In an “Ask Al” feature on his website, Weird Al Yankovic answered a question as to whether he makes more money from a traditional CD sale, or from a song purchased on the iTunes Music Store. His answer (on this page, fourth question from the top) indicates he makes more money from an album sale than he does from a download.
That makes no sense (and Yankovic admits he’s baffled as well). There are essentially no per-sale costs associated with a download… no physical packaging, no artwork, and no shipping or storage fees, yet as an artist he makes more money from the sale of an item which has all of those overhead costs. Is this an oddity or are most artists in the same situation?
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Well what I can tell you is this:
One of the FAQs about Digital Distribution agreement with CD Baby (online at http://cdbaby.net/dd-faq2 ) is:
Every company is different, but the average is 60 cents per song downloaded, $6.50 per full-album download, and 1 cent per listen or stream (when people listen to your song as if on a radio station, but don’t download or buy it).
Which makes me wonder about the “renegotiation” in Al’s contract. Is this on a larger scale? Is it causing issues for other people? Are they trying to show that they don’t make money on digital sales or something? It’s really weird, I totally agree with you.
Did he get ripped off of the profits from all three people that downloaded his songs? Wow!
Ok, Ok… Weird Al flaming aside… I doubt any but the most successful artists who have the leverage to negotiate agood contract make $6.50 from a CD sale at a store. If even successful ones do.
Most groups I know do a little better on indie labels, but major label deals seem to always be ten to twenty five cents per CD (not counting when they charge you back for “expenses”…)
I dont care for his music, but I do respect Weird Al as an artist… just so no one takes that flame the wrong way.
I know you’re just quoting Al on the “essentiall no per-sale costs” statement, but it’s not really correct. In just about any industry, you amortize the cost of production over the forecasted sales of the product.
Let’s say you’re manufacturing a computer mouse. You expect to sell 5,000 pieces a month, and the product has a lifecycle of a year, so that’s 60K pieces. Your box design (photography, film, labor, etc.) costs you $6K. That’s a $0.10 cost per mouse sold.
Now, let’s say you’re producing an album. You expect it to go gold, selling 100K pieces. Half of those — 50K — will be online sales. The album costs $50K to produce from beginning to end — studio time, paying the engineers, session musicians, you name it. There’s 10 tracks on the album, so that’s $5K per track. If each track is downloaded on average 50K times, that’s $0.10 in overhead cost per downloaded track.
I’m pulling numbers out of the air, but I hope the concept is clear. An album costs money to make. The people who make it expect to be paid in cash. That cash is raised by selling the album, either in CD or online form. The amortization method may not seem logical, but it’s a very common way of accounting for production costs.
Gross vs. net margin, cost of sale, etc. are very real issues that people in the retail business must deal with. Online distribution eliminates manufacturing and shipping costs, but those are often a small part of the true cost of sale.
I don’t find this at all surprising. It is the system at work. Most people who want to buy a Weird Al song, probably only want a certain one or two at the most – not the whole CD. In the previous system, they were forced in to buying the whole CD instead of single songs.
Well, he’s “Weird” Al, not “Business Savvy” Al.
The iTunes deal is like thru his same label that sells the physical media. Word is the label makes the artist pay packaging even on download sales. This explains the lower net.
The particulars may not match but the concept might be similar:
http://www.mp3.com/news/stories/4310.html
Not true. Out of all the groups I listen to Weird Al consistently delivers the most good songs on a CD (usually all of them, or maybe 90% worst case). All the other artists seem to go with the ‘one or two hits’ and mix in a bunch of crap theory. But not Al.
Actually, I’d rather buy his CD than download it. Then I have the cover art and don’t have to waste time grabbing all the songs. Its more convienient.
.cp
“you amortize the cost of production over the forecasted sales of the product.”
That only works to a point in the music industry. What would you estimate the current amortization rate for, say, Led Zepplin’s ‘Houses of the Holy’? Or The Beatles ‘Abby Road’? Or how about the album that’s been on the charts longer than any other in the history of music – Pink Floyd’s ‘Dark Side of the Moon’? At this point, none of those albums should have any sort of amortization rate included in their online distributions.
