|Most people work hard at their music, their playing,
songwriting, performing and recording. In their mind, the plan is to develop their
talent and their music will be magically "discovered" by some national record
company. In their mind this company will give them mega-bucks and take care of any
other action needed to make them a star. The chances of this happening, are so small
that you need a microscope to see them.
|But let's say you are one of the unlucky handful that did
have this happen to. What would be next? Well the record company would spend
somewhere near $100,000 to get your release ready and then put it out. You would be
signing a "standard" new-artist contract. Under this contract, you
would be paying for all of the production expenses out of royalties earned from record
sales. You would get a new artist royalty rate, maybe half or two-thirds what
an established artist would receive. In other words you would receive no royalty
payments until the production costs were paid for and you would be paying them out of a
reduced rate. Even more madding would be the fact that you would have little or no
say about how the production budget was spent.
|Lets say that you get a rate of 10% of sales. Doesn't
sound too bad, does it? A CD sells for $15 so you get $1.50 for each one sold,
right? Wrong. First of all, you're being paid off wholesale,
which brings the figure down to $0.75. But then the company deducts a
"packaging charge" bringing the amount per record sold down to 57 cents.
But the record company sells on consignment and those "sold" records can come
back. To protect itself from "returns" the company will withhold another
25% to cover these costs - bringing your net down to 42 cents per copy sold. This
means you have to sell about 235,000 copies to break even. But Record Companies sell
lots of records - even off the flops - right? Wrong -read on.
|Record Companies have two stacks of releases. The first
stack (we'll call it stack A) are the top 8% of their releases. These releases are
hugely "successful." The second stack (we'll call it stack B) are
the rest of their releases (92%). These releases are not successful.
According to a recent article in EQ Magazine, major companies average about 750 unit sales
per release for this B stack.
So how does one get a hit record with all of
these odds stacked against you?
|The answer is to test market. A
successful test marketing in a local region can result in the record company being
convinced that your release belongs in the "A" stack. So you put out the record
yourself and attempt to sell 5000 to 10,000 units yourself, keeping records of the sales.
If you achieve this level, you have "proven" to a record company that you
deserve the "established artist" royalties and contract terms. You should
at this point be able to show them that you can direct the expenditures in production, and
you should get the production budget to spend on the next release.
|Additional Data For Y2K Issue
|You may ask why a record company would spend over $100,000 on a "B
Stack" record when it's only going to sell 750 copies. The reason is that every
once in a while one of those records starts selling and moves up to the "A
Stack." It happens often enough to make the activity "worth it."
After all, the royalties they have to pay on this kind of a deal are little,
little, little compared to what they have to pay for "established" recording
artists. This activity in the industry is called "throwing it [the release]
against the wall to see if it sticks."
|A reading of Billboard charts in the middle of the 1999 year-end
"hot" selling period shows that the "A Stack" record sales are way
down - about 40% of what they were 5 years ago. Many companies are blaming
this situation on the web and the MP3 format. In reality, it is probably caused more
by changing consumer tastes than by anything else. John Q Public isn't accepting
what the companies are trying to cram down his throat and is demanding to listen to the
music he likes.
|Record companies are reacting in a way that hurts the new artist trying
to get a deal but helps the new artist that successfully test markets. Record
companies are writing less new-artist deals and when they do sign a new artist they are
trying to limit the production budget to $40,000 - $50,000. Companies just don't
have the same kind of money to "experiment." On the other hand companies
are making deals quicker and for more money when the record has "proved" itself
with test marketing.
|So as Y2K rolls in, the necessity of test marketing your release is even