“Music managers will today wade into the row over online royalties with the claim that bands and solo artists are being unfairly squeezed in the digital era,” Dan Sabbagh reports for The Times. “The Music Managers Forum is unhappy that artists typically receive a royalty of 4.5p on every 79p track sold on Apple’s iTunes, a proportion of less than 6 per cent. On a £2.99 single, the performer’s royalty is 35p, or 12 per cent.”
“Jazz Summers, the manager of the Snow Patrol, and chairman of the Music Managers Forum, said: ‘Sale prices and royalties have gradually been eroded to the point where an artist needs to sell in excess of 1.5 million units before they can show a profit, after paying for recording time and tour support.’ Mr Summers said that the squeeze on artists is a by- product of a record industry “that has been caught with its pants down” by the emergence of digital. His group’s complaint is that the major labels have handed pricing power to the download retailers because they have not come up with an online distribution model of their own,” ,” Sabbagh reports.
“The MMF wants to improve artist royalty rates, complaining that the music industry has cut fees in an attempt to maintain its own profitability. The record companies often force artists to accept a ‘new technology’ discount on their royalty rate of about 25 per cent — replacing a now outmoded discount that was intended to reflect the cost of packaging a CD,” Sabbagh reports. “Unhappiness with Apple’s flat 79p a track pricing exists across the music industry, but the Californian computer company has been so dominant in the download market that it has been able to set rates. Last month Edgar Bronfman Jr, chairman and chief executive of Warner Music, described Apple’s policy as ‘not fair,’ arguing that pricing should be flexible, reflecting the popularity of the artist.”
“The new MMF complaint emerges alongside another related royalty dispute that is pitting Apple, other internet music retailers and the British Phonographic Industry (BPI) against groups representing songwriters, the Mechanical Copyright Protection Society (MCPS) and the Performing Rights Society (PRS). The MCPS/PRS wants to receive 12 per cent per song — discounted to 8 per cent for two years — rather than the existing 8.5 per cent, but the scheme has been challenged by Apple, the BPI and other online retailers before the Copyright Tribunal,” Sabbagh reports. “The Music Managers Forum is backing the MCPS/PRS alliance. ‘The BPI is jumping into bed with a group of digital music retailers, which are in the process of eating our lunch,’ Mr Summers complained.”
Full article here.
Advertisement: Apple iPod nano. 1,000 songs. Impossibly small. From $199. Free shipping.
Eliminate the middlebronfman. Apple isn’t the problem. Apple is the solution.
According to most reports, record labels take 70 cents for each song Apple sells for 99 cents. Apple spends almost all of their 29-cents on bandwidth, iTunes operational costs, and marketing.
Flash forward a few years: Apple has settled with or bought Apple Corps. Apple signs Snow Patrol. Snow Patrol gets far more than the mere 12-percent they so longingly dream of today.
Related articles:
Dvorak: record companies’ biggest concern about Apple’s iTunes is clear and accountable bookkeeping – September 29, 2005
In 99-cent fight with ‘Looney iTunes’ labels, Apple CEO Jobs will get whatever Jobs wants – September 29, 2005
Warner music exec discusses decapitation strategy for Apple iTunes Music Store – September 28, 2005
Warner CEO Bronfman: Apple iTunes Music Store’s 99-cent-per-song model unfair – September 23, 2005
Analyst: Apple has upper hand in iTunes Music Store licensing negotiations with music labels – September 23, 2005
Steve Jobs plays high-stakes poker with greedy record labels – September 22, 2005
Record labels accuse Apple CEO Jobs of ‘double standard’ as they seek to force iTunes price increase – September 21, 2005
Apple CEO Steve Jobs to repel ‘greedy’ record companies’ demands for higher iTunes prices – September 21, 2005
Apple CEO Steve Jobs vows to stand firm in face of ‘greedy’ record companies – September 20, 2005
NYT’s Pogue to record companies: it’d be idiotic to mess with Apple iTunes Music Store prices – August 31, 2005
Apple CEO Steve Jobs prepares for pivotal fight on digital music prices – August 28, 2005
BusinessWeek: Apple unlikely to launch music subscription service – August 15, 2005
Record labels to push Apple for higher iTunes Music Store prices in 2006? – August 05, 2005
Study shows Apple iTunes Music Store pay-per-download model preferred over subscription service – April 11, 2005
Record labels look to raise iTunes wholesale prices, music industry fears Apple’s market domination – March 05, 2005
Report: Apple CEO Steve Jobs ‘angered’ as music labels try to raise prices for downloads – February 28, 2005
Report: Music labels delay Euro iTunes Music Store fearing Apple domination – May 05, 2004
Greedy Big Five music labels looking to jack up iTunes songs to $2.49 each? – April 22, 2004
Just get Dorkman out of everybody’s way.
