ABCs of the Music Industry

Music is an art, but when it comes to the music industry, music is about money!

If someone or any company feels that your music will not make money, there will be absolutely no interest in your music. It’s in the nutshell. Remember to remember it always. The music industry is about money!

There are some sources of money to be made in the music industry. They include but are not limited to:

Record sales

Songs played on the radio

In movies and TV







If you are an artist and want to enter the music business, you need 3 many important good people in your corner bat for you on a daily basis. They include:

Personal Manager The most important of the three. They need to have contacts in the music industry, keep an eye on all your business, advise on things to do, help promote your music, rent growers, who to draw when to go tour, etc. The personal manager will receive 15% and 20% of an artist’s gross earnings and have good contacts with the A & R, Marketing / Sales and Promotion departments.

Music Attorney A good attorney who specializes in music will know how to properly negotiate and structure what an artist will do. They must have good contacts and be reliable. Expect to pay between 100 and 200 per hour for a good music attorney. If an attorney thinks you will be signed, they leave a fixed amount and pay a percentage of artists’ earnings. In larger cities you pay more than in smaller cities.

Music agent Book concerts and special appearances. A Personal Manager will help the artist to choose a good agent.

If you start generating inflation and the big money, a good manager / accountant will be required to handle your tax situation, royalties, finance tours, investment advice and how to manage your money.

To give recognition by sending your demo to record labels is impossible, but 99.9% of the time your material is not listened. Even if you have the best song on the planet, it will not be listened. Record labels will limit their liability so that they do not listen to unsolicited music. Record labels do not want to listen to many songs and then held accountable if someone claims that their material is copied.

If you decide to send your CD to the label, send the requested material. First, get a contact, preferably an individual in the Artists & Repertoire (A & R) section. Call and talk to someone first. After you sent the CD to determine if the targeted individual received your material and a further follow-up call to determine whether it was listened. Submit 3 to 6 songs and send a bio and picture of yourself. Again, this is not the best way to offer your material to large plate labels.

Until you try to promote music business advisors in your corner to promote you and there is a buzz around you, your demo will not reach the decision makers on the record companies. Record companies on a daily basis receive thousands of unsolicited CDs. Most likely, your CD will be put in a pocket in a remote room filled with CD cassettes.

Draw labels like to deal with artists who have a history of record sales. These are artists who have produced and sold their own CDs locally or regionally. Draw labels like to deal with artists who performed their material and this buzz is going on. MC Hammer, before becoming acquainted, performed his own material and sold his own records until a big record company signed him. MC Hammer had a big leverage to undertake a good contract because he had already proven on a local basis that he could sell records.

Record companies want to limit their liability. Once signed, you are considered an investment that requires money and they want to see a premium on your money invested in you. The more you can prove that you can sell a record, the better you can sign.

If you are registered with a record company, the artist will go to the studio and record songs for the record company. The record company makes copies of the master survey and sends it to a distributor. The distributor is a wholesaler who then sells the CDs to retail sales like Best Buy, Sam Goody and Tower Records. The record company then pumps money into marketing by advertising and promoting your music with the hope of selling records, making you a superstar and getting rich!

It’s not as easy as it sounds. It requires a lot of hard work by a talented group of people. Everyone must work together to make it happen. There are usually many people behind the scenes that work to make an artist a superstar.

Record companies are often divided into 4 groups: Key label record companies – have the survey and operating resources to complete all functions to sell records. Important label record companies are integrated in order to handle the promotion, sales, marketing and distribution to sell music. Key label record companies are Arista, Atlantic, Capital, and Sony.

Important label affiliate labels have special agreements with the large label record companies, where the big label can finance smaller label recording and operating costs in return for a portion of the smaller label profit.

Independent labels – distribute records through important labels. Independent labels have few employees. They tend to find talent, draw talent, ensure that the music is recorded and contracts with key record labels to perform the promotion, marketing and other functions.

