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Some investors won't spend more than a few hundred thousand on a promising startup - especially now. Yet major labels are still pouring millions to push releases and develop artists (like this $1.1 million cost for one song).
In fact, the IFPI estimates that a newly-signed pop act requires $1 million in capital to break. Similarly, an already-established, superstar artist breaks the bank with roughly $4.65 million invested around an album and related assets. Here's the estimate from a recently-released, investment-focused IFPI report.
Comments Closed
@jjhchang Friday, August 12, 2011
Jonathan Chang
Might make sense if most of them sold 4.65MM units...
@jacksontalent Friday, August 12, 2011
Ms. T
What does 4.65 million get you? A mediocre pop scene at best. So much money. So little art.
@caroleinfl Saturday, August 13, 2011
Carole Sue
Hey they forgot to include the cost of payola.
mahki sahn Saturday, August 13, 2011
yes...payola...how did they forget!
Space Sunday, August 14, 2011
That would be Marketing & Promotion. ;)
@themusicpimp Sunday, August 14, 2011
Alejandro Marin
Lo que le vale a una gran casa discográfica el desarrollo de un nuevo producto musical.
@Lore5punto1 Monday, August 15, 2011
Lorena Morales S
Efectivamente se necesita mucho dinero.
Teresa Monday, August 15, 2011
Es realmente costoso, sobre todo para un nuevo artista...
Music X Monday, August 15, 2011
Why is it that it cost so much more to promote an artist that is already out there? Shouldn't it be a little less than marketing a new artist? Any insight?
RadRandy Tuesday, August 16, 2011
Look at the breakdown. The advance givent to the performer is over $1M difference.
Some new pop artist that nobody has heard of yet is going to get by for much less money than say, Beyonce or Lady Gaga. Think of the video for a new artist, then think of the big money video for one of these established superstars. Big difference!
@DELAPRAT Monday, August 15, 2011
VIVIANE @LIFE VIVELA
Omg! I accept donations!
@Taichi0225 Monday, August 15, 2011
getstage
Payola
@ONErpm Monday, August 15, 2011
ONErpm
$4.65 million to release a superstar album!? No wonder the label side of the music industry is rapidly vanishing.
@NewArtistsWG Monday, August 15, 2011
NewArtistsWorkingGrp
Now you know why labels work through us a lot of the time.
Jason Miles Monday, August 15, 2011
The insanity continues-How do you recoup 4.65 mil by selling a CD-maybe some licensing in there but that is still insanity money
2011
WhyIsThisStillHappening Monday, August 15, 2011
What is the label's ROI? All this info on the cost to create a hit record/artist but no info on the actual revenue/profits.
Ritch Esra Monday, August 15, 2011
What is the label's ROI? All this info on the cost to create a hit record/artist but no info on the actual revenue/profits.
This is the real issue! Today, the answer is less and less revenue and profit is made - even from the most successful examples of Major Label Hits! Using the dollar figure that they mentioned in the piece, ask yourself how many artists have even sold 4.65 M copies of an album/CD release in the US over the last few years? The answer is very very few - I can think of 3 of the top of my head - Lady Gaga, Taylor Swift & The Black Eyed Peas. The reality today is that at their best and most successful, the returns just aren't there anymore. Take Katy Perry for example. I use her as a recent example because it just doesn't get any better than this for a Major Label Pop Act - she's had 5 # 1 Hit Singles each with a six figure marketing budget (promo, video, etc) and they only sell 1.6 million copies of the album (the vehicle where they make the most amount of money) You say "what about the sales of her digital downloads on the singles?". That money covered the promo, video, etc for each of those releases at best with VERY little left over. This situation would be a far different story if they were selling 10-15 Million copies of an album with that kind of marketing push and financial commitment, but 1.6 million! Really? The bottom line on this is that your looking at a 60-75% cost against any dollars that they bring in and at the end of the day you realize that this model just can't sustain because no one - Not Even The Major Labels - are going to be willing to spend 60-75 cents for evey dollar that they want to bring in on recorded music.
Now you might say "well what about acts that are in 360 deals? Can't they make money with them there? The sad truth of a lot of contemporary "Pop Top 40 Hit Artists" today is that they don't do any big Live Business and subsequently no merchandise sales or any of the additional revenue streams from Live Performance), so even if they are in a so-called 360 deal, in order for a label to really make money from it, you have to be generating $$ in all of the other areas and most Top 40 Pop Acts (with very very few exceptions) are doing this.
