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  #1  
Old 02-16-2010, 06:47 PM
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Default CD Sales

A question here that I've had for a while that is sort of bugging me. Allow me to show my ignorance in the matter.

I've noticed several big name acts state publically that they don't make any money off of CD sales, or make very little, if any. Neal Peart of Rush stated something like that recently in the latest Guitar Center flyer. A few other big acts have said that lately, although I can't seem to remember which ones.

Is it because of the Internet and iTunes, Rhapsody, CD Baby, and the like, or is it something else? I'm aware the record companies and everyone else involved in the production and distribution get their cut, but is it really that bad that a world-wide act like Rush doesn't see a dime, or very little? Or am I completely off the mark here?

And now it seems these big bands make their money touring. Back when I was growing up in the 70's and early 80's, bands made their money on record and CD sales and toured to promote the album; the tours not making much revenue by themselves.

Thanks!
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Old 02-16-2010, 07:51 PM
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Default Re: CD Sales

CD sales as described by Mr. Peart would most likely also include internet sales. I'd blame illegal downloading before I looked at iTunes et al.

Here's a nice little article, not exactly the topic, but touches on some aspects and is generally a good read for anyone getting into the industry:

http://www.negativland.com/albini.html

Even when signed to an "indie" label, we only saw $2 per disc sold, (which is actually a killer deal) - being truly independent and self financed is just about the only way to go if you want to actually make any money from CD sales, but yeah, we make more playing shows than we do selling merch.
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Old 02-16-2010, 09:45 PM
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Default Re: CD Sales

Actually, CD sales have always paid the bands who make the albums poorly.

This is why so many big name bands try to get off their record lables.
This is why Metallica sued their record company, and why Prince said he was a slave to his record company.

The albums are a means to tour, the tour hopefully pays, and then the band picks up extra sales from t-shirts, and such.

From the book "Bumping into Genius" by Danny Goldberg (who headed three different record lable, once managed Nirvana and Steve Nicks, and got his start doing PR for LEd Zepplin).

Page 47-48
Quote:
"So in the mid-eighties, when CD's sold for $10, a new artist who got a 12 percent royatly would be credited with around $.60 per sale. Foreign sales in those days paid at a 50 percent of the US rate. By the late ninties, the international rate to US ratio was much higher.

So if a 12 percent artist got $50,000 to sign, and spent $275,000 to record, and sold one million copies in the US, and one million outside the US, they would have a gross royalty rate of $900,000. Record producers...typical got 3 percent, which in this example would be worth $225,000. After deduction of of the advance and recording costs, that would leave $350,000 in artists royalties paid to the band. Assuming a 4 member group, who paid a manager, lawyers, and a business manager a total of 25 percent, this would mean around $72,000 per member"
So yeah, a band sells 2 million copies, and nets roughly $72,000 for guy. And this is using 1980's numbers. Royalty rates were as low as 3% in the 60's to 14 to 20% in more modern times.

The real money is in publishing rights to the songs. ASCAP and BMI collect from the record companies, radio stations, TV, song books, and anywhere the songs are played and pays that to the song writer (or who ever owns the rights to the publishing).

Per the same book, the song writer(s) of the above album would make roughly another million in publishing fees from the sale of the album, and then what ever from radio, music books, etc.

Fighting over publishing money tends to be the biggest issue with bands and labels.

The Beatles famously signed away all their publishing rights when they were young, and didn't know better, which is why so many Beatles songs are used in advertisements. However, they fortunate to sell enough albums they became rich anyway.

This is (in part) why Pete Townshed of the Who never had money troubles, but the rest of the band often did.

Van Halen songs are always credited to all members even though everyone knows Eddie writes 99% of the material so as to divide the publishing equally. Other bands break up because of the inequality of the division of publishing.

And this is why so many older artists are ticked off over file sharing. Not only do the bands lose their royalties for playing on the song, but the song writers lose tons of money in publishing fees.

And if you read "Hit Men: Power Brokers and Fast Money Inside the Music Business" by Fredric Dannen, you'll read how many other costs are charged against that royalty rate, giving the people who play on the albums even less money than the above scenario.

And yet despite all this, so many of us darn near kill ourselves to become part of it. :-P
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Old 02-16-2010, 10:03 PM
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Default Re: CD Sales

Rogue are they saying they don't make money from CD sales because they don't sell enough CD's or are they saying they don't make a large enough percentage of the CD sales.? That's two different issues and has to do with how the contracts are signed.
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Old 02-16-2010, 10:57 PM
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Default Re: CD Sales

Rogue are they saying they don't make money from CD sales because they don't sell enough CD's or are they saying they don't make a large enough percentage of the CD sales.? That's two different issues and has to do with how the contracts are signed.

