By Jeff Price

On the other hand…perhaps, since the beginning of the music business, more artists are earning some money for the first time as opposed to a few earning less.

In the old school model, an artist got signed to a label.  The label would agree to pay the artist a negotiated royalty rate on each CD sold; usually around $1.40 to $1.70 per album. The label would then advance the artist band royalties from their “to-be-earned-in-the-future-CD-sales.”  The artist would  take this money (their own royalty money) and use most of it to record the album that the label would own and control.

If the label advanced the artist $100,000, it meant that on the first 71,000 copies of the CD sold, the artist would get no additional royalty payment as the label already gave the artist the money (100,000/1.40=71,000).

In addition to the advance used by the artist to record an album, ultimately controlled by the label, the label would also stipulate that some portion of marketing costs — out-of-house press, video production, tour support, etc. — were also recoupable advances of the band’s own “to-be-earned” royalty money.

If a band did not “hit”, they never earned back the advance and therefore it did not matter to the artist’s bottom line if the label made $7 off an album or $.0003 from a stream — none of this money would ever make it back to the artist.  It’s the label that got hurt.

If the band did pick up momentum, than a label would pour more money into the project in hopes of getting it to hit.  More money pouring in means more money being advanced, means more CDs need to sell in order for the band to recoup.  Once again, there is no band royalty flowing back to the artist.  As a matter of fact, well over 98% of artists on major labels never recouped and never earned another band royalty aside from the initial advance and marketing spend. For the artist, it almost just did not matter how much the label made off the sale of the music; they simply never recouped back their advance, and they would make their money in other ways (gigs, merch sales, publishing income for the songwriter etc).

If a band became one of the fewer than 2% that became a “hit” (think Lady Gaga, U2, Led Zeppelin, etc), they would recoup and most likely get paid their band royalty unless their contract was up at which point they would demand HUGE royalty advances to “re-up” (i.e. re-sign) with the label.  For these elite few that actually do recoup and receive artist royalties, it is quite possible the amount they earn from streams will be less than the amount they would earn from a full $17.98 list price CD sale.

And this system existed for the few elite artists that got signed and were let into the system.  The other 99% of artists, tens of millions of artist around the world, never even got a chance to earn anything off the sale of their music… until now.

For the first time in the history of this industry, music stores like Amazon, iTunes, Spotify, Rhpasody, Napster, eMusic, Rdio, the forthcoming Google service and all the other digital music stores have the ability to “stock” ALL music by ALL artists, and they have the desire to do so.  And for the first time there is now a way for all artists to have their music available for consumers to find, listen, share, discover, stream and buy.

With access to distribution, for the very first time, hundreds of thousands of artists are now earning money from the sale or stream of their music that in the past would have earned nothing.

Now add to this the fact that today’s artist is also often the record label, the songwriter, the performer and the publisher.  Each one of these categories also earns money — each distinct from the other — that flows back to the artist/songwriter/performer/label/publisher.  Yes, each one of these income streams might be the equivalent of some change found under a couch cushion, but together they start to add up.  Now add one more upside: more artists are becoming famous.  Once you are famous, there are even more income streams that can be created: merchandise deals, gig income, fan club membership, on-line gig performances (like, ad money, sponsorships, stem sales and so on.

I don’t see the big icebergs melting, rather I see them floating into new seas with new ways to make money.  I also see many more artists making some money, and in some cases, more money than ever possible in the old model.

Most radical shifts bring change, how you view and address this change (glass half empty or half full) has a lot to do with whether you succeed or fail.

Part 1: The Melting Iceberg Syndrome And The Music Business


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