To make it more topical to Weird Al, his first album, orginally released in 1983, sells on iTunes. What part of amortization does either Weird Al or his record company have to pay on that music? Twenty-three year old stuff should be paid for by now. For those, there is pretty much no “per sale” costs to the record companies. They’re just operating on pure profit there.
in response to fred, no one is saying that it doesn’t cost anything to produce music that is sold as a download. yes, if you expect to sell 100,00 copies of an album and the album cost $50K to make, then yes, you will have to divide the production cost *of the music* over the number of copies you expect to sell. for every copy you sell as a download, the costs essentially stop there (there are nominal fees for bandwidth, etc). however, for every copy you sell as a physical album, you also have to factor in the cost of the jewel case, the disk itself, the printing of the album art, and the shipping costs of distribution. for each disk you manufacture with the intent to sell, you incur a cost that has to be recovered. this is not the case with “manufacturing” an additional download. there isn’t a marginal cost to download sales.
gold = 500k albums sold
standard artist contract is 11% of retail sales price, which averages about $8 when you factor in promotional sales, record club sales, and other discounted distributions.
I agree with fred, but I just wanted to ad that there’s the advertising and R&D cost to be amortized as well. It wouldn’t sell at all if people didn’t know it was available, or if Apple didn’t keep making mp3 players that people liked.
Still, it would make logical sense that even these costs would be less than the physical album production and shipment. *shrugs*
I don’t really know anything about this industry, but how much do CDs cost where you are from? Retail here is about $20-30. 11% of that is $2.20 to $3.30.
Well, he and his agent negotiated the contract. Seems to me like they should have negotiated something better. Notice all he says is that his contract doesn’t pay him as much for downloads as it does for albums.
As for the costs, the online versions also have costs. Sure, the album is made, but there is a cost to selling music online – someone has to pay the electric bill, the internet bill, the cost of the humans running the servers, the servers, the hardware and os upgrades and the cost of installing those, and more. Those costs have to be paid, so the people providing the service charge the labels, and the labels, in all likelihood, establish a set price that is rolled into the cost of every track to be downloaded. There may even be additional costs for albums – i don’t know how the charges go. But salaries have to be paid, advertisements, etc. for the online services have to paid, etc.
I can tell you that Apple, for example, gets 34 or 35 cents (I can’t remember) per EVERY track sold, and I don’t know what that comes down to on albums, but I’m guessing it’s about 3.50 (sticking with the ‘near 35%’ math of the single track). While the online store cut varies from service to service, if Apple needed more to pay for bandwidth and Customer Service and so on, I would imagine they’d just raise their take a little bit. I’ve worked on digitally distributing music, so I can also tell you it is SIGNIFICANTLY cheaper to go that route. Yeah you pay to get “cover art” created, but not printed. You pay for studio time, but not for CD manufacturing (or the media or the jewel boxes or whatever). You pay for digital distribution with each track sold, you don’t pay for trucks to take your discs to places. Do you think iTunes gets all that “exclusive content” just because they’re iTunes? While that probably helps, I’d bet it’s also cheap-all you pay for is studio time, get someone to take a nice picture while you’re in the studio, and send Apple a copy. (I’m not even going to bring up how many people have come out and said that it is an order of magnitude cheaper to produce CDs than it was to produce cassettes but the price is now more than double for a CD then it was for a tape.)
So on the one hand that argument holds water, but on the other it totally doesn’t. I’d be curious for Al to break down what he does get per album sale via iTunes as opposed to a physical copy. And find out who thought it was a good idea to get shafted on the digital DL. (:
“…R&D cost to be amortized as well. It wouldn’t sell at all if people didn’t know it was available, or if Apple didn’t keep making mp3 players that people liked.”
But they don’t give us a free iPod when we download the tracks. or even, more room on our iPod to put the music. In the past they gave us a physical CD which required the same R&D AND CD’s are also subject to a patent licence fee (i think from phillips). So we recieved so much more and somehow, artists still made the same.
“…major label deals seem to always be ten to twenty five cents per CD (not counting when they charge you back for “expensesâ€â€¦)”
labels also factor in piracy expenses such as lawyers. so when a label says they lose money paying lawyers, they’re lying. The artists pay for it. And when they win a decision in court, it’s pure profit for the label.
http://digitalmusic.weblogsinc.com/2006/06/14/weird-al-yankovic-says-digital-is-a-raw-deal-for-some-artists/
Quoting Larry:
“…there is a cost to selling music online – someone has to pay the electric bill, the internet bill, the cost of the humans running the servers, the servers, the hardware and os upgrades and the cost of installing those, and more…”
That’s true. But those costs have to be lower than the ones of selling in a store. All of the technical costs you mention have parallels in the world of physical sales – there is a lot of database work involved in keeping things in stock and on the shelves in a big-box store, which also has to look pretty and pay employees to do things like run a cash register. Online, that’s automated.
