback. He couldn't have done it better if he tried. There are few Canadian bands that have seen more Worldwide success than them and, despite being pop-cultures most hated and despised band (see their video response to Detroit petitioning to have them not their play football game. Friggin hilarious), still boast success across the board. How? By becoming the record label that controls the money. This doesn't work for everyone and the band had to take chances all over the place risking professional failure, but I'd say it was a gamble which, for them, has greatly paid off. They keep the record labels percentage of the profits. Boo ya for them.

 

Before blaming record labels for an artists lack of profits start looking at the general population and audience. I'm not saying blame is necessary or even called for, but if blame is going to be laid by public opinion in this way then they should understand that they have no one to blame except themselves. In order for a corporation to have long-standing success and passed on success for the acts they support they need to have profits and substantial profits at that. It's the reality of the industry. If people steal everything then there's no way for them to generate that profit or, as we're seeing now, the labels are forced to cut back their spending and investments in acts and artists who aren't already proven. Again, it's the same as Dragons Den. How many un-proven companies come on that show and get funding? None of them. Nobody wants to take a chance in something that they're not sure is going to work. I can't blame them for making that decision. It's not fair, but the people with money more often than not had to work their way up too and understand how hard it is to not only make money, but KEEP that money, let alone continuously make a profit.

 

The AFM (American Federation of Musicians, musicians union both in the U.S. and Canada) sent out an email this week to its members expressing how disappointed they were with the lack of support for the Protect IP and SOPA regulations they were hoping to bring in governing the internet. While I don't support these endeavors myself with their current wording and structure, like the Occupy movement, I believe the idea and concept was at least founded on the right principles and heart in mind (To clarify, I'm not supporting the Occupy movement. I personally don't believe the movement is correct in a lot of its assumptions, but I do believe it's correct in its conclusion that there is something inherently wrong in our political and financial system. I just don't agree with their particular conclusions. Businesses work hard for their share of the pie and deserve to keep their money if they should choose as long as they do it honestly and fairly and if they're not doing it fairly government/financial institutions shouldn't help them do it in a crooked fashion). These regulations would help more to protect the work of a more typical union artist such as a score writer for television or the film industry. Very important issue from that standpoint.

 

The system does need to change, but the first thing that should change is the populations mindset that downloading something for free isn't stealing. That said, I think there needs to be a better system in place which will allow people to purchase mainstream entertainment and media more freely. I think iTunes is a great start to that system and that the industry as a whole needs to embrace these types of technologies and take advantage of them to see, not only greater profits, but eventually slow if not all together stop free downloading that harms the industries profit margin. The music and entertainment industry doesn't like change. It's questionable, not guaranteed to be profitable and has a turn-over time when things are, frankly, going to suck. But, every other industry has to deal with it and our time has come.

 

All that said, when you think about it, greed on everyone's part is to blame. Record labels, flagrantly unscrupulous corporations AND consumers as a whole are all out to keep more of their money for the sake of having more of it. I'm all for success and making a profit, but .... ..... come on. Think about it people. *stares you down* If you part with that $20 in your pocket to buy an album of a more mainstream band you like the reality is that you ARE, although indirectly, helping an 'Indie' band succeed in the future by assuring that the record label, whose attention an indie band seeks to grab, has the money, freedom and ability to not only sign and support indie acts, but seek them out!!! The money put into "mainstream" and "commercial" music is the same money that goes to 'Joe Schmo and the Miracle Gumdrop Band'. It's almost as important in the grand scheme of things as going to the bands show and giving that ten bucks at the door.

 

Support live music. Support your local bands. Support any band and all music. Go buy an album. Preferably mine. :)

 

Find my music on iTunes at:

http://itunes.apple.com/ca/artist/see-spot-run/id262427860

 

And if you're interested you can find that Nickelback response video here:

http://www.youtube.com/watch?v=A6r0IomSrpI&amp;feature=fvsr

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