Sometimes Big Promo Doesn't Work

More and more, music mass marketing is working less and less. This is especially true for television, where once upon a time, an appearance on a popular show could mean a huge jump in sales. Take for instance an appearance on Saturday Night Live, which could mean at least 100,000 in sales; sometimes even more back in the good old days of limited media. This is becoming less and less the case however, as we get further into Music 3.0 where consumer's listening, watching and buying habits are dictated by the time they spend online.

Probably the best example of how little impact television can have came recently with the airing of Spike Lee's documentary of the making of Michael Jackson's Bad. This was basically a 90 minute commercial for the re-issue of the album during prime time of one of the best television viewing nights of the year, and it sold only 11,000 albums the next week as a result.

Let's go over that again - Michael Jackson, big album, Thanksgiving evening, 11k!

The worse thing is that it was a really great program, showing another side of Michael that few have ever seen, along with much of the backstory of the making of a big-selling album. Granted,  the record is 25 years old and MJ's music isn't currently hot, but it would have been interesting to see if a similar show on Justin Bieber or Lady Gaga (or even Psy for that matter) would've done any better. Maybe a bit, but I doubt it.

Several things are changing at once here. Television is losing it's impact, and people are getting more used to subscription music instead of buying it. I bet a lot of the audience that were motivated to listen to MJ afterwards just fired up Spotify or Pandora or Grooveshark or ..........

The fact of the matter is that I think more copies of Bad might've been sold with an online marketing campaign, and it would've been a  lot cheaper.

The estate of MJ no doubt made some big dollars from the network, but the show just proved that we're in a state of evolution in all media. Hang on for ride!

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Sell A Million And Make Zilch - Another Example

Yeah, it sounds really cool to get a record deal with a major label. Wow, you're label mates with Coldplay, or Brittney, or Nikki, or Bruno. The problem is, the chances are that even if you go platinum right out of the box, that doesn't mean you'll make any money. As you can see from the graphic on the left, there's not much left over after all the bills are paid.

Here's an excerpt from an eye-opening article in The Root that should be a must for any artist contemplating a deal with any label. It outlines the various places that the money goes from a record sale.
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"SLRP: The suggested list retail price of a CD is currently $16.98, while the standard wholesale price -- what retail stores pay the label per CD -- is about $10. Once the retailer gets the CD, they can sell it for however much they'd like -- hence "suggested." Artist's royalties are a percentage of the retail price. Superstars can get 20 percent of the SLRP, but most get 12 percent to 14 percent.

Packaging charge: 25 percent of the SLRP goes back to the record company immediately for what's called a "packaging charge" -- that's the label literally charging the artist for the plastic case in which his or her CD is sold.

Free goods: In essence, "free goods" are a roundabout way for labels to discount records so stores will be more inclined to buy them. So rather than sell Best Buy 100,000 records at the regular wholesale price, the label will sell them 100,000 records for the price of 85,000. The artist is then paid for the 85,000 CDs, not the actual 100,000 sold to the retailer.

Reserves: Records, especially records by newer artists, are generally sold with the caveat that retailers can return to the label whatever copies they don't sell for a full refund. Thus to ensure they don't lose too much money on artists, record labels will sometimes pay artists for only 65,000 copies out of 100,000 copies, just in case 35,000 (25,000 if you consider the free ones) are returned. If the retailer ends up selling all their copies, the label will then pay the artist the balance owed, which can sometimes take years.

Distributor: Music distributors are entities designed to promote and distribute records. The major labels maintain in-house distributors, while most all indie labels use private distribution companies. For smaller bands' records, the distributor can take as much as a 24 percent cut of the SLRP; bigger bands might only be charged 14.2 percent.

Songwriter/publisher: If an artist doesn't write his or her own music, someone else has to. And someone who writes a song must first go through a music publisher, whose job it is to place that song with a recording artist who will agree to perform it. If an artist buys the song, the writer and publisher then receive 9.1 cents for every copy of the song sold, a sum they must then split.