Some of these costs are passed on to music labels. Many times, labels pay for good placement in a big-box store – if you want your CD to be really visible, it will cost you.
Then think of the waste costs. If I want to sell my album in physical stores around the country, I have to ship copies to each one, and whatever doesn’t sell is either sold at reduced price, thrown away, shipped back, etc. All of that is wasted cost. Online, you keep the servers running and “make” a new copy at the moment someone downloads it. No waste.
I hear what you guys are saying ,but for a large service like Napster or Itunes the costs to distribute songs might aucutally be more than the cost to make a cd. I also think that the workers that make the programs probably get paid more than people that make CDs.
It’s certainly true that the Album art is used online. The reproduction cost of course (e.g., converting it to a jpg, etc.) has to be rather low.. but maybe some lic. $$ for the images in the Album art..
I guess this is kind of interesting, but the real earth-shattering revalation is that the great Weird-Al/Coolio Feud has come to an end! (last question in the Q&A)
Weird Al did graduate as the valedictorian of his high school. He’s a smart man, if you just get past the zanyness… he’s just out to have some fun.
Also note: you’ve been slashdotted.
Maybe he should do one of two things.
1. Go on tour, and make money like the rest of the bands on the planet.
or…
2. Quit, and disappear … like the rest of the bands on the planet.
Just to clarify, a per-sale cost and development costs are two entirely different things. Above, ‘fred’ mentions that the effective development (recording, producing, etc) are essentially per-sale costs. That is complete babble.
A per-sale cost is not development. If say I’m going to sell 100K widgets, and it costs me $50K to develop the widgets, I don’t have a per-sale cost of $.50 per widget to cover development. A per-sale cost is based on the production or sale, not the development of a product. Because if I need 100K boxes for widgets, at $1 each, then the total per-sale cost for packaging is $100K. But if I sell 150K instead, my per-sale packaing costs increase to $150K. But no matter how many of the widget I sell, my development only cost $50K.
NO, NOT WEIRD AL!
IMO, if you’re a real fan of his music, then you should have all of his albums sitting on your cabinet or shelf, as I do. Even though I can easily access his songs on iTunes, they don’t have some of his older songs and that’s when I go to used CD stores and get it.
The comment on CD Baby is false, no artist, there or anywhere else makes that much money on a song sale. After splits, deals, and such, they come out between 1 and 4 cents per song. Credit card companies and paypal make their profit upfront before things are even split down to the artist. The only artist that make money on digital downloads are independent bands and artist because they don’t have a middle man/company to sap all the profits. The website http://ind-music.com/ is a good example of where music artist actually do make money on digital downloads. No one else can claim that without having the numbers to back it up like those guys.
The statement on CD-Baby’s website is true, but its giving the price services like iTMS pay to distributors, not the rates artists get. CD-Baby in fact only keeps 9% of download sales (meaning the artist gets about $5.90 per album sale). However, CD-Baby is only a distributor; they don’t do music production. An artist wanting to use CD-Baby has to have a CD in hand to sell (they do encode the albums for download services, but the artist still has to provide the album to encode from).
I guess Tool is thinking of more than just awesome packaging and art while they can not be found on the iTMS.
And don’t knock Al if you have not listened to him. Some of his original songs would surprise you and still provoke smiles or laughter. It sounds like some of the other commentors could use some.
The comment on CD Baby is not false, it’s just telling you what you get paid when you sell your own music through CD Baby (and hence onto iTunes, etc) rather than through a record company.
How do I know ? My wife has two CD’s on CD Baby..
Chris
It’s no ‘oddity’. It’s greedy record and retail companies’ scheme to make more profit at the expense of everyone else.
The amortising argument is wrong. Amortisation is not a per-sale cost, it is in fact the opposite. It takes advantage of the lack of per-sale costs (ie gross profit on a sale) to pay for the massive one-off costs at the start. Logically, if amortisation were real per-sale costs then the artist would be better off (in terms of the up-front costs) selling just one item.
Amortisation is a bookkeeping mechanism for calculating the real nett profit of a sale based on expected sales, it is not a cost. Plus, it is not fixed. If the sales figures flop then the calculation has to be redone, which obviously can’t happen in the case of a true per-sale cost.
