The big money question!

[Mahoora]

Hey all. after the discussion which is going on the torrent downloading topic ( http://www.blind-guardian.com/forum/vie ... 23&t=36868 ) an ancient question came back to me that've been bothering me for a long time: where does the money comes form in the music buisness? or let it be the Metal/rock music industry.

I think this question has two sides, first the writing/recording side: when a band is at the studio composing or writing an album, who pays for the studio time,producer,technicians? is it the record company or the band themselves? besides does the label pays the band members a salary during that time? (because during that time, and especially for a band like BG who takes a looooot of time to write and record it's gonna be difficult for the bards not to have an income during years right?). Eventually when the album is finished and released, does the band takes any profit percentage of the sales? or does that all go to the record company? I know for sure that the label has some serious album promoting business to do but what are the other relations between a band and a label? does they send a delegate or something into the studio to oversee the production and give an opinion maybe on the market conditions? or the band just surprises the company with its material?

The second side is of course the touring side: when it comes to touring, does the label takes a share of gigs profits? or all of it goes to the band and the local promoter? also does the record company has a part in promoting tours? I mean does the label representatives in different countries try to make an impact on local promoters (by promoting the album maybe) in order to get them into that country (especially new unvisited countries by the band)
And finally what about merchandise? what goes where? etc

sorry if that was a little bit long but I really want to find the answer for this one and i think it's gonna be good for a lot of ppl to find out about this side of music industry as well (the dark side ). Wouldn't it be great if Marcus for example answered this one by him self! but I'm going to have high hopes (he's turning holograming these days ) so please anyone who has a bit of information you're welcomed to post your knowledge

[End Of An Era]

i can understand that major labels have a kind of clause in their contracts which prohibits signed artists and bands to talk about such matters, so i don't think Marcus will come on in and answer your question!

It is nevertheless a very interesting question, i am wondering myself too actually... I think it's a making money with money deal though...

[The Rider Of Rohan]

Hey all. after the discussion which is going on the torrent downloading topic ( http://www.blind-guardian.com/forum/vie ... 23&t=36868 ) an ancient question came back to me that've been bothering me for a long time: where does the money comes form in the music buisness? or let it be the Metal/rock music industry.

Ill true to answer your questions as clear as possible. I point out in advance that I'm going to generalise for the sake of painting you a good picture. There will of course be examples of cases that contradict these answers - I just omit them because I see them as the exceptions rather than the rule.

I think this question has two sides, first the writing/recording side: when a band is at the studio composing or writing an album, who pays for the studio time,producer,technicians? is it the record company or the band themselves?

A bit of both, actually. Not counting the last decade, it has been custom for recordcompanies to advance the money for the recordings. The label sends the band off to a studio and pays for the costs of the recording, as well as the costs for the video and the advertising. This money is considered as an advance of the royalties. While this sound good on paper, it basically amounts to bands being in a huge debt with their recordcompany by the time their album hits the street; debt which is repaid through the royalties.

For example: imagine an album costs 50.000 euro's to make (which is not that much), a video costs 10.000 and the advertisement costst 15.000. This means that the band is in debt for 75.000. The band makes about 80 eurocents per album, so the band has to sell 100.000 albums before they get to see any money from the royalties.

When I say debt, I have to say that it is not a redeemable debt (like an unpayd phonebill, for example). The band usually signs for an x-amount of albums, and when the deal ends, the debt is written off. If is slighly different when the band wants an early release from their contract to switch to a new label. In such a case the band or their new label is 'kindly' asked to repay the investment. This is where a lot of lawsuits between bands and their former labels come from.

So technically its the recordcompany that pays for the studio, but in the end it comes out of the artist his wallet.

The above has changed in the last decade, away from the favor of the bands. Nowadays it is more and more common for recordlabels to only distribute the finished album, with lower royalties. Bands are expected to finance albumrecordings, videos and advertisement themselves - in other words, to present the recordlabel a finished product.

besides does the label pays the band members a salary during that time? (because during that time, and especially for a band like BG who takes a looooot of time to write and record it's gonna be difficult for the bards not to have an income during years right?).

