How much? Really?

[Joe Fenton]

From a link on the DOOM9 news today:

Where does the money go when I buy a CD?

Of course, it all depends on the cost of the CD, but the Canadian Recording Industry Association compiled figures this summer. Out of 100 per cent of the cost:
# 4% is retailer profit
# 7% is label profit
# 9% is manufacturing costs
# 12% is artist and songwriting payments
# 12% is record company distribution, sales & overhead costs
# 13% is promotion and marketing costs
# 19% is recording, video and production costs
# 24% is retail store costs

Look at those last three, the last two in particular. That's over half the reported cost of an album. What ARE the retail stores costs? Paying someone to reorder the album? To put it on the shelf when it comes in? Is 19% really needed for production costs?

Okay, say an album goes gold. That means it sold 500,000 copies. At $14 a pop (cheap these days), that means that supposedly $1,330,000 dollars went to production. So they want us to believe that is costs over a million to produce an album. How about when albums go platinum? Double platinum?

Use the above figure for a gold album and you get almost $1.7 million for "retail store costs."

I can believe people spending what that 13% represents on advertising. I don't believe that 19% or 24% on "costs." Seems to me there's some fat that needs trimming!

[mpucoder]

I'm not going to defend the figures, but just point out that they are probably "on average". A few go platinum, more go gold, most are in the middle, and some go bust.

[Joe Fenton]

I thought of that too, but check out how many albums go multi-platinum, platinum, and gold each month according to the RIAA (who hands out the awards).

http://musicians.about.com/gi/dynamic/offsite.htm?site=http://www.billboard.com/bb/riaa/index.jsp

I just averaged over four months of 2004. Per month, we see:

9 multi-platinum
8 platinum
19 gold

This yields per month:
9 x 1,000,000 (another million to get another platinum)
8 x 500,000 (500,000 more to go from gold to platinum)
19 x 500,000

For a total of 22,500,000 records per month. Apply the above chart to get:

$5.4 million in retail store costs
$4.275 million in production costs

From an earlier series of post about the RIAA, we know they produce about 3000 albums per year, or 250 per month. That works out to $17,100 per album (per month) in production costs. That is one expensive album!

That is only counting albums making it to at least gold, using those to pay ALL the bills. You KNOW that isn't the case. The RIAA members don't sign someone unless they KNOW they will sell enough records to make a profit. If you don't make enough, you will be dropped. They don't care for the artists, as has been shown by recent lawsuits by groups of artists against the record cartel.

This also discounts money made from radio, videos, commercial licenses, etc..

It's pretty obvious they're "cooking" the books. I would love to see an official investigation of the finances of the media corporations. We'd see some pretty interesting fireworks I imagine.

[Doobie]

Originally posted by Joe Fenton Okay, say an album goes gold. That means it sold 500,000 copies. At $14 a pop (cheap these days), that means that supposedly $1,330,000 dollars went to production. So they want us to believe that is costs over a million to produce an album.

If you own the voice, the studio, and the CD press, you can make a CD for a nickle (electricity and materials). If you have to pay for a studio, you an rent one long enough for a couple hundred bucks. If you don't own a CD press, you can pay someone to press and package them, a nickle per CD (in quantity).

All that's left to do is pay for the talent and then everyone can share the profits.

If people were willing to pay only a dollar per CD, they'd still be selling. And, the artists would have to get rich off of performances (concerts) rather than royalties.

The price of a CD has nothing to do with the cost of a CD. The price is set at what they believe is a maximum profit... how high they can lift up the price to increase income before the number of people who won't buy becomes so high that their profits stop increasing. This gouging is what happens in the absence of real competition.