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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 worth promoting.

•The label advances the artist money to spend recording an initial release, using the label's production talent, studios, pressing facilities, art department, and distribution channels.

•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 product.

•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 4-5 years.

•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 74 minutes.

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

All Articles In This Section:

Avoiding the Pitfalls of Mp3.com: A New Model For Music Distribution

Participate in our 2005 Artist Survey
Take a look at our Manifesto from 2001
A brief statement about a new model for music distribution, from our 2003 white paper
The Ann Arbor Band Listings Are Back
Landing Page Interfluence Landing Page