They dont. A recordcompany doesnt employ its muscisians, so they should have a separate source of income when they are working in the studio.

Eventually when the album is finished and released, does the band takes any profit percentage of the sales? or does that all go to the record company?

Bands receive a royalty based on the price of a cd sold through the wholesale channels. This used to be around 80 eurocents, but it is significantly lower.

The artists always retains its copyright, so theres always a source of income gerated from reproduction of the music. Reproduction is not meant in the mechanical term, but relates to the times the music is heard by a person. This concurs when the radio plays your song, when it is played in a bar or when another band covers your song on stage.

I know for sure that the label has some serious album promoting business to do but what are the other relations between a band and a label? does they send a delegate or something into the studio to oversee the production and give an opinion maybe on the market conditions? or the band just surprises the company with its material?

Interesting question. It depends on the contract the band signed. Obviously a recordlabel signs a band to make a profit, and not for the love of the music. There have been numerous cases of recordlabels having full control of the artwork, the sound, the packaging and the choice of songs. Basically it depends on the policy of the label (some give unlimited creative freedom) and the quality of the bands lawyer who reads the fine prints before the bind signs on.

The second side is of course the touring side: when it comes to touring, does the label takes a share of gigs profits? or all of it goes to the band and the local promoter?

Three options.

a) The headliner chooses a door-deal, where they get a fixed percentage of the tickets sold. This means thyey'll make a good amount of money when the venue sells out, but also means that theyll have no money to eat on a bad night. This doesn''t happen a lot in metal, btw.

b) The band is booked by a touring-agency, who in turn is in touch with the local promotors. The local promotors pay the touring-agency, who deduces their profits and expenses and pays the band an amount of money agreed beforehand. Bands are either part or an exclusive deal or are part of a packagedeal with for example 3 other bands. This is quite common in the metalscene.

c) The band is part of a package mentioned above, only the band is expected to pay for the expenses of the tour (for example the tourbus). The rate is generally 10 to 15.000 euros for 2 weeks touring Europe. In return to funding these costs the band gets a spot as the opener of the evening. This is quite common and happens to all these debuting bands that youll see opening for your fave headliners.

In general, recordlabels have little to do with touring, although they do have an interest in pushing their bands through the throats of touring agencies as much as possible.

also does the record company has a part in promoting tours? I mean does the label representatives in different countries try to make an impact on local promoters (by promoting the album maybe) in order to get them into that country (especially new unvisited countries by the band)

Not on the local promotors, but certainly on the touring agencies. Convince an agency to hook up with your signed band, and you have free advertising for the cd.

And finally what about merchandise? what goes where? etc

It goes straight in the pockets of the band. A t-shirts costs about 5 euros to make and sells for 25 (when a band is part of a packagedeal it is custom for the contract with the touringagency to dictate the price of the merch - where the price of the shirts of the openingband have to be sold at the same price as those of the headlined). The remaining 20 euros is for the band. The person selling the t-shirt is usually the tourmanager or a girlfriend of a bandmember.

It is slightly different when you are playing a big hall, where you are legally forbidden to set up your merchandise stand - unless of course your bands lawyer negotiated something different in your contract. In those cases you just hand over your shirts to the venue, they sell them for 25, and you get about 22,50 euros in return (which is still a good deal is you sell 500 shirts on an evening).

sorry if that was a little bit long but I really want to find the answer for this one and i think it's gonna be good for a lot of ppl to find out about this side of music industry as well (the dark side ). Wouldn't it be great if Marcus for example answered this one by him self! but I'm going to have high hopes (he's turning holograming these days ) so please anyone who has a bit of information you're welcomed to post your knowledge

Well, I hope this helps. I worked in the musicndustry for years (as a journalist, organiser and roady) and its a dirty busines. If you think it all happens because of love for the music, you are painfully wrong: its about the money and the money only.

In conclusion I say: download whatever the fuck you can, then go and see your heroes on tour and buy as much of their shirts as you can possibly wear.

