POSTED BY MAX_PAYN: I have a REALLY IMPORTANT question, Mike, Do mp3 sites pay you actually? I sometimes buy couple of songs from mp3 sites, I’m not sure are they really paying you for that songs. what about abroad sites? Here Korea we have big mp3 sites selling your songs, I sometimes buy them…Nowadays people don’t buy CD, they buy mp3… so I really wanna know whether you can get actual benefit from them. Love you man. Anyway I did that survey but some error occurred, it won’t submit my survey! ….gave up…
M: Artists are supposed to be paid for all music sales (mp3s, ringtones, albums, etc.). Our label and publishing company are supposed to make sure all those sellers are doing the right thing.
For all the music makers out there, I should elaborate further: whether major or indie label, it’s not as much as you’d think. Even on a $9.99 album, the artist gets pennies. For each sale, everyone has to get paid out of that money; the store, the distributor, the record company; then your manager, lawyer, business manager, and more (at the end, if you’re in a band, you usually split it up among band members).
To see more of the scary underbelly of how it works, check this article out:
Here’s a really breakdown, based on a (highest price point) $18.98 CD:
$18.98 – suggested retail price in store (what buyer pays)
$14.74 – what’s left after subtracting for “packaging costs”
$1.33 – how much your band gets as defined by average major label contract (standard average, 2004. Complicated stuff, and varies slightly depending on your deal and who you sign with…but I would be willing to guarantee that most upstart bands today make less than this if they sign with a major).
$0.93 – what band gets after various managers commissions (estimated: 30%)
$0.23 – what you get if your band has 4 members
The bottom line? You just got paid less than a quarter on your CD that sold for almost $20. The funniest part is that the label actually charges you some or all of the studio costs, video expenses, tour money lent, promotion of album and singles, and other expenses, so they don’t pay you your $0.23 until they’ve “recouped” their expenses. Which could be never.
That’s why it’s important to think about whether or not it’s time to work with a label. If it’s just you and the fan, you make almost all $9.99. Even if you’re only selling a few hundred units, selling them directly can be worth it.
PS: Again, Donald Passman’s “All You Need to Know About the Music Business” is one great book to reference (It was even mentioned in the USA Today article).