True independent labels Do not associate with an important label and distribute their music by independent distributors.

The A & R (Artists & Repertory) Department

The A & R department is the talent scout. They are in charge of finding new talents. They are the eyes and ears of the record company. But not because you are signed on a record label because a representative of A & R likes you does not mean that your CD will ever be produced and released. Managers who are higher in the company can cancel your transaction if they feel that your CD will not sell. A record company will have to invest hundreds of thousands of dollars to release your CD so they will be extremely careful about who they release.

The marketing and sales department

This section is responsible for the public excited about your music and the first sale to retailers the idea of ​​carrying your CD. They are responsible for promotional products, the advertisements of your CD, in the shop display, publicity, your CD cover, etc.

The Promotion Department’s department

This section is responsible for the music on the radio. The individuals in this department will visit the different radio stations to convince them to play your material. If your material is not played, nobody will know how you are. People will look into the store after your CD and wonder who you are. There is also a direct connection to CD sales how many times a song for the CD is played on the radio. More aerial hours on the radio are equal to more CD sales for the record companies.

Remember music is art, but on record companies it’s about money. Keep in mind that it’s a business. Keep in mind everyone is out to earn money. The moment people believe you will not make money for them, you will be relieved and the same people will turn to find other new artists who believe they will make money. Unfortunately, the record business does not believe in caring for people. If your first CD is not a success, you’re out. There are rarely second chances. There are always other talented people behind you who fame your lap.


Most major retailers like Toring Records will not carry a CD unless the record has a distributor. A strong distributor ensures that your CD will be available in enough places, so your CD will sell to eventually earn money. Large labels use large distributors who are better able to get record stores. After years of consolidation, there are only 5 major national wholesale distributors in the USA owned by conglomerates who also own large label labels. They are:

BMG (spread Arista, BMG and RCA).

EMI (Distributed Capital and Stomach.)

Sony Music (Distributed Columbia, Epic and Sony)

Universal Music Group (Distributed Interscope, Island / Def Jam and MCA)

WEA (Distributed Atlantic, Elektra and Warner Bros.)

Distribution Through The Internet Records Labels and Artists use the Internet to spread their music more and more. Unknown artists can also use websites like this,, to generate buzz about their music. However, unknown artists will still have to work hard to let the buzz over their music go. Eventually, the signing of a contract with a large record company is the way to go. The main record labels have the financial muscles and people to give you a good chance to become acquainted.

Let’s look at it. It’s all about money! Yes, the entertainment industry looks fun and exciting, but people are there to earn money. As an artist, the most important contract in the music industry is the record contract. The royalties are part of the money from record sales paid to the artist for his / her music. The record contract that is a negotiated legal agreement between the record company and the artist will indicate how much money an artist is entitled to.

An artist must have a good understanding of how royalties are calculated. A good music attorney will assist in this process by making sure that the artist is paid what he / she deserves. A 13% kingdom for one artist can be a lot of money, but a 13% kingdom for another maybe a lot of change.

So that’s how the numbers work. An artist signs a record contract successfully. The artist goes to the studio and works diligently to create a CD that fully supports the record company. The record company sells its CD with a suggested retail price of $ 17.99 to a retailer for $ 10.99. The distributor will take 10% – 14% of the $ 10.99. Therefore, the record company will get the $ 17.99 certificate. Independent record companies may receive less than the SRLP. Key record companies pay artist rights as a percentage of SRLP.

The rates vary from each artist depending on how successful their records are sold. For a new artist who has never had a record deal or sold less than 100,000 albums, a typical royalty rate of 12% to 14% of the SRLP will be obtained. For an independent record company, it may be 10% to 14% of the SRLP. For established artists who have a record of selling 200,000 to 500,000 albums, royalties are 14% to 16%. For artists who sold more than 750,000 albums, the royalty is about 16% to 18%. As you can see, the more successful the artist is, the higher the kingdom. In addition, royals can be based on how well the record sells. For example, the record contract can determine that an artist will receive 12% for the first 100,000 units sold, 14% for 100.001 to 300,000 units and 16% for more than 300,000 units sold.

