View
3
Download
0
Category
Preview:
Citation preview
Selling Sound
An economic overview of the recorded music industry
Where and What do we Listen to?
People’s Polls 2016
Napster late 90s iTunes store 2003
Pandora 2005
SoundCloud, Bandcamp 2007
We’re buying less music . . .
. . . and more of it is digital
Spotify
AppleAmazon
Check out this growth between June 2017 and June 2018
Subscriber growth rate
Spotify 43%
Apple 54%
Amazon 74%
% total US revenues from recorded music sales
KPI = key performance indicator MAU = monthly active users
94% of streamers don’t subscribe, but 76% of streaming revenue comes from those 6% who do subscribe
300 songs are streamed for every one that is downloadedBut 60% of revenue comes from the 0.3% of music that is downloaded
In 2017 the music industry generated $17.2 bil in sales
Top Selling Singles of All Time
Over 130 million views
Song Artist Released Units sold (mil)*
White Christmas Bing Crosby 1942 50
Candle in the Wind (This is the Princess Diana version, not the 1973 original honoring Marilyn Monroe)
Elton John 1997 33
Silent Night Bing Crosby 1935 30
In the Summertime Mungo Jerry 1970 30
* worldwide sales as certified by RIAA
What’s in the future?
• Virtual reality: VRTIFY
• Biometric
– music that responds to the body and moods
– Pietr-Jan Pietr's Sound on Intuition project, which transforms body movement into music.
Music Income Flow
American Society of Composers Authors and Publishers
Broadcast Music Incorporated
American Federation of Musicians
ONLINE
The Recording Contract
• Royalties with advance
– Most common type in U.S.
• Standard for new act is 10% of wholesale
• Established star will get 20% of retail sales
Recording a New Act• Typical Contract
– an advance
– 10% of the wholesale price in each channel after recoupable expenses
• The typical first album will not generate any royalties if it doesn’t go gold (500,000) or even platinum (1,000,000)
• Less than 5% of albums will reach gold
Lee Dewyze American Idol winner 2010
Retail channels
• Record clubs
• Discount stores (Sam’s Club, Costco)
• Foreign sales
• Retail stores (Best Buy) markup may be 80%
• Each channel has a different wholesale price
Recoupable expenses
• Packaging charges and free promo copies
– May account for 25% of royalties
• Recording
• Promotion
• Music video production
• Touring
Other expenses
• Manager/agent fees
– Paid after recoupable expense deduction
– Typical fee is 20%
• Cross-collateralization
– If the first album does well enough to warrant picking up the option but does not cover all recoupable expenses, these must be covered by the second album before royalties are paid
What the producer provides
• Recording studio
• Creation of a master recording
• Produce the “album”
• Sell/distribute/promote
What the producer gets
• Exclusivity– Music, name, band members, images, and likeness for
the duration of the contract
• Merchandising rights– Tee shirts, key chains, action figures, etc.
• Interviews/publicity• Creative control of music• Limit outside work of artist• Band personnel• options
Options• Each option is a contract period for producing an
album– First contract may include as many as seven
• Enforceable at discretion of producer• Recording is property of producer in perpetuity• Lock-out clause prevents artist from re-recording the
material for 5-10 years beyond the end of the contract• Producer may reject an album, requiring artist to
produce another, but retains rights to the music and lock-out still applies
• “live” albums usually do not count toward album requirements
Breaking Down the Price of a CDmusicians' unions
packaging/mfg
distribution
publishing royalites
artis royalties
marketing/promo
label overhead
label profit
retail overhead
retail profit
= Share going to producer
The record and the royaltiesItem quantity income expense
Total sales 500,000 @ $15 $7,500,000
Sales outlet
Record club 50,000 @ $6 $300,000
Retail outlet 250,000 @ $8.33 $2,082,500
Discount outlet 50,000 @ $7 $350,000
Foreign 150,000 @ $6 $900,000
Total royalties (10% of wholesale) $363,250
Packaging (25%) $90,812
Recording, promo, video, tour $250,000
net $22,437
Mgr fee (20%) $4487
Advance $25,000
Royalty base -$7050
Simulated accounting for Ruben Studdard: I Need An Angel 2004 (2d album)
The Impact of Technology
The Impact of Technology• Drastic reduction in cost of recording• Digital recording bypasses need for expensive
pressing of albums or CDs• Internet allows for cheap, easy, global distribution• However, the landscape has become very
crowded– Approximately 3000 songs are released every week– In May 2014 itunes sold its 35 billionth download. The
first was sold on April 28, 2003– Average 100 per second
• The piracy problem
Napster
• Launched June 1999
• Shut down July 2001
• Peer-to-peer file sharing service specializing in MP3 music files
• Metallica filed first lawsuit charging copyright infringement in 2000
• Also in 2000 A&M Records joined by several other recording companies in suit vs. Napster
• Parker’s current net worth $2b
The Solution to Piracy?
• Online streaming
• Credited with dramatic reduction in piracy
• But how does it help the artist?
Remember Rebecca Black?
• The 1.3 million views of her video on YouTube
• At $0.00074 per view
• Have netted her a grand total of $962
• Since its debut in September of 2011
• That’s $10.69 per month
File Sharing: Good or bad?
• Copyright infringement
• Free publicity
– English rock band Radiohead’s first album to hit the top 20 in the U.S. due to it being leaked on Napster before its release
– The indie band Dispatch gained fame and tour bookings as a result of its music’s popularity on Napster
All time top selling digital songsArtist Title Release
dateSales units (mils)
Ed Sheeran Thinking out loud 2014 12
Eminem Love the way you lie 2011 12
Justin Bieber Baby 2010 12
Florida Georgia Line
Cruise 2012 11
Katy Perry Dark Horse 2013 11
Katy Perry Firework 2010 11
Lady Gaga Bad romance 2009 11RIAA certified
The Fate of the Album
Summary
• The recording industry favors the producer
• Until you become a star and escape your first contract
• Technology has changed how and where we buy our music
• The shift from albums to singles
• And from physical to digital
• More units are sold, but revenue is falling
* Worldwide sales
*
You got all that?
Recommended