Why are they need a middle man anyway? All they need to do is buy Mac and try garageband ( To learn about the coming of Digital age). They will find how easy to make music and distribution with out middle man. Apple should give these artists a free class lecture and hand on about the garageband and podcast.
Oh g#d, Snow Patrol is whining because iTunes doesn’t pay them well enough? If Snow Patrol (or other artists) truly don’t like Apple’s policies, they are free to shop around. Nobody seems to raise a fuss about Wal-Mart’s policies to this regard. I would have never heard of them if Apple hadn’t made them a download of the week several months back. Downloaded the song, liked it, then bought the album…
Which is exactly 100% more than they would have gotten from me if they relied solely on the RIAA to market and distribute their stuff.
This is one of those deals where the RIAA, in an effort to squeeze Apple, is going to trot out artists to bitch and moan about iTunes prices, just like they did with the Napster thing five years ago. It reminds me of when hostages read manifestos condemning their way of life, conveniently provided by their captors (See “Patty Hearst”).
“…pricing should be flexible, reflecting the popularity of the artist.”
That’s one approach. Another is the flat rate in which the popularity of the artist is reflected in the number of sales. There is no single right answer to this issue. The problem is that the argument is fundamentally about control of the oligopolistic music market.
Wouldn’t take them too long to break even if they got 80% or 60 pence per track by cutting out the greedy backward labels..
I don’t think this is an iTunes Music Store issue. It’s yet another way that the major labels are screwing the artists. Snow Patrol gets their royalities from their record label I believe. I don’t think they deal directly with Apple, so it wouldn’t be an issue of how much Apple is paying or not paying.
“The record companies often force artists to accept a ‘new technology’ discount on their royalty rate of about 25 per cent… or 12 per cent…”
Hugh?! Apple is NOT the problem here folks. Geez! The record companies have “forced” a ridiculously low royalty rate on the artists who “agreed” to the ridiculously low royalty rate. Even if Apple doubled the price, the artists would still be getting the same ridiculously low royalty rate compared to the record companies.
Genius writing:
“Eliminate the middlebronfman.”
The artist pays for recording time etc, apple pays for iTunes and its bandwidth – what exactly do the record companies do?
The record companies pay for all that wonderful promotional material so that we’ll be sure to know everything about Brittany Spears.
Get a job, “artists”.
Ah the same ol’ story when I was in the industry…the record companies screw the musos and then cry poor. A manager does provide a function and the good ones are worth every cent. The record companies are blood suckers short and sweet.
The only reason I won’t do illegal downloads is that it would take money from musicians. As for the companies, screw copyright and screw them. The time I spent in the industry (over thirteen years) showed me that there are some real bloodsuckers out there. The RIAA and the Australian equivalent ARIA are regular vampires.
An Australian footnote:
The fourth predicted launch date of the Australian opening of iTunes music store has come and gone…screw Sony/BMG and Warner Music.