The only per-sale costs are: bandwidth and storage (too small to measure expect in bulk) and royalties.
When the Net removed the distribution costs the RIAA stepped in and blasted lawsuits around in order to prevent anyone else taking those segments of the retail price for themselves. Being an organisation for record companies rather than artists, they made sure they wound up with the money in their pockets, not Apple, not the artists. That was the WHOLE idea of the RIAA’s massive move against Napster. It had to be stopped before it (or someone similar) started to make deals with artists directly.
The world has moved on and record companies are now largely pointless, their business model is being supported entirely by the law because they know that a free market would annihilate them.
Yes. We’re all winners with iTunes. Consumers have less control over their music (in fact, I just had to deauthorize and reauthorize my computer just to be able to play songs I had already bought on iTunes – and the nice software bot happily told me I had 1 of my allotted 5 computers authorized – they wanted to let me know I hadn’t tried to step out of the box I was in).
And…the artists are not making as much money. In the business world this is called win-win. Apple wins twice. Consumers and artists lose.
The major labels and iTunes also have to factor in the cost of research and development of the DRM that goes into all iTunes music. Al should consider releasing future albums under and independent non-RIAA affiliated label if he wants greater profit and his fans to be able to actually *buy* his music and not just lease it for awhile. eMusic, Al, eMusic!
That’s the irony of being a recording artist and dealing with digital distribution: the record companies are still going to take their cut, while the distributors take theirs, and soon there’s not much left.
I think more and more artists are going to be turning to sites like http://www.tunecore.com (TuneCore) to handle their digital distribution — sites that don’t take a penny of the artists’ profit, so folks like Weird Al can actually make *more* money digitally than they would on physical CDs.
Everything in production is equal. The stores pay electricity and other utilities. They also pay an inflated rent to the mall they’re in or some large sum of money on their books for the building they built for the store. The real difference is in the fact that publishing a song to a CD is cheap as dirt these days. The equipment is proven and the workers are not that expensive. I am a computer programmer and I get paid pretty well. Napster, iTunes, and the others probably do too. That and the infamous greed of the executives is the real difference.
By the way, Weird Al not only graduated first in his class he also was going to school for architecture when he happened on his music career. He is also a director and producer in the industry. Kurt Cobain received a phone call from Weird Al while he was doing a late night talk show and said yes to Weird Al’s question of doing a parody. He later said that he knew Nirvana had finally “made it” because Weird Al did a parody. Yep, nobody likes Weird Al at all and nobody, but Nirvana, listens to his music. He also asks each artist personally before doing a parody. Have you ever had a personal talk with Michael Jackson? Coolio is the only one he didn’t ask directly and the producers told him yes even though Coolio was opposed. Oh, and Prince is the only artist who has ever, ever, said “no” to Weird Al.
You know, because he does parodies, everybody considers the guy an idiot. If you’ve ever watched the video of Amish Paradise (Good lord, what am I saying?!), you’ll realize that the guy has actual talent. It’s not that he has a hoard of writers doing his songs for him, he does most of it himself, and they’re over a wide variety of music… He’s not just some idiot doing comedy, he’s actually well educated and intelligent, he’s got a bigger hand in the production of his albums than most artists would have, he’s more involved with his music than some bubblegum-pop BS artist…
Sure, it’s a parody, and that means it’s not 100% original material (Not original music), but he sticks with good parodies and belts ‘em out at a pretty good clip. He’s been doing this for quite a while (23 years of albums), so if you can find another artist which is able to do, essentially, 23 years of comedy and STILL be a hit, good on ‘ya!
Regardless, the artist typically gets the sh** end of the stick when it comes to how much they see from a track / album sale, they make up for it by concerts, swag (Shirts / mugs / whatever), endorsements, whatever… He’s doing good for himself, and good for him. Intelligent artists (as opposed to the “just a pretty face with some talent”) just deserve more.
Give Weird Al his money or I’m coming down there and Polka-ing all over your heinie!!!!!!!
You don’t think that the RIAA wants to encrouage it’s artists to like digital distribution do you? If they did, they’d all come out and say in the press that they loved MP3s and digital distribution. They’d also encourage their fans to buy nothing but downloads. Then where would the RIAA be when they don’t have control of the the distribution channel any more.
