The NY Daily News does a brutal breakdown of a hypothetical band’s financials. A member of a quartet that goes gold (500K units) makes about the same as a NYC sanitation worker:
- Because they’ve got buzz, the band gets a 15% royalty rate, a few points above the usual amount for a new artist.
Its debut, “Gruntastic,” goes gold – only 128 of more than 30,000 records reached that level in 2002.
The Gold Record Gross: 500,000 albums sell at $16.98 = $8,490,000 The Grunts’ royalty is 15% of retail. That’s $1,273,500.
But the Contract calls for “packaging deductions” of 25%, so the gross drops to $6,367,500. Then there’s promotional albums and giveaways the labels give to wholesalers, retailers, radio and the press. That’s a “free goods” charge of 15%, so the gross drops another to $5,094,000. So, the band’s royalty is actually: $764,100. The record company keeps the packaging and “free goods” funds. After collecting a $9.99 wholesale price, it also reaps an additional $829,900.
….Because the band was hot, they got an advance from the record company of $300,000. They spent $200,000 of that recording the album, which included a $50,000 advance to the producer. They pocketed the remaining $100,000. Additionally, the label spent $100,000 making the band’s first video, which got them played on MTV2. The band owes all of this money back to the label.
So the royalty drops to $364,100.
But the band’s producer also earned a 4% royalty of $203,760, of which he already received $50,000. So the band has to pay him an additional $153,760, reducing their royalty to $210,340.
After pocketing $310,340 (which includes the remaining $100,000 of the advance), the band has to pay their manager 15%, or $46,551, and give 2% of the total deal, or $101,880, to the power lawyer who got them the deal in the first place. That takes the band down to $161,909.