As a well known attorney told me very recently "Most of these Top 40 acts only have 173 deals" because they lack the ability to generate dollars in most of the areas that you traditionally make money in a 360 type of deal"
And it's not only music that this is becoming a very real issue in. It's also becoming the unspoken reality of the Bockbuster Film today as well. When you have to spend between 45 - 65% of your Blockbuster gross on making and marketing your film that's an awfully big financial risk to take to earn 35% - which by the way has to be split with the producers and stars, etc. Is it any wonder why 2 major blockbuster films have been shut down or cancelled in the last 3 weeks (Disney's Lone Ranger staring Johnny Depp)was shut down last week in pre-production due to this very factor) and the cancellation of Ron Howard's upcoming Sci-Fi film at Universal was also axed due to financial concerns. Even a potential One Billion dollar Box office Take as the recent 4th installment of Pirates of The Carribean & the 3rd installment of Transformers achieved in worldwide Box office take you still have to acknowledge that even rarified Blockbuster hits like these 2 films are not as profitable as they appear to be when you factor what that box office take actually costs you to achieve.
No different than the recently completed U-2 tour. Yes, it took in the largest amount of $ in ticket sales ever, but the level of profit on that expenditure (at a cost of $750,000.00 a day - every day) is far less than one would imagine after it's all said and done. I'm not saying that no one is making money in these examples, just not the kind of money you would think based on what needs to be spent in order to bring it in in the first place.
Jon Magnificent Thursday, August 18, 2011
wow. damn.
And to think I've dedicated my entire life to this, the art of composition and performance.
I appreciate the reality check, Ritch.
It's still a tough pill to swallow..!
Rob Monday, August 15, 2011
I'm calling total BS on the advance/recording budget part of this. I KNOW FOR A FACT that advances/budgets like that are NON-EFFING-EXISTENT for new artists now. Period.
rhythmhub Monday, August 15, 2011
4.65 milli....I bet for some it's double. It's just bad business..and part of the reason why they can't make $$ anymore. Music is to be created not manufactured....figure the majors do this 2-3 times a quarter or more and you've got BIG loses...these label heads just amaze me with this waste.
Devcon Tuesday, August 16, 2011
Kreayshawn, a new artist just got 1 mil advance from Sony... It's still happening!
Visitor Tuesday, August 16, 2011
UMG and Sony are each making several hundred million per year in profit.
It may take several albums to break an artist but in the long term they are likely to make real money from their investments, which many of you simply view as costs.
You shouldn't view these investments as short term.
/yv
@arpixmedia Tuesday, August 16, 2011
arpixmedia
Superstars get 10X the marketing budget of a new act. Too funny.
@dhhargis Tuesday, August 16, 2011
David Hargis
It costs how much to release a major label album??
Music manager Tuesday, August 16, 2011
WHAT NEW UNHEARD OF BAND IS GETTING $200,000 ADVANCE? THESE NUMBERS ARE ABOUT 10 YRS AGO.
Royal Wade Tuesday, August 16, 2011
No one makes it on single song sells, and there are zero cd sales this day and time. Payola alone breaks the bank. Oh, and by the way, the record Pres. calls payola, "Promotion Money."
All those other figures are nice, but meaningless. Unless you as an artist come in with big bucks behind you from an outside source (invester, sugar daddy, or american idol) then you better work hard, watch the out go, be smart, patient, shoot for the moon and hope like hell you just get off the ground.
@CashRichRecords Tuesday, August 16, 2011
Cathy Richardson
Anyone have a million bucks they want to invest in a promising music artist?
@bigphatbandHQ Tuesday, August 16, 2011
Gordon Goodwin
I think Concord got a good deal on the BPB.
@MeredithBlis Wednesday, August 17, 2011
MeredithBlis Sincoff
Very Interesting Mathematics!
@jonmagnificent Thursday, August 18, 2011
Jon Magnificent
This is my competition - and this is why I appreciate it every time you tell someone else about me and my art.
@CD09 Thursday, August 18, 2011
Cheryl
Wow! This is crazy.
@jeremycurrent Monday, August 22, 2011
Jeremy Current
Reading about the music industry is like hearing about a ship in the sea that's sinking and realizing you're on it.
AG Monday, August 22, 2011
With repect to the advance, the label is a lender and not an investor. The recording artist is required to pay back the advance. Because that money is a loan, not a captial investment, is should no tbe included here.
@HeatherSchultz Wednesday, August 24, 2011
♥Heather Schultz♥
Being in the music industry is like being on a ship in the sea that's sinking and realizing you're on it.
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