Artists STILL Don't Make Money From Record Deals MAKE MONEY
Artists STILL Don't Make Money From Record DealsArtists STILL Don't Make Money From Record Deals
By Wendy Day ARTISTS STILL DON'T MAKE MONEY FROM RECORD DEALS
By, Wendy Dayfrom Rap Coalition (w.
RapCoalition.
org and w.
rapcointelpro.
com)Who is the incredible bonehead who said rap artists make a lotof money?
Wrong, wrong, wrong, wrong, wrong!! Because the fansexpect their favorite artists to be very wealthy, and have aninteresting, far above average, glamorous lifestyle, this putsan incredible amount of pressure on the artists to appearwealthy.
And it's not just the fans; I can't tell you how manytimes I've been out with rappers along with people in theindustry, and the industry opportunists have expected theartists to pick up the dinner check.
I've even seen people havean attitude if the artist doesn't pay for everything.
This issmall minded and ignorant because the artist is ALWAYS the lastto get paid.
Everyone gets their cut first: · the label (78% to 92% afterthey recoup most expenses), · the manager (15% to 20% of all ofthe artist's entertainment income), · the lawyer (
By the hour or5%-10% of the deal), · the accountant (
By the hour or 5% of allincome), and, of course, · the IRS (25% to 35% depending on thetax bracket).
Add to this the artists' own payrollresponsibilities: fan club, website, security, office and/orstudio, etc, and family members he, or she, is expected tosupport or help financially.
Once an artist releases a record, the pressure is on to portraya successful image to fans, friends, families, and people aroundthe way.
People expect the artists to be well dressed, drive anexpensive car, live in a very nice house, etc.
Think about it.
Don't you expect artists "to look like artists?
" Would youadmire Jay-Z as much if he drove a broken down old 1994 Grand Aminstead of that beautiful, brand new, top of the line Bentley?
Sadly, when an artist gets signed to a record label, especiallya rap artist, he or she receives somewhere between 8 and 13points.
What that means is 8% to 13% of the retail sales price(less inane deductions that whittle that small percentage downanother few points), after the record label recoups the money itputs out (the advance, the sample clearances, the produceradvances, usually half the cost of any videos, any cash outlaysfor the artists, half of the radio promotion expenses, most ofthe street promotion expenses, etc.
).
The artist has to sell anincredible amount of units to make any money back.
Here's anexample of a relatively fair record deal for a new rap groupwith some clout in the industry and a terrific negotiatingattorney:ROYALTY RATE: 12%We're going to assume that there are 3 artists in the group, andthat they split everything equally.
We're also going to assumethat they produce their own tracks themselves, contributingequally, without sampling.
Suggested retail list price (CDs) $12.
98 less 15% packagingdeduction (usually 20%) =$11.
03 gets paid on 85% of records sold("free goods") =$9.
38So the artists' 12% is equal to about $1.
13 per record sold.
Inmost deals, the producer's 3% comes out of that 12%, but for thesake of brevity, in this example the group produced the wholealbum, buying no tracks from outside producers, which is rare.
Let's assume that they are a hit and their record goes Gold(although it is rare that a first record blows up like this).
Let's also assume they were a priority at their record label andthat their label understood exactly how to market them (which isalso rare).
So they went Gold, selling 500,000 units accordingto SoundScan (and due to the inaccuracies in SoundScan trackingat the rap retail level, 500,000 scanned probably means morelike 600,000 actually sold--but they'll only be accounted to forthe 500,000 SoundScan verified units instead of what actuallyhas sold).
GOLD RECORD = 500,000 units sold multiplied
By $1.
13 = $565,000.
Looks like a nice chunk of loot, huh?
Watch this: Now the labelrecoups what they've spent: the cost to make the record,independent promotion, 1/2 the video costs, some tour support,all those limo rides, all those out of town trips for theartists and their friends, etc.
$565,000 -$300,000 recoupable stuff (recording costs, etc)-------- $265,000 -$100,000 advance -------- $165,000Still sounds OK?