[Mahoora]

Cool, that was really interesting to read, thanks a lot

[Lilyael]

It certainly was. *sigh* Everything is about money, at one point or another. And I hate middlemen. I buy an album and most of my money goes to some suit I've never heard of ? Pah.

[End Of An Era]

It certainly was. *sigh* Everything is about money, at one point or another. And I hate middlemen. I buy an album and most of my money goes to some suit I've never heard of ? Pah.

yup. it's better suport to buy loads of shirts and merchandise instead of the music you love to hear so much. What a paradox!

@Rider: thanks for the story

[The Rider Of Rohan]

Yeah, its a strange paradox. I bought at least 10 BG cds in the stores and at least 10 of their shirts at their concerts. The band made a lot more money from me through the shirts, even though the albums were what prompted me to buy those shirts in the first place.

Oh well. As long as it helps the bandmembers to pay their bills, feed their families and spent 37 months a year in the studio, I consider it mjoney well spent.

[Lilyael]

indeed. But of course if they sell enough records then they do make money. Downloading's fine as long as you're paying for it.
It's like anything though. To have a product to sell you have to create the product and the money for that always comes out of your own pocket. In my case there is no middleman so I keep what I earn when I sell stuff. I don't have to pay anyone putting my stuff together for me as well as the materials, which of course a band has to do. But then I have the hard work of doing my own promotion which, with no money to spend on advertising, is a time-consuming job, and then leaves me little time to actually produce my stuff ! Catch 22 or what

[End Of An Era]

indeed. But of course if they sell enough records then they do make money. Downloading's fine as long as you're paying for it.

.....well... Take this example: i download legally or buy the CD in a record shop for € 20.- Of this amount about € 0.80 goes to the band, the rest to all the middlemen like record companies, the record store/iTunes and stuff like that.
Now, i download illegally and visit a concert, admission € 10.- and i buy some merchandise, also € 10.- Same money spend, but in the latter the band will receive more of my money. I'd rather do that then!!

[Gandalf de Grijze]

the only downside is that the higher the sales the higher the interest from a local promoter in an artist.
At least, if I want to make money off organising a concert, I'd be more interested in a band that has shown their popularity through good sales. The bigger the sales, the bigger the band, the bigger the venue needed, the bigger the profit (for both band and me)

[The Rider Of Rohan]

Downloading is perectly legal, End.

the only downside is that the higher the sales the higher the interest from a local promoter in an artist.
At least, if I want to make money off organising a concert, I'd be more interested in a band that has shown their popularity through good sales. The bigger the sales, the bigger the band, the bigger the venue needed, the bigger the profit (for both band and me)

True, but arent there other ways to measure a bands popularity? For example the coverage in the media? Even the amount of seeders on Piratebay?

It seems to me that a good promotor has a pretty good idea of what is hot at the moment and has an estimate of how big a crowd a band attracted on last years tour.

[Gandalf de Grijze]

guess so..

hell, nowadays i only buy cd's that are on discount sales...
but i do get the feeling from time to time that there are much more "secret" fans than seems to be estimated.
I get the feeling some bands can do one or two shows more than just the one exclusive one.
guess it might just be me.

[Joost]

True, but arent there other ways to measure a bands popularity? For example the coverage in the media? Even the amount of seeders on Piratebay?

Or perhaps amount of listeners on last.fm? Funny thing though, almost all of the top artists on last.fm are rock (in the widest meaning of the word – ranging from mainstream pop/rock to alternative rock to hard rock/metal). A genre like hiphop is vastly popular but there are hardly any hiphop artists among the top artists on last.fm.

(Top artists on last.fm: http://www.last.fm/charts/artist )

[Sentinel]

Nice and interesting story, Ferdi. Thanks!

I still got one question: What about the shirts that sell via a mailorder, such as EMP? Does the band still get the same amount of money or do they have to pay middlemen for distributing the stuff? Or does the mailorder buy the stuff directly from the band/label?