Personal manager: This manager guides the career of the artist and gets about 15 percent of the artist's gross earnings.

Business manager: This manager is the artist's money man, making sure the musician repays his debts and invests his earnings wisely. A business manager charges 5 percent of an artist's gross.

Lawyer: While it's not always the case-many charge hourly-some artist's lawyers charge 5 percent.

AFTRA and AFM: These are the musicians unions. Singers join AFTRA (the American Federation of Television and Radio Artists), while players join AFM (the American Federation of Musicians). If an artist cuts an album, he has to join a union, which will then take $63.90 in base dues plus 0.743 percent of the artist's first $100,000.

Record advance: Unlike touring fees, of which the record company can only recoup half, record advances are 100 percent recoupable. That means that if the label fronts an artist $75,000 to pay for whatever he or she needs to record an album--studio time, new instruments, etc. -- the artist then owes the label that initial $75,000, regardless of whether the record is a success or not."

Depressed yet? Don't be. Hit artists have always made 90% plus of  their money on touring and merchandise, but if you have a 360 deal where the label gets a piece of your touring and merch income, that job at McDonald's might be looking better and better.

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Check out my Big Picture blog for daily discussion of music, recording, and production tips and tricks.

Slicing The Profit Pie

Here's an interesting pie chart that can be quite disturbing to a new artist or band (can't remember where I found it). It's not entirely accurate, but it's enough to give you the idea that working at McDonalds might be a better career choice than the music business.

Let's break it down:

• If you're signed to a label, most new acts will have a deal that will give them about 15% of the net sales revenue. Now this isn't as good as it sounds, since the label has a variety of ways to make it seem like they've never made a profit even though your record might've went Gold (500,000 sales), but for now we'll assume they're straight up about everything (which only happens in your dreams).

So your left with 15%, but that figure can be as much as 25% if you financed it and produced it yourself and just licensed it to the label. Whatever the amount you're left with, here's how it's split.

• In the case of this chart, the band had a deal before and still owes the previous label money. Maybe they can get out of this and maybe they can't. In this chart, it looks like it amounts to about 1 point (percent) of your 15. You're down to 14 points. (I don't know why the agent is on this chart since he only gets paid on gigs, not record sales.)

• The band didn't have any money, so it made a "spec" deal with a studio that really believed in them. Spec means speculation, which means that they agreed to pay the studio probably another 1 point if the album sold. You're down to 13 points.

• The normal producer deal is 3 points, although it may be as high as 4 if the project was on spec. You're now down to 9 points.

• The manager is making 20% of your gross, which means he takes another 3 points, and you're down to 6.

• You didn't have any money to pay an attorney, so he did a contingency deal with you, meaning that he makes 5% of the gross of any deal that he negotiates. 5% of 15% is another .75 of a point. If you also have a business manager that has the same deal, that's another .75 of a point. That means 1.5 points of your remaining 6 and you're down to 4.5.

• That means that if there are 5 people in the band, each one gets .9% of the income from the record.

Now if the album went gold with sales of 500,000 copies (which rarely happens these days) at a wholesale of $7.50 each (also high for the times), that means the label brought in a total of $3,750,000. Assuming that there was no hanky-panky with the accounting (in your dreams only), that means that each member of the band made $33,750. This doesn't include any tour expenses and the fact that you probably worked pretty hard for a couple of years before this check came in.

Still feel good about the music business?

Of course, if you were a songwriter, you made money on mechanical and performance royalties, and the band may have made some money on gigs and merch.

But you're not going to get rich even under the best of circumstances, and they hardly ever happen these days.

That's why the only reason to be in this business is because you love the music. You've got to do it because it's what you live for, and you're willing to make the sacrifice in lifestyle that it will take to pursue the dream. If you're worried about the money, go back to school and get your MBA.

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Follow me on Twitter for daily news and updates on production and the music business.

Check out my Big Picture blog for discussion on common music, engineering and production tips and tricks.