You see without the distribution channel they loose a lot of their relevence. You might find an innovative online music distribution company all of a sudden actually becomes the recod company and signs the artists themselves. ;^)
Just an idea but I think in the future if the RIAA doesn’t embrace digtial distribution fully they might find themselves completely irrelevant.
“he’s more involved with his music than some bubblegum-pop BS artist…”
So true.
Let me get this straight. He is complaining that he makes more money by selling an album, probably 12 songs, than he does when sombody downloads 1 song? How is that a surprise? Besides, it doesn’t cost “nothing” for the download service. You have to buy internet bandwidth, servers to host the download, IT staff to maintain the servers, buildings to put the servers in, electricity for the building and servers, etc. All of that stuff adds up pretty quickly and it is hardly “nothing”.
This seems pretty clear cut… the market is changing and the label, recognizing that… gave Al a contract that would give them a larger % of the pie for this growing distribution method.
#4 – the costs you refer to are production costs.. artist is usually fronted this money by label… and money is taken from their profits… what is at question, is why artists get lower rate when there is virtually no “distribution costs” i.e. packaging, shipping, warehousing….
#41 – think you missed the point… he is not comparing an album sale to a single song sale… its a question of rate. how much per song or per album… he is saying that he earns a lower per song/album rate via the web download vs. retail store sales of physical album/single.
to me this is just more record industry rule #4080 for those that know the language.
“will wrote:
Yes. We’re all winners with iTunes. Consumers have less control over their music (in fact, I just had to deauthorize and reauthorize my computer just to be able to play songs I had already bought on iTunes – and the nice software bot happily told me I had 1 of my allotted 5 computers authorized – they wanted to let me know I hadn’t tried to step out of the box I was in).
Go buy a cd and quit whining? Was there a gun to your head?
“And…the artists are not making as much money. In the business world this is called win-win. Apple wins twice. Consumers and artists lose. ”
What world are you from?
Simply, you make more if you are good at retaining the cash flow from the consumer. There are too many people in the middle between weird al and me. That is true in hard and software music distribution. If weird al wants more money, he needs to buy his rights back, don’t share/sell them in the first place, and do what MC Hammer did by selling volumes of his ‘music’ (which is systematically a rippoff in the firstplace) out of the back of his ride traveling on tour instead of bellyaching about how he is being screwed.
Sigh…repeat after me, “Prices have nothing to do with costs. Prices have nothing to do with costs. Prices…” Apple has near-exclusive access to their network of iPods, and they can charge what they want, just like the record and broadcast companies before them. Over time, the distributor’s cut has been steadily rising; it may be that it is now a better deal for all but the most popular artists to distribute their music without copy protection (via mperia, for instance) than via any of the mass channels, especially considering the draconian terms of deals the mass distribution oligopolies are willing to offer.
I thought the basic iTunes deal was straightforward. Apple hosts the downloadable song (plus artwork, lyrics, whatever) on it’s servers and pays for all the related costs (servers, maintenance, electricity bills, rents for the building the servers are kept in etc) itself. For that Apple takes its cut – 35 cents out of the 99 cents per song fee.
The record company takes the remaining 64 cents. How much of that 64 cents goes into the artists’ pockets depends on the terms of their recording contracts. If the artists are getting reamed on on-line sales they are, as usual, getting reamed by the record companies. Same as it ever was…
The only way an artist will ever make big money through on-line sales is to cut out the record company and either host the songs themsleves (and pay for the infrastructure) or deal directly with Apple/Napster/eMusic etc.
Amortisation is always a bit of a guess. It’s a way of spreading fixed costs, such as the studio time, over an unknown quantity of product. You make 100k copies, and you amortise over maybe only 50k, maybe with no profit showing on them.
So you sell 60k, and make a nice big profit on the last 10k copies. Nopw, what’s the profit you talk about?
Your all missing the point here. The major labels are stealin….um er….making rediculous sums of money to pad their pent houses with. I have no problem with people making some cash but when is enough going to be enough. I’m tired of paying for rediculous costs of things today. 20 bucks for a CD? Artists might as well just start their own site and do their own advertising. Join other like minded musicians and then get a “new school” label going. It can’t be that hard. Neil Young has all of his new songs available for free on his site. It would be a quick change for him to sell his music there instead. No more of this “well were gonna have to charge you for random crao you don’t care about or need” BS from major labels. Cut out the middle man with the big grin on his face from all the money your music is making him.