06:47
Faizan
The music industry is a business. Like any other business, it develops a product, markets its product to a target group of consumers and has the primary goal of turning a profit. That product is entertainment in the form of songs. Consumers are downloading more music in place of purchasing albums, but compact discs, or CDs, are still relevant in the music industry. A number of entities are involved in the release of each CD, and the revenue earned from CDs is shared by all of those parties.
CD's Total Revenue
A CD's total revenue is simply the total amount of the CD's sales. As an example, if an artist sells $1 million CDs at $15 each, the total revenue generated by the CD is $1.5 million.
The Artist
The amount of the artist's share, or royalties, depends on a variety of factors. Generally, artists with higher album sales have higher royalties. Danny Goldberg of Artemis Records indicates that Shania Twain earned around a 40 percent royalty rate on one of her albums, but mid-level artists can earn as low as $1.40 on a $16.98 CD. Emerald Bay records published a breakdown of how album sales are distributed, indicating that it pays artists a flat rate of 25 percent of total CD profits.
Recoupable Expenses and Additional Income
The artist sometimes receives cash advances, money for touring or other funding from the record label. In some cases, that money is recoupable; it is deducted from the artist's share of the CD's revenue. Emerald Bay Records also considers the direct costs of making the CD (manufacturing and licensing) as recoupable expenses. The artist may earn additional income if he writes his own songs; this income is known as mechanical royalties. Goldberg affirms that an artist usually earns around an additional 75 cents per CD sold for writing his own music. Merchandise, such as T-shirts, and appearances are additional sources of income for a musician.
The Record Label
The remaining revenue belongs to the record label. However, the record label must pay a variety of expenses such as advertising, marketing, promotional costs, recording costs and overhead costs. The label must pay for the salaries of any employees or contractors who worked on the CD, such as sound engineers and other contributing musicians. The label must pay any expenses that it did not recoup from the artist. The remaining balance is profit.
CD's Total Revenue
A CD's total revenue is simply the total amount of the CD's sales. As an example, if an artist sells $1 million CDs at $15 each, the total revenue generated by the CD is $1.5 million.
The Artist
The amount of the artist's share, or royalties, depends on a variety of factors. Generally, artists with higher album sales have higher royalties. Danny Goldberg of Artemis Records indicates that Shania Twain earned around a 40 percent royalty rate on one of her albums, but mid-level artists can earn as low as $1.40 on a $16.98 CD. Emerald Bay records published a breakdown of how album sales are distributed, indicating that it pays artists a flat rate of 25 percent of total CD profits.
Recoupable Expenses and Additional Income
The artist sometimes receives cash advances, money for touring or other funding from the record label. In some cases, that money is recoupable; it is deducted from the artist's share of the CD's revenue. Emerald Bay Records also considers the direct costs of making the CD (manufacturing and licensing) as recoupable expenses. The artist may earn additional income if he writes his own songs; this income is known as mechanical royalties. Goldberg affirms that an artist usually earns around an additional 75 cents per CD sold for writing his own music. Merchandise, such as T-shirts, and appearances are additional sources of income for a musician.
The Record Label
The remaining revenue belongs to the record label. However, the record label must pay a variety of expenses such as advertising, marketing, promotional costs, recording costs and overhead costs. The label must pay for the salaries of any employees or contractors who worked on the CD, such as sound engineers and other contributing musicians. The label must pay any expenses that it did not recoup from the artist. The remaining balance is profit.
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