The State of the Music Industry

Despite all the moaning and wailing by record industry executives, the music industry is alive and well and artists are making more money than ever before. So what is going on? Here's the story from one of the new vendors of music, Tunecore:

music purchases are up over 50% from 2006 to 2009

and

The financial food chain of the music industry used to be as follows. A distributor sells a CD to a retail store for a wholesale price (let's say $10). The retail store marks the CD up to $16.98 and make $6.98. The distributor takes a “distribution fee” of 20% of the wholesale price (in this case $2) and passes the remaining $8 back to the label.

A band signed to a major label could expect to earn a band royalty rate of $1.40 - $1.70 per full length CD sold. This band royalty was paid through to the artist if they had “recouped” the band royalty fronted to them by the label (i.e. an “advance”) - most do not recoup.

Compare this to self-distribution to iTunes though TuneCore: an artist makes $7 for each album sold at $9.99 and $0.70 for each song sold at $0.99. By selling just two songs on iTunes for $1.98, the artist makes the same amount of money as if a $16.98 full length CD was bought. An artist sells one digital album for $9.99 and makes 500% more than a signed band. The price may have dropped for the music consumer but with self-distribution the artist makes more money.

The reality is:

• More musicians are making money off their music now then at any point in history.


• The cost of buying music has gotten lower but the amount of money going into the artist's pocket has increased.


• There are more people listening, sharing, buying, monetizing, stealing and engaging with music than at any other point in history.


• There are more ways for an artist to get heard, become famous and make a living off their music now than at any point in the history of this planet.


• Technology has made it possible for any artist to get distribution, to get discovered, to pursue his/her dreams with no company or person out there making the editorial decision that they are not allowed “in”.


• The majority of music now being created and distributed is happening outside of the “traditional” system.

and

...why then are we left with the impression that music sales and revenue are down? The simple answer is album sales and overall gross revenue from music sales (CD and downloads) are down. The increase in music purchases comes from the people buying individual songs. The decrease in revenue comes from a $0.99 song costing less than a $16.98 physical album as well as fewer purchases of physical CDs.

The impact of this is fascinating.

• First, music fans are buying more music from a wider spectrum of artists.


• Second, despite the cost going down to purchase music, the net revenue for a self-distributing artist is up as compared to what an artist traditionally earned via a label.


• Third, the entire financial model of the labels (well, at least post 1960) was built around selling a full-length physical album. Due to this, it is the record label (and those artists signed to them) that net less money off the sale of the music.

There is more fascinating material in this article. Go read the whole thing.