I’ve just read this quote, where the labels say that artists “have not had to invest heavily in creating new legal online services and fighting Internet piracy” as a way of explaining why they pay them so little.
What did the record labels pay for in relation to iTunes? iTunes after all is the dominant player by a large margin. Apple should buy apple to avoid problems and then just let anyone sell whatever they way directly via iTunes.
Is this article referring to independent artists? If not, then Apple isn’t the problem. If they are independent artists, and Apple is only giving them the same percentage as the record labels give them, then shame on Apple.
“Eliminate the middlebronfman”- how nicely put……
Who the hell is “Snow Patrol”? Sounds like hip-hop crap anyway…
here, here! eliminate the “middlebronfman” and all others of his ilk. if it weren’t for the artists, there would be zero profits for the labels. the artists should band together and sue the labels for extortion, get released from their contracts, then everyone go to iTunes. who needs the bloodsuckers.
that come out of Apple’s tiny slice of the pie.
Apple’s barely breaking even on iTMS downloads. Record labels are profiting on every one.
So which chunk of the pie should the managers be going after?
I agree, artists deserve more. But not from Apple’s slice!
According to most reports, record labels take 70 cents for each song Apple sells for 99 cents. Apple spends almost all of their 29-cents on bandwidth, iTunes operational costs, and marketing.
Don’t blame Apple because Apple is not in control of what the record labels do with the money. That is supposed to be handled by them.
It costs the record companies less to sell through iTunes so they are getting a better margin. How do they justify making the musicians take a “new technology” reduction in their royalties? Something smells here.
What makes anyone think that Apple-as-label would give any bigger slice to the artist than the existing labels do? They’d inherit the same advance liabilities (recording, promoting, touring) as any other label, and they’d expect to profit from it.
Funny your comment mentions the Apple Corps thing, my article came to that conclusion too.
http://www.appleshift.com/index.php?option=com_content&task=view&id=95&Itemid=3&mosmsg=Thanks+for+your+vote!
Dear Jack A,
How do they do they justify their screwing of musicians? Simple it’s called greed.
Dear PC Apologist,
“What makes anyone think… Apple would give (more) to the artist…” Simple if you want to lure someone over to your product you give them a better deal. Isn’t that what the Windows’ world has been pushing to sell their dipstick products. Get a life!
So let me get this straight. The artist is paying for the recording, Apple pays for distribution and marketing on iTMS, and the record companies are providing exactly what service in the digital distribution scheme? Hmmm… sounds to me like the people taking the most are doing the least. The funny part is, they then have the stones to complain that it’s not enough!
ndelc –
Record companies are doing the marketing. Apple is *not* promoting anyone’s new CD, *not* setting up appearances in stores, at events, and on TV and radio, *not* keeping people on payroll to advise hair, makeup, wardrobe, *not* stepping up to “explain” artists’ stupid anti-gay / racist / uninformed / etc. comments which could sink their record sales if not dealt with.
Arists don’t pay for marketing out of their slice.
Funny how the ones that are complaining the loudest are the ones that are taking the largest percent of the money and doing NONE of the work!
I say we do our best to support digital distribution, pay to see our favorite artists when they come around on tour and eventually some of these FAT CATS at the labels will have to get real jobs or at least a proportionate amount of the take.
The guy who runs CDBaby, a label which signs up indie acts, has posted multiple times on Slashdot and he makes it a point to stress that with his label, artists keep 90% of the profits.
90%
The reason the artists’ royalties are getting eroded? The labels that are so-called representing the artist are ripping them off and keeping most of the dough, pure and simple.
Now we here that “the costs of promotion” are so high that the artist is being sent to the poor house. Those promotion costs are exactly why the execs are driving $100K cars and living in $2 million homes.
Seriously, Apple just needs to show how much an artist will get if they bypass the labels all together. It shouldn’t need to cost $20 million just to put on a few shows and stamp out some CDs. Professional recording is not that expensive.
