Adele, Beverly Hills, $30,000 discussed on iHeart Podcast Channel Programming


Let's get back to tech stuff. Alright. So year after year, the music industry was facing huge cutbacks due to flagging revenues. And it's hard to feel much sympathy if I'm being really honest because the industry was also known for Not just big, insanely profitable for many years, but also for a rather hedonistic approach to business. There are legendary stories about parties and drug use and lavish offices for record label executives and crazy bonuses that they enjoyed mostly at the expense of the musicians who were creating the stuff the record labels were selling. And there were some artists who likewise enjoyed comparable lifestyles. But for every Madonna, you had hundreds of artists who are making maybe a decent living. But they were not not getting rich or some people who weren't even able to get by even as being assigned artist with the record label. So generally speaking, artists weren't being paid anything until an album published And then they would get some money and in order to make serious money to really make back enough money to justify the amount of time you spent recording the album, the album sales had to do really, really well. Then the artist would get royalties which are percentage of each sale, And I think I need to give you a quick word on how royalties typically work. So you understand. How this model tends to work in the entertainment business. So in the negotiation phase, an artist and label or a publisher come to an agreement, and that agreement typically includes a guaranteed payment on delivery or publication of content. So in this case we're talking about The an album dropping, so the artist comes up to the record label, and they say, all right when the album drops, the record label is going to pay the artist $50,000. That's a decent chunk of change. 50 grand is that's nothing to sneeze at. But it's not going to make anyone rich, right? It's not going to make them shop for a brand new house in Beverly Hills or anything now, along with that negotiation. Is the royalty rate. So let's just say, for the purposes of an example that the rate is five cents per copies sold. Now. Does that mean when the first copy of the album is purchased that the artist gets a shiny new nickel? No, because the nickel typically actually goes to pay off the $50,000 that the publisher initially paid the artist. So in other words, you have to pay off that $50,000 guaranteed payment before you start accumulating royalties after that, and there are one million nickels and $50,000 so the record label would need to sell a million copies of the album. Before the artist would start to see any money in royalties. And then from that point forward, they would get a nickel off of every sale. So if an album does really, really well and still sells millions and millions of copies, and artists can make some serious cash through royalties, and as long as the album is in print, the potential to earn those royalties continues as long as the album is still available to purchase as new Then you could still be making money off a classic album or re master years after you first publish it, depending upon the contract negotiations he went through before. But if the album only receives modest sales, then the artists won't get any royalties at all. Like if they don't sell a million copies, they never pay off that 50 grand. However, they also don't have to pay back the difference. To the publisher. It's not like Oh, well, we only sold $30,000 worth of the album. If we look at your royalty rate, you don't have to return 20 Grant you keep the 50,000. After CD sales started to decline in 2000, the record label companies began to face some pretty harsh realities. Things got worse year after a year they had to start laying off employees. It was a very drastic change from the days where it looked like there was no end in sight. To all the parties and all the drugs and all the bad behaviors. Um, I never occupied that world, so I don't know if all of that behavior stopped for once. Things started getting more real for the record labels or if they just kept doing it in the hopes that maybe that would help ease the pain. I wasn't there, so I don't know. But the years from 2000 to 2010 were really, really rough on the industry in general, now in 2000 and eight, the streaming service Spotify launched and it would become one of the most important Players in the streaming game at the time, it wasn't seen as the savior of the music industry. But things have changed since then. The streaming model pays record labels a royalty fee per stream as typically a fraction of a fraction of a penny per stream. So let's say a A play of a recording is a stream now, according to a survey by digital Music News in 2018, the royalty rate range from $20180.397. That would be on Spotify $2.783 on Apple music, And it's not a one size fits all rate record labels could negotiate those rates on behalf of artists and influential artists sometimes have the clout to demand that their work remains off the server services entirely. If they think the royalty rates are too low. Lots of artists have done this Adele, for example, Um, they've said, no, I'm not going to allow my music to be on those services because The royalty fee they're paying is far too low. A lot of artists, however, don't have that clout and they don't really have any option. But what became really clear later on was that These tiny fractions of a penny really do add up when you start looking at them collectively, and the big reason for that is it's not a one time occurrence per customer. So the profit margins on CDs were great, and the royalties were more profitable per sale at first glance, But when you go out to buy a CD as a customer, you buy it. Just the one time you weren't going to go buy a new copy of the same CD every time you want to listen to the CD. Just listen to the one you've got, so CD sales had a natural curve to them. It would peak often right around release or if a single from the album got a lot of radio play. And then sales would drop off gradually. But with streaming a payment goes through with every stream, So every time a person listens to the same song, it triggers a payment. A royalty payment. So if you put a song on repeat, let's say that you've got a song that you particularly like, and it's just stuck in your head and you gotta you gotta listen to it like 20 times in a row. This happens to me all the time. Well, that's actually 20 royalty payments that end up going to that record label into that artist. A portion of it goes to the artist. So while the initial Amount is less than what you would get with the CD sale. You do it way more frequently, because it's every.

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