Napster users have often questioned why a CD costs $16. Courtney Love told the story of how that $16 is certainly not going to the artists. The profits of the major labels, while significant, are not so high as to imply that they are getting all of that $16. Here are the parts of the cost that seem to exist, though I’m not sure how much each one makes up:
- Cost of producing the music (studio time, up front producer fees, session musicians, etc.)
- Physical cost of the CD and booklet
- Packing and shipping to wholesalers
- Wholesaler profit margin
- Wholesaler overhead
- Shipment from wholesalers to retail
- Retail store profit margin
- Retailer overhead
- Retailer advertising
- Independent promoter fees to get the songs on radio
- Cost of unsuccessful releases
- Record label profit
- Royalties for the people who put together the album: the band, publishers (songwriters), producers
I put the musician’s share at the bottom. Why? Because, as Courtney Love points out, the musicians don’t really make anything until everyone else along the chain has been paid.
A record label may spend $300,000 producing a release, and another $200,000 promoting it. If the release looks promising, retailers may buy it as well. If that release fails to do well, there is more than $500,000 in cost that is going to get pulled from the pockets of consumers. And, of course, the artists who wouldn’t see any money for their work.
The only way to break this cycle, is to start looking at independent sources of music. There are still plenty of those online. The truly independent ones are a much better deal for consumers and artists, because you cut out many of the middle men and eliminate nearly all of that promotional cost.