I'm not sure, the article didn't get that specific but I would imagine in Rush's case it would be not making a large enough percentage of the CD sales, but Rush?!? That is a good question GRUNTERSDAD. It seems like there is something else working here that wasn't mentioned in the article. I can't imagine that as long as Rush has been around and as many of their records, CDs, and the like are on the market and sold, and as much clout as they have, it's hard to imagine they couldn't get a better contract and negotiate better terms. I don't know, I'm probably missing something here.... But just reading what I have read from the posts on this site, it may be just that. And I am thinking of single-CD contracts. I would be shocked if their deals were for only 1 CD at a time. Probably multiple CD / album contracts?

But since Neil is the chief lyricist for the band, and both Alex and Geddy write, I would imagine they are all doing quite well from the publishing aspect of it all, as was stated below.

Thank you for the wonderful explanation DrumEatDrum. I will have to buy those books you quoted from.
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Last edited by rogue_drummer; 02-16-2010 at 11:10 PM.
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Old 02-16-2010, 10:57 PM
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Default Re: CD Sales

i've even heard that not only do bands not make money from cds, but they don't make money from ticket sales either. they say they make most of their money from merchandise sales. could that be true?
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Old 02-16-2010, 11:17 PM
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Default Re: CD Sales

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i've even heard that not only do bands not make money from cds, but they don't make money from ticket sales either. they say they make most of their money from merchandise sales. could that be true?
For some bands, yes.

It really depends on what kind of deals they have going.

As I mentioned, the Beatles signed away their publishing, because they didn't know better. The Who signed bad management deals, which for most of their career held them back from making as much money as other bands with similar sales. Plenty of other bands have fallen into similar traps. Or agree to outragoues marketing campaigns, of which their record company deducts the costs of from the bands royalties.

Other bands are fortunate to set themselves up in a way they only license out their albums to the record companies, and thus retain more of the sales.

Live, if the band is the opening act, they're usually paid a flat rate per show, from which they have to deduct their expenses. Some festivals, like Ozzfest, only pay the top acts, leaving the smaller bands to fend for themselves.

So, depending on things fall, it is possible for a band to sell records and tickets, but not make much money from either after the record company, managers, and lawyers take their cuts.
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Old 02-17-2010, 12:00 AM
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Default Re: CD Sales

I really don't see the point in record labels anymore. My band presses our own cds for a less than a dollar a piece and sell them for $10. We still sell plenty of cds and sell about 3 times as many digital downloads. CD baby keeps $4 per cd we sell through itunes. Shirts cost us between 3-5$ a shirt and we sell those for $10 too, there is plenty of profit to be made, and it's really not something you need a record label to do for you.

DO IT YOURSELF
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Old 02-17-2010, 12:53 AM
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Default Re: CD Sales

The reason merch is an easy way to make money is because the chain from manufacturer to point of sale is very short. Venues usually take a commission but that's it, so it's money in hand. This stuff is all up in the air at the moment though, no-one knows what's going on.
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Old 02-17-2010, 01:25 AM
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Default Re: CD Sales

I really don't see the point in record labels anymore. My band presses our own cds for a less than a dollar a piece and sell them for $10. We still sell plenty of cds and sell about 3 times as many digital downloads. CD baby keeps $4 per cd we sell through itunes. Shirts cost us between 3-5$ a shirt and we sell those for $10 too, there is plenty of profit to be made, and it's really not something you need a record label to do for you.


The main band I am in now, we are planning to do that. We have enough original material to hit the studio the first half of this year and record at some of the better indie recording houses in our area. At every show, we play our originals mixed in with covers and after we play an original, we always get great reviews and audience resonse. And it is now fairly cheap to record a CD using pro-level gear. The best deals are coming from these indie places who are hungry and want to get their studio name out there.

After that, we plan to use Rhapsody, CD Baby, etc. to reach a mass audience and we have been burning our own demo CDs to pass out to booking agents and venues, so we have that process down pretty good now. As soon as we get our originals recorded, we'll sell those at gigs. As far as merchandise, that is in the plans are well.

Will we get rich? Probably not, but at least we'll make some money doing all this ourselves and keeping control over our material and our own destiny. We don't need this money to eat or live on, so that's in our favor.
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Old 02-17-2010, 01:28 AM
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Default Re: CD Sales

Quote:
Originally Posted by rogue_drummer View Post
I really don't see the point in record labels anymore. My band presses our own cds for a less than a dollar a piece and sell them for $10. We still sell plenty of cds and sell about 3 times as many digital downloads. CD baby keeps $4 per cd we sell through itunes. Shirts cost us between 3-5$ a shirt and we sell those for $10 too, there is plenty of profit to be made, and it's really not something you need a record label to do for you.



whoa!!! Where are you getting your shirts man??? I need to know I'm paying a lot more than that!
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Old 02-17-2010, 03:52 AM
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Default Re: CD Sales

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Originally Posted by mcbike View Post
I really don't see the point in record labels anymore. My band presses our own cds for a less than a dollar a piece and sell them for $10. We still sell plenty of cds and sell about 3 times as many digital downloads. CD baby keeps $4 per cd we sell through itunes. Shirts cost us between 3-5$ a shirt and we sell those for $10 too, there is plenty of profit to be made, and it's really not something you need a record label to do for you.

