Tuesday, December 01, 2009

record labels and the "real" music biz...

This is a very good article that describes the some of the mechanics that are involved in a record contract.

The interesting thing about this article, which I came across from a mention here, is that it made it easy to see what a record label does and how a label can actually make money if it is successful.

There are thousands of CDs in a mainstream-type music store from hundreds of artists that you will never buy. If you take a moment to consider it from the store's point of view, it is often the case that the slots on the shelf contain product that does not move. But it gets rotated out to somewhere and it is not like it physically spoils, so as long as enough of it sells it's ok.

From the record label's point of view, there are two kinds of musical artists: those that are 'recouped', and those that are not. That is, those whose output has more than paid for the cost of the promoting and publishing work that the label does, and those whose output has not.

There are two kinds of problems for the record label: 1) the kinds of problems when they don't have enough recouped output, and 2) when they have too much.

The first problem is the one we think that most labels currently have: too much cost and not enough hits. Solution, concentrate on established acts.

The second problem doesn't seem like a problem, all the artists are recouped by big hits. But it can be a problem because when your investment is small but your return is huge, you end up owing a lot of taxes. So you introduce some additional overhead into the mix, and you pay less taxes.

So, from the label perspective, the artists like the one who posted this article are really just "ballast". That they get upset when they get cut loose is irritating to the label.


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