Mass retailers like WAL-Mart, Best-Buy and Target have the market power to demand lower prices from major record labels. By relying on traditional distribution these demands are becoming increasingly difficult for the labels to achieve. Labels point to roster cuts and staff layoffs as evidence that they can’t sell CDs any cheaper. As of November 2004, the following is a breakdown* of the cost of a typical, traditionally distributed, major label release according to the Almighty Institute of Music Retail (http://www.almightyretail.com) for a new album priced at $15.99:
Retail Overhead
Label Overhead
Marketing & Promotion
Label Profit
Artists’ Royalties
Distribution
Publishing Royalties
Retail Profit
Packaging & Duplication
Musicians’ Unions
|
$3.89
$2.91
$2.40
$1.70
$1.60
$0.90
$0.82
$0.80
$0.80
$0.17
---------
Total = $15.99
|
*source: rollingstone.com – issue 960
One thing that this article fails to mention is that back calculation of the royalty amounts results in a 10% artist royalty rate (100 x 1.60 / 15.99) and a 5% publishing royalty (100 x 0.82 / 15.99). These rates exist for established acts only and are in fact MUCH lower for developing artists.
