Crabbyappleton submitted another
article today as he lets us know that Business 2.0 has published a nice article on how your (online) MP3 dollar is divided amongst
record labels and music artists.
Currently online music
stores, such as Apple's iTunes, offer music downloads for less than one dollar.
Although it costs very little to produce and distribute these songs, the
economics of recorded music sales haven't changed much since the vinyl
era:
 The
Site's Cut
The biggest chunk of your dollar goes to the online
music provider. This explains why sites like Rhapsody can offer
promotional discounts: When you buy a song for 49 cents, the site
sacrifices its profit but the label still gets
paid.
The Label's
Cut
The record company receives "performance royalties" that
are paid to license an actual recording (not the written music). That
explains why some performers, like alt-rocker Aimee Mann, run their own
labels -- it allows them to keep a larger share of these royalties for
themselves.
The Artist's
Cut
Twelve percent is average, but successful bands often
hammer out better contracts. In many major-label contracts, charges for
"packaging" and promotional copies are subtracted from the artist's cut,
leaving the talent with a measly 8 percent. BMG, Universal, and Warner
have announced plans to do away with such deductions for digital
downloads. |
So only a very small percentage of your dollar will
go to the artist. The biggest percentage goes to the website hosting the files
and the record label. You can see an overview of the percentages in the
article.
Source: Business 2.0
