What can an artist actually earn from record sales? Lets take a couple of different examples:
Example A – Debut album of a new act, signed to a major label.
A major label will probably spend around £250,000 in advances, recording and marketing costs.
For every CD sold at £15, 17.5% will be taken in VAT leaving £12.37.
The retailer takes 30% of this price for their share, leaving £8.66.
The distributor takes around 30% of this price for their share, leaving £6.06.
If the band receives a royalty of 15% of PPD (published dealer price) this would leave them with 91pence for every CD sold.
The artist would have to sell around 275,000 CDs before the original £250000 is recouped.
Royalties are usually paid from the record company twice a year. The artist will receive a statement of accounts for that period.
You should have a clause in the agreement that allows you to inspect the company accounts relating to your affairs.
Example B – 2nd album of an established act, signed to an independent label.
In this type of deal, the artist would share the profits with the label after all costs have been deducted.
As an example, recording costs may be £25000, manufacturing costs around 60p per CD, distribution, VAT and retail costs around £9 per CD. Marketing and promotional costs could be £50000.
If the album sells 100000 copies, the net profit, after all costs have been deducted, could be around £450000. Label and artist would then share in this profit, around £225,000 each.
As you can see, there are vast differences in what an artist can earn, depending on the type of deal they do. No two cases are the same, and you need to carefully weigh up the pros and cons of each situation before making a decision.
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