Tuesday, June 13, 2006

Sympathy for the record industry

Mike SkinnerTom Robinson works out how much of the £7.99 iTunes price for Mike Skinner's new album goes to the artist (via Open Rights Group):

The government (of course) took its 17.5% in VAT off the top, leaving £6.59 net. Under a standard record contract, the split, according to the BACS, would go something like this: performer 48p, songwriter 53p, credit card company 59p and Apple 99p - while the record company trousers the remaining four quid. Even at the megastar rates enjoyed by Macca, Jagger and Jacko (22% of retail, no deductions), the performer gets maybe £1 more and the record company a quid less. Hey, do the maths.

Regardless of what royalty rate he's on, Skinner will still have to cover all recording and promotional costs from his share of the income. So if he can still afford a Ferrari, go figure how well his record label, Warners/679, is doing right now - and which one of them has the harder way to make an easy living.

Daniel Davies retorts that the music industry acts like a venture capitalist with very few successful ventures:

The biggest single cost that a record label faces is the number of acts they sign who just turn out to be no good. So when Mike Skinner gives up £4 from every album he sells to his record label, it isn't just champagne and coke for the company executives and shareholders he's paying for. He's paying for all the dreadful acts they sign every year who take an advance, record an album at vast expense, never sell a copy, break up and go back to university, all without paying back the money advanced to them at the start of the process.

It would be interesting to compare the investment successes vs. failures of the record industry compared to venture capital benchmarks. It would also be interesting to think up approaches whereby artists could defer "investment" by the record industry until a later stage at which they could extract a fairer amount of "equity" from the deal…

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