.....well... Take this example: i download legally or buy the CD in a record shop for € 20.- Of this amount about € 0.80 goes to the band, the rest to all the middlemen like record companies, the record store/iTunes and stuff like that.
Now, i download illegally and visit a concert, admission € 10.- and i buy some merchandise, also € 10.- Same money spend, but in the latter the band will receive more of my money. I'd rather do that then!!

I concur, but you may take into consideration that every CD you don´t buy, is one copy less the band needs to pay the label back and thus make an earlier profit for themselves. I think it´s still best to do the whole package: Buy the CD, go to the concerts and buy some merch.

[End Of An Era]

if i only have € 20.- to spend i'd leave the CD

But if i do have the money, i buy at the same merch stand at a concert

[Lilyael]

what's the initial print run ( or whatever you call it ) of an album ?

[The Rider Of Rohan]

Nice and interesting story, Ferdi. Thanks!

I still got one question: What about the shirts that sell via a mailorder, such as EMP? Does the band still get the same amount of money or do they have to pay middlemen for distributing the stuff? Or does the mailorder buy the stuff directly from the band/label?

It depends on the situation, which is all about geography and economy. When you re a German band and you want to sell through EMP (which is a German company, for those who dont know) it possible to deal with EMP directly. You can contact them, negotiate an agreement, deliver them your merch and receive a hefty sum of money based on the agreed price per t-shirt on your bankaccount. In the specific case of EMP this is a good deal, because their size enables transactions of large quantities of items.

Its slightly different when you want to make your shirts available to a worldwide audience (thus increasing your potential market). This causes significant problems with storage and the availability of stock. Therefore a lot of bands opt for zone-distributing, where merch is sold through regional wholesalers who in turn sell the merch to the mailorders. The advantage is that, if Merchandiser A runs out of stock before Merchandiser B, they can quickly resupply through the wholesalechannel.

This second option might sound like a bad case because there obviously is a middleman involved who takes his share of the profits while the askingprice of the t-shirt is the same, but it is not a bad deal at all. The band sells a higher amount of items for a lower price and basic economics dictate that these two even eachother out. After all: you get a big pile of money on the short term, which is always better than a large sum of money in the long term.

Plus, when youre dealing with mailorders outside the country with the biggest market - Germany - youll find that mailorders will order small amounts of items; for example 25 or 50 shirts per order; the reason obviously being the mailorders fear of overstocking and ending up with unsold shirts. This would mean that either the band has to anticipate and overstock themselves - running all of the financial risks of unsold merch themselves, or the band would have to order small print runs; thus increasing the price per item.

Some overstocked shirts can obviously be sold during the next tour (I for example bought my NIME-shirt on the ANATO-tour) but you dont want to exaggerate it. It takes an investment (either through your own funds or a loan) to make a huge amount of shirts, and the sooner you return your investment the sooner you start putting food on the table for your children.

what's the initial print run ( or whatever you call it ) of an album ?

Thats impossible to say. A debuting blackmetalband might enjoy a printrun of 250 copies per run, whilst the new Metallica could be anythung up to 500.000 per print run (Im totally guessing numbers right now).

[No‘am]

Aren't there cases where record companies hold rights on the actual songs of the albums, so they are the ones to get royalties from it, like Airplay, or shirts with the cover artwork?

[The Rider Of Rohan]

Those cases excist. It is possible for an artist to licence the songs to a recordlabel. The auther still retains his copyright, though.

[No‘am]

I thought that those are the majority of the cases, at least for the bigger artists/labels.

[The Rider Of Rohan]

True. A common misconception is for people to think the recordcompany owns the copyrights too. That's not true. The copyrights are always owned by the band, which means that they are elligeble to money made from bands covering their songs and airtime on the radio. The recordcompany gets a license to publish the songs. Based on the contract this license can be exclusive, or limited to a geographical area or a period in time.

Of course there are exceptions to this rule as well. There have been cases of young bands negotiating a recorddeal without the aid of a lawyer and consequently signing away their copyrights and merchandisingrights too.

