Funny Money
Published September 25, 2002
Kinda. They aren't going to go after your house if you don't pay it. These expenses are held in a royalty account. As royalties come in they are charged against the recoupable expenses. Once the money is "paid," 2 million in this example, future earnings get paid out.
If all of the million records are sold at full price with no discounts or record clubs, the band earns $2 million in royalties, since their 20 percent royalty works out to $2 a record.
You mean the band "grosses" $2 million.
Two million dollars in royalties minus $2 million in recoupable expenses equals ... zero!
All this really says is that the artist has to sell 1 million units to recoup their recoupable expenses. If they sell 2 million units the band would receive $1 million in royalties after expenses. If it sells 10 million units then the "Prada pants" start flowing. If the album sells 22 units the record company is never going to recoup that $2 million. This is called break-even analysis.
How much does the record company make?
There isn't enough information in this example to tell you. There are many more costs that Love didn't add up, like the cost of all the albums that tanked.
They grossed $11 million.
And the band grossed $2 million. If you look at just the expenses that Love counted, the record company is "up" $9 million. But they have a whole big machine of people they have to pay to make those 1 million units sell, not to mention a whole bunch of bad (and good) albums that didn't sell that they have to pay for.
It costs $500,000 to manufacture the CDs and they advanced the band $1 million. Plus there were $1 million in video costs, $300,000 in radio promotion and $200,000 in tour support.
What is the $500,000 manufacturing costs based on? Marginal unit cost? This grossly underestimates the fixed costs involved in running a CD manufacturing plant.
The company also paid $750,000 in music publishing royalties.
They spent $2.2 million on marketing. That's mostly retail advertising, but marketing also pays for those huge posters of Marilyn Manson in Times Square and the street scouts who drive around in vans handing out black Korn T-shirts and backwards baseball caps. Not to mention trips to Scores and cash for tips for all and sundry.
That's $2.2 million in external marketing expenses for this album. This doesn't include the overhead for all the marketing, promotion expenses in the form of salaries, not to mention the cost of royalty accountants, lawyers and most importantly IT people.
Add it up and the record company has spent about $4.4 million.
So their profit is $6.6 million; the band may as well be working at a 7-Eleven.
- Funny Money
- Published: September 25, 2002
- Type:
- Section: Music
- Filed Under: Music: News
- Writer: Martin Devon
- Martin Devon's BC Writer page
- Martin Devon's personal site
- Spread the Word
- Like this article?
- Email this
Save to del.icio.us
Comments on this articleComments
Anyone wanting to know where the money *really* goes should look no further than MixerMan's diary. For the uninitiated, MM is a recording engineer who's basically blogging the recording process of the first album for a big-hype major label group, with the names and some details changed to protect the guilty. Regardless of how clueless Courtney is, it's clear the labels are the cause of their own current slump.
OK, Ian, I followed your link and read a couple of entries. What is your point? If you think that by just reading MixerMan's diary "all will become clear" you are mistaken. Please explain your question/comment.
How disgusting that a man (Courtney had a sex change, there is viable proof) claimed to be married to this icon, after they (the COG cult) murdered him in 1990. Geffen (and his boyfriend Pitt, who was snogging Love too) helped "it" steal Cobain's songs and record them with her group. It is a mockery of talent and goodness. Courtney Love, your life is in ruins and soon you will be dead. As will everyone involved in the sacrafice of Kurt Cobain.
This is not Kurt Cobain's child, he had no children! Frances Bean belongs to Jennifer Aniston and Brad Pitt (yes, they knew each other long before they married). She is idenical to her parents, and strangly, ever whore Hollywood has ever produced. She is hideous.
Kurt had unearthly crystal colored eyes, that demon's eyes are grey just like it's real father, Brad.
Kurt Cobain was murdered in 1990, later Courtney Love (whose real mother is actually "Wendy" who falsly claims to be Cobain's mother) was paid-off to pretend to be married and have a child, all so that the Hollywood 3 could share in the reported 6 billion Nirvana has thus far grossed. Geffen was delighted by all of this, helping Courtney with her transgendering (She was once a male). The hundreds (no doubt thousands) that were and are involved in this horrid Sacrafice are paying-with their lives! Oh, how they shall pay for those crimes.
We love you Kurt.
Kurt Cobain was murdered in 1990, later Courtney Love (whose real mother is actually "Wendy" who falsly claims to be Cobain's mother) was paid-off to pretend to be married and have a child, all so that the Hollywood 3 could share in the reported 6 billion Nirvana has thus far grossed. Geffen was delighted by all of this, helping Courtney with her transgendering (She was once a male). The hundreds (no doubt thousands) that were and are involved in this horrid Sacrafice are paying-with their lives! Oh, how they shall pay for those crimes.
We love you Kurt.
It is just another Cult admission of guilt, a silly one at that (there is no G-d, and no jesus, but those are the cults false idols).
Just a hyme, a crust of bread thrown on the trail of murderers...
Ladies and gentlemen, Dave Grohl. Thanks, Dave. I always thought you were a funny guy in interviews :)
That is all.
Add your comment, speak your mind
(Or ping: http://blogcritics.org/mt/tb/890)
Nice job eagle eye business dude.