DO IT YOURSELF
Largly true. Which is why so many major artists are getting away from traditional labels.
I've done my own band via CD baby, and yeah, it's nice.

But for the upstart bands, labels still offer something DIY have problems with:
Clout and promotion.

It's easier to impress booking agents, venues, DJ's and such if you have a label behind you.

And getting air time on radio, and promotion in major magazines, etc, is difficult without the power of a record label.

Which is why I think record labels will never fully die out.
Perhaps sometime in the future though, labels will be more of a promotional coop than what we've thought of them in the past. (?)
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Old 02-17-2010, 08:56 AM
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Default Re: CD Sales

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whoa!!! Where are you getting your shirts man??? I need to know I'm paying a lot more than that!
G & E Impressions Inc
6400 Westpark Drive, Houston, TX 77057-7275
(713) 789-3955‎

They don't have a website, and pretty much work locally, but there should be similar places pretty much everywhere in the u.s.

You shouldn't pay more than that for a shirt unless your doing full color.

I've worked with these guys before also
http://www.iheartuproductions.com/
They have great prices 4 color screens colored shirts for $5 white t's for $4.
No screen or set up fee's. They are more used to shipping too.

These guys are just local people that I work with and I'm sure if you call around you can find somebody in your town that can give you a similar price.
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Old 02-18-2010, 12:36 AM
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Default Re: CD Sales

Ha! when we "signed" to an "indie" label we paid for the recording ourselves, they pressed the cds and that was that. We've never seen any money from them for cd sales other than the ones we sell ourselves at shows and the shirts we print ourselves.

The highlight was seeing it in the racks in HMV, the lowlight was that that copy stayed in those racks so long I almost bought it myself and I'm guessing they [the label] have a bigger coffee table made from unsold shrink wrapped cd's than we have so I'm not complaining. lol
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Old 02-18-2010, 06:49 AM
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Default Re: CD Sales

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Originally Posted by rogue_drummer View Post
Rogue are they saying they don't make money from CD sales because they don't sell enough CD's or are they saying they don't make a large enough percentage of the CD sales.? That's two different issues and has to do with how the contracts are signed.

I'm not sure, the article didn't get that specific but I would imagine in Rush's case it would be not making a large enough percentage of the CD sales, but Rush?!? That is a good question GRUNTERSDAD. It seems like there is something else working here that wasn't mentioned in the article. I can't imagine that as long as Rush has been around and as many of their records, CDs, and the like are on the market and sold, and as much clout as they have, it's hard to imagine they couldn't get a better contract and negotiate better terms. I don't know, I'm probably missing something here.... .
Rush was signed in the 1970's, when record royalty payments were still low. They were stuck in the same contract until the late 80's when they left Polygram for Atlantic.

Keep in mind, their first three albums bombed sales wise, and the band didn't make a profit until their 4th album. Rush didn't break through and become mega starts until their 8th studio album (Moving Pictures). So from the record company perspective, when the band became mega starts, from the business perspective, that was finally pay back for all the years the label supported the band with poor to mediocre sales. So Polydor had little incentive to renegotiate.

When Rush did negotiate a new deal with Atlantic, they could only negotiate based on future sales, not re-negotiate past sales. And once on a new label, the new label doesn't get the benefit of back catalog sales, so clout becomes relative.

For the most part, Rush is a legend based on their combined sales over time. While every Rush album has gone gold or platinum, most of their back catalog has only done well based on new fans in the 80's and 90's then going backwards and buying their past albums. Even their best selling album, Moving Pictures, didn't go 4 times platinum until 1995 http://riaa.com/goldandplatinumdata....SEARCH_RESULTS, 14 years after it was released.

Rush are legends in USA and Canada, as well as England and a few spots in Europe. But outside of those core areas, they're not like a band like Iron Maiden who are popular all over the world more than they are in the USA.

While Rush have sold some 35-40 millions albums, that's small compared to the Eagles, Aerosmith, Fleetwood Mac, an others who have 60 to 100 millions albums to their credit.

But mostly, as you'll read in those books I mentioned, the major record labels are owned by mega corporations for whom selling records is only one small part of their core business. Altantic is part of the Warner Brother's family of record labels, who are in turn owned by Time-Warner, who are more concerned about their cable TV, movie and such business that generate far more revenue than any one band.