A new exception is the all-in business-model some labels have tried out, where the band signs away the rights to everything and gets a huge sum of money in return. This business-model almost seems like a regular employment. Korn is the biggest example I can think off who tried this. They received close to 25 million for a deal with Virgin/Emi spanning two albums and the subsequent touring/merchandising, where the recordlabel would strike up the proceeding of merch, touring and albumsales.

[SozosMichael]

I am currently working with a record label in Cyprus. The whole recording thing is free of charge for me and when we finish producing songs (80-100 of them) we are sending them to a label in the U.S.A. (I believe it's Columbia Music but I'm not sure yet) which will choose 10-11 of them to make an album. The guys from the recording studio just offered me their time and equipment, along with some pre-written music and assigned the vocal lines and the lyrics to me. It's a lot of work, but it surely is promising, and the studio guys believe in me. The money will come after the record label in the U.S.A. recieves the songs.

BTW, money from shows and merchandise goes to the artist and the author of the songs, not the record label.

[The Rider Of Rohan]

No offence, but that seems like the strangest deal ever. First of all because you're getting free studio-time, second because you are throwing away 90 percent of the recorded material, third because it involves Sony Music, and last because you expect to receive money from it.

I don't mean to sound like a cynical old git, but where's the catch?

[John T. Berzanske IV]

That sounds like a marketing scheme where the label has all of the creative control. Are you under contract? If you are, double check that the lable can't just reject everything and grind you until you produce what they want or they kick you to the curb. Is this your personal band? Or more of a session thing?

[spamel]

Why does the last song on Pearl Jams' Ten album not list the lyrics due to contractual reasons? I have the tab book for Ten and it is the same in there, although the tabs are there the lyrics are not!

[SozosMichael]

No offence, but that seems like the strangest deal ever. First of all because you're getting free studio-time, second because you are throwing away 90 percent of the recorded material, third because it involves Sony Music, and last because you expect to receive money from it.

I don't mean to sound like a cynical old git, but where's the catch?

Let me tell you the whole story...
1.I was one of the participants in a competition this record label organised, and the prize was a contract with the company. The competition got postponed but the guys called me and told me I was just what they've been looking for. I got to the studio, talked to them and made a deal: They'll be sending me material and I'll be writing the lyrics and vocal lines, and send them back to them. Once we do that with plenty of songs, I'll just go to their studio and record the vocals professionally. They said nothing about money so far, but since I'm only recording vocals for music they've written, I think I won't have to pay a lot, if i do.
2. The excess material will be kept for the 2nd, 3rd etc album. That's how it's done. We are not throwing it away Where do you think the 100-so songs of Michael Jackson that were released after his death came from?
3. One of the 2 guys that run the company in Cyprus is one of the 6 guys that run the american record label (whatever is its name) in the east coast of U.S.A. (he is just a music producer, not the owner). He settled here because of his kids that now go to primary school or something, but still sends music constantly and in great numbers to the record label in america. It's pop and R'n'B stuff, but hey, it pays.
4. I don't expect to be paid yet, since the guys from america must approve me first (we'll be sending them samples) and give the green light to the guys over here to produce the songs, but once this is done, I'm having a contract with whoever I'll be working for.

[The Rider Of Rohan]

Well, it seems rather vague, but if you're happy with it, so am I. What exactly did your lawyer say when he read the contract?

[SozosMichael]

We don't have a contract yet, I don't even have a lawyer . Once I ve been offered one I'll let you know. It shouldnt take long now.

[John T. Berzanske IV]

2. The excess material will be kept for the 2nd, 3rd etc album. That's how it's done. We are not throwing it away Where do you think the 100-so songs of Michael Jackson that were released after his death came from?

Yes, but there's a difference between saving songs for the next album or B-sides and a record company running a DP camp for musicians leaving songs for them to expoit after the arist has moved on or up. I've worked with some labels and they can be real tricksters if you're not careful. Regardless though, if you're happy with the situation, that's all that matters.

Just making sure you're not getting used.

[SozosMichael]

Awwww, thank you for your interest:D I'll let you know how it is going the next days