But hold your horses. If you sell 500,000 albums and have a royalty rate of 12%, it does not mean that you will get 12% of 500,000 at a $ 17.98 SRLP, which will amount to $ 1,078,800. This is because the record contract specifies deductions (expenses) that have to be deducted.

To start the bat, the record size will decrease packaging costs of the SRLP, typically 20% for cassettes and 25% for CDs.

Secondly, the artist is more responsible for paying the record producer a portion of his / her royalties. Typically, a producer will receive 3% to 4% of the SRLP.

Third, in the record business, the contract states that artists only generate royalties at 85% of unit sales. For sale for every 100 albums, 15 albums sold, the artist does not get royalty.

Previously, the record company will own a portion of the money because the distributor typically has an agreement with retail sales to retrieve and credit the retail stores from unsold units. This is very important because a good part of your album can be returned to the record company if the album does not sell! The money that is retained is called a reserve. Reserves may be held for 2 years before it is paid to the artist. Usually a large record company will hold a reserve of 25% to 40% of the royalties.

Fifth, prepayments paid from the record company to the artist are deducted from the artist’s rights. Advances include, but are not limited to:

Recording studio costs (new artists to independent, I get a progress of $ 0 to $ 80,000, a new artist from a big record company $ 150,000 to $ 400,000.

Rent independent promoters to sell the albums.

Cost to make video (promotions and a cheap music video can cost $ 150,000 to $ 200,000.)

When making money for record sales, this cost of artist’s royalties is deducted. re-coupment. If the artist’s record is not successful, the artist will be guilty if the royalties are less than the deductions, can their artists guilty the money of the record company by being in red! This negative cost may be transferred After the next album release, negative costs are transferred from one album to another album (cross-insurance). If there is no other album, the record company usually eats the loss.

There are many other costs w Writing the record company Will not charge the artists. This includes marketing and in-house promotions (free CD, etc.).

How much does an artist make for a gold album (sell 500,000 albums).

Look at the math:

CD (Recommended retail price, SRLP) = $ 17.99 Less CD Packaging of 20% = $ -4.50 NET = $ 13.49 Times: Artists royal rate (12% – 3% to producer) = X 9% Gross royalties per CD (9% of $ 13.48) = $ 1.21 Times 500,000 albums = $ 500,000 SUB TOTAL = $ 605.00 Times: Legal% (15% o = no royalties) = X 85% Gross Rule = $ 514,250 Less Advances: Recording, Promotion, Music Video, Tour = $ -350,000 TOTAL ROYAL TO ARTICLE = $ 164,250 – Resale (35%) Repaid by Retailer) = $ -57,487.50 (1) ACTUAL ROYAL PAYABLE TO ARTIST = $ 106,762.50

(1) Reserves will be paid to artist in 2 years if no CDs are returned by the merchant.

Remember, the artist still has to pay taxes! Do not forget that Uncle Sam must get his cut! Also, do not forget the Personal Manger, the Attorney, the Accountant, the Agent and other numerous expenses.

However, there are many other royalties that an artist can acquire. They include: Records clubs, Compilation CDs, Samplers (Low Price Albums in which some artists appear), Premiums (Albums sold with other products such as grain), Film Soundtrack, Music Video Sales, Greatest Hits Album, Foreign Royalties (songs played in some foreign country radio stations pay royalties, unlike the US), master license (music used in movie, television, commercial, internet, cd-rom and dvd), etc.

Of course because of the internet, the rules change royalties. Many people now buy their music over the internet. Just think, no packaging required and no distribution to traditional retail stores. Some websites allow customers to purchase individual songs as an album. Changes are currently being made on how royalties are calculated as a result of the internet. Many lawyers are pushing for royalties based on each song sold as against every sold album. So stay tuned!

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