Music Business Manifesto
From Our 2001 White Papers
The basic business model for the American
Music Industry works something like this:
The creative artist, through a great
deal of sweat equity and a modest financial investment, builds
a marketable product.
An executive or A&R person from
a major record label discovers the product, and decides it's
The label advances the artist money
to spend recording an initial release, using the label's production
talent, studios, pressing facilities, art department, and
If the label promotes the resulting
product effectively, enough units are sold to recoup the production
and marketing costs (which usually were income for the label
in the first place), at which point the artist receives a
percentage of the revenues. Usually a paltry 3%-5%.
More often, the product is poorly
produced or promoted, and fails to sell enough units to recoup
the initial costs. This means the artist sees no income, and
likely owes the label for the advances to create the initial
A standard recording contract is usually
for a combination of a defined number of releases or a specific
period of time. Typically something like 4-5 recordings and/or
If the initial product fails to move,
the label is very unlikely to invest in a second release.
This means the artist is bound by a contract with a company
that won't let them release any material, and worse, won't
allow them to sign with another label to generate income.
This is presumably because the original label can utilize
the failed artist as a tax loss by keeping them on their roster,
and not making any money on them. Fun!
A ridiculously small number of signed
artists get enough attention from the label to benefit from
the relationship, and even when they do move units, the distribution
of the income generated and the resulting pricing structure
is ludicrous, by any sane standards.
The cost of the physical media (the
CD) is usually well under a dollar per unit; much of the promotion
is paid for through touring and third-party promotional relationships
with producers of youth-targeted products like beverages and
jeans; and in spite of this, the end-user ends up paying nearly
twenty dollars retail for the resulting product.
Let's recap this:
The artist creates a marketable product
through sweat equity and personal investment.
The label charges the artist to repackage
and distribute the product, making money at each step.
The artist makes money if they're
fortunate enough to be a statistical anomaly.
The consumer pays easily twice what
they need to for for 30 minutes of music on media that holds
This doesn't make a lot of sense to us.
We see a lot of possibilities for:
Trimming the fat otherwise referred
to as a record industry executive.
Putting a broader variety of music
in the consumer's hands at a lower price.
Putting more money in the artists'
pockets for their investment of time and money.
If as an artist, manager, distributor, or
investor you'd agree, please contact
us about the business model we're developing. We'd be
very interested in learning what you think, and perhaps building
a working relationship with you.
Last Updated: April 2005