Watch.
.
.
Now, half of the $265,000 stays "inreserve" (accounting for returned items from retail stores) for2 to 4 years depending on the length specified in the recordingcontract.
So the $100,000 advance is actually subtracted from$132,500 (the other $132,500 is in reserves for 2 years).
Now,there's also the artist's manager, who is entitled to 20% of allof the entertainment income, which would be 20% of $265,000, or$53,000.
Remember, the artist is the last to get paid, so eventhe manager gets paid before the artist.
The attorney isentitled to 10% of the upfront value of the deal, which in thiscase was $200,000, so the lawyer made $20,000 the day thecontract was signed (which the label paid directly), which theartist pays back now out of royalties.
So the artists are in debt to the label yet their album wentGold, and they are experiencing some pretty good fame andperceived success.
Unless they are making money in other areas(shows, mostly) they are completely broke.
In two years when thereserves are liquidated, IF they've recouped, they will eachreceive another $44,166.
IF they've recouped.
Guess who keepstrack of all of this accounting?
The label.
Most contracts are"cross-collateralized," which means when the artist does notrecoup on the first album, the money will be paid back out ofthe second album.
Also, if the money is not recouped on thesecond album, repayment can come out of the "in reserve" fundsfrom the first album, if the funds have not already beenliquidated.
Even if all the reserves are paid in our example, each artistonly actually made 6 cents per unit.
The label made and/orrecouped about $8 per unit.
This example also doesn't includeany additional production costs for an outside producer to comein and/or do a re-mix, and you know how often that happens.
So each artist in this group has received a total of about$26,000 (pretty much just the initial advance, less themanager's cut).
After legal expenses and costs of new clothingto wear on stage while touring, etc, each artist has made solittle before paying taxes (which the artist is responsiblefor-- remember Kool Moe Dee?
).
Let's look at the time line now.
Let's assume the artists had no jobs when they started this.
They spent 4 months putting their demo tape together and gettingthe tracks just right.
They spent another 6 months to a yeargetting to know who all of the players are in the rap musicindustry and building a local buzz while shopping their demo.
After signing to a label, it took another 8 months to make analbum and to get through all of the label's bureaucracy.
Whenthe first single dropped, the group went into promotion mode andtraveled all over promoting the single at radio, retail,concerts, and publications for free--unless they had a radio hitas their single, in which case they began getting some showmoney for about half or a third of the dates they performed.
This was another six months.
The record label decided to pushthree singles off the album so it was another year before theygot back into the studio to make album Number Two.
This scenariohas been a total of 36 months.
Each member of the group made$70,000 for a three year investment of time, which averages outto a little over $23,000 per year.
In corporate America, thatworks out to be $11 per hour (before taxes).
So there you have it, the real deal on how much money an artistmakes.
You can subtract another 25% to 35% of all income,including show money, (depending on the artist's tax bracketwhich is determined
By how much income was made within any givencalendar year) for the IRS who get paid quarterly (hopefully)
Bythe artist's accountant, who gets paid 5% of the total artist'sentertainment income for this luxury (that's 5% of the netincome, meaning BEFORE taxes).
If the average artist releases arecord every two years, then this income must last twice aslong.
.
.
I think about this every time I see my favorite artistsin their music videos drinking $300 a bottle champagne, or everytime I see them drive
By in a brand new Benz.
.
.
Wendy Day Rap Coalition w.
rapcoalition.
org w.
rapcointelpro.
com w.
HelpfulAngel.
com About the author:Wendy Day is an authority on the business side of the musicindustry.
She started Rap Coalition, a not-for-profit artistadvocacy organization in 1992. She has worked with Eminem,Master P, Cash Money, Twista, David Banner, and many others.
Shehas built many millionaires and has contributed to the successof many stars.
Wendy also helps artists set up their owncompanies and start their own record labels! Return to HOME to read more articles RSSTAGHERE4
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