Part of where Rush kind of got screwed was they moved to Atlantic in the late 80's. Then in the 1990's, Atlantic and their parent company Warner Brother records when through numerous changes and mergers, and all all of the executives who were music people were fired and replaced with executives who were more about shareholder profit than band development.

I had a buddy who's band got signed to a big money deal with Warner Brothers, and when the label head firing's came, the band found themselves without an AR person, or anyone at the label who cared about them. Despite the investment of the recording costs of the album and two videos, the new label management dropped the band without a thought.

So, per Wikipedia, Rush has sold 25 million albums in the USA, and roughly 40 million internationally over the course of their career.

Per the info from the book I quoted, they got probably less than 10% royalty on their 1st deal, and well over 10% on their 2nd deal, averaging roughly 10% for their career.

So if they sold 40 million copies, and an average of $10 (far less in the 70's, more now, but we'll keep the math simple), that's $400,000,000 gross. At 10% royalty rate, that's $40,000,000. Minus producer costs of 3%, and managers and lawyers taking another 25% of the bands profits. Leaving the band band with $28,000,000

Also deducted are recording costs, video costs, promotions, ads, discounts for breakage, etc. What this is, I don't know. So I'll ignore it for now, but keep in mind that's significant.

So the bands $28,000,000 sounds nice, but divided that over the course from the 1st album to their latest album, (1973 to 2008) of 35 years, and now we're talking the band has made an average of $822,857.14 per year.

Divide that by three members (never mind John Rusty was on the 1st album) and Rush is now averaging $274,285.71 per man, per year BEFORE significant expenses BEFORE taxes.

For music legends with 40 million records sold, their average take home pay just from album sales isn't all that significant. Better than what most of us make at our day jobs, but nothing compared to the $400,000,000 in gross album sales.

Which is why they tour, sell t-shits, posters, music books, videos, and what ever else.

I think I read Neil Peart was quoted as saying future recordings may not even be on a formal album. And it's easy to see why.

If they could DYI themselves on CD Baby, they'd make a ton more money.
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Old 02-18-2010, 06:25 PM
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Default Re: CD Sales

Wow! That is a great history lesson on one of the bands I grew up with and love. And good business advice, DrumEatDrum. Thanks a ton for that insight!!!
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Old 02-22-2010, 08:08 AM
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Default Re: CD Sales

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Originally Posted by rogue_drummer View Post
Wow! That is a great history lesson on one of the bands I grew up with and love. And good business advice, DrumEatDrum. Thanks a ton for that insight!!!
A bit of an update from the man himself:

http://www.neilpeart.net/news/november_09.html

Quote:
Of course, these are parlous times in the music business, so our time-honored pattern of touring, recording, and touring is no longer the obvious way to do things. The music world—or at least the business of it—is very different now, even since 2006, when we began work on Snakes and Arrows. The importance of “the album” is not what it was, and there is currently a reversion to a musical climate rather like the 1950s, when only “the song” matters. Radio, downloads, and “shuffle” settings are inimical to collected works. Because of that reality, record company advances that used to pay for album projects are a thing of the past, so if that was what we wanted to do, we’d be on our own.
Wow. Just wow. So much for clout, Rush can't even get a record advance anymore.
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Old 02-22-2010, 10:47 PM
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Default Re: CD Sales

On a slight side note, CDs are the worst recording media I have experienced in my lifetime (which began with 45s and 33 1/3 LPs). One scratch and the whole CD becomes worthless. If those producers never could make a decent profit with CDs, it just goes to show how dismal the whole industry is right now.
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Old 02-22-2010, 11:22 PM
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Default Re: CD Sales

I can agree on scratches on CDs. Man, I've blown some fine CDs just leaving them in my car laying around. There was nothing like the feeling of bringing home a new 33 1/3 LP of your favorite band and putting it on the turntable and shutting out the world.
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Old 02-22-2010, 11:41 PM
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. There was nothing like the feeling of bringing home a new 33 1/3 LP of your favorite band and putting it on the turntable and shutting out the world.
Yeah, with a pair of these on:

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Old 02-22-2010, 11:48 PM
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Default Re: CD Sales

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Ha! when we "signed" to an "indie" label we paid for the recording ourselves, they pressed the cds and that was that. We've never seen any money from them for cd sales other than the ones we sell ourselves at shows and the shirts we print ourselves.

The highlight was seeing it in the racks in HMV, the lowlight was that that copy stayed in those racks so long I almost bought it myself and I'm guessing they [the label] have a bigger coffee table made from unsold shrink wrapped cd's than we have so I'm not complaining. lol
Wow, I could have written the exact same post with the exception of we convinced the label they should give us the leftover cd's, which I have lugged around with me for the past 10 years. Don't get me wrong, they are being put to practical use - they are holding up other boxes of cd's that were never sold.
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