Is my math wrong, or are they getting 17.5% of the price not the 6 percent they are saying? 79/4.5 = 17.55555
Is this some new fuzzy math, or is something else going on here?
<< Flash forward a few years: Apple has settled with or bought Apple Corps. Apple signs Snow Patrol. Snow Patrol gets far more than the mere 12-percent they so longingly dream of today. >>
Interesting thought. The labels currently receive 69¢ of the 99¢ download revenue. Artists receive 6¢ of the label’s 69¢. What would happen if Snow Patrol were to get 50¢ per download, and be responsible for all production and marketing costs? Instead of contracting with a single label to market and distribute their music, they own their work product and contract with the successful distribution bidder.
With artists focusing on download material vs CDs, they would have greater control over illegal copying, piracy and their music/finances.
What would happen to iTMS revenue if they got 49¢ per download vs the current 30¢?
I think its time to load up on more AAPL stock. It ain’t going to get any cheaper than it is now.
First I thought all these high and mighty performers did it for the “ART” My ass. They wanna get rich. So Let them start their own labels.
Here is How
1.Buy the Instruments and equipment for your band to play live (microphones, speakers, etc.)
2.Buy a Mac.
3.Buy the equipment to commecto Mac and instruments.
4.Record music using GarageBand.
5.Burn a copy of the music to CD.
6.Design the Jacket and CD Art.
7.Pay company to make 10000 copies (about $0.80/CD at that size)
8.Place Music on Apple.
If you are good you will not be able to get famous as fast as with a label, but you can start your own, and keep 100% of the profits. (must pay expenses first)
If they say. but thats too expensive, then they don’t believe in themselves and will never make it anyway.
If artists singed to an Apple label…
Would Apple produce CDs as well or would they be limited to one distribution channel with only one type of media?
Would artists make as much money if they were limited to individual download sales?
Would I, the consumer, want to be limited to purchasing music through only one store, being tied to a specific format, and having to use a specific bit rate?
king_alvarez,
You are limited to purchasing your music now. You are stuck with 44.1Khz, 16bit CDs. There are very few SuperAudio (or whatever its called) albums out.
Being a professional musician myself, you do it because you love it. The money comes if you are good at it. Most all musicians would be happy making a good living just doing music.
PC Apologist,
if you re-read my post, I said that Apple takes care of the marketing “in the digital distribution scheme” (meaning iTMS). I realize that Apple isn’t doing ALL of the marketing. I’m simply talking about the music sold through iTMS, which is what they are complaining about. Not CD sales or sales through other digital distributors. The marketing on iTMS mainly consists of what they put on the front page of the store and their e-mails. The technology behind iMix is another marketing tool.
Selling music through iTMS requires very little work on the part of the record company, yet after taking most of the money from each sale, they are the ones complaining that it’s not enough.
Eric, there’s nothing fuzzy about the math — you’re just doing the wrong calculation. 4.5/79 = .057(ish) (5.7%)
Your calculation worked out that 4.5p is appx one seventeenth (or, appx. 5.7%) of the whole 79p.
Eric: your math is wrong. It should be 4.5/79, which works out at 5.7%.
Hence why I’m not in a Math related field……
ndelc –
Whatever marketing Apple is doing “in the digital distribution scheme” is probably irrelevant to the sales success of the record. When I said “CD” I meant the track/album/recording itself, not the medium.
If there is any number of people who just go to the iTMS and choose to buy whatever song Apple has on their banner at the moment, I’d bet money it’s statistically insignifigant. People go to the iTMS with a purchase in mind. Their awareness of an artist / record / album is the product of record company marketing.
Making music AVAILABLE for sale through iTMS requires very little work on the part of the record company (versus the cost of pressing a CD, LP or tape and printed packaging and liner material).
SELLING music there takes exactly the same amount of work as does selling music in a store. Possibly more work, because “the record store” is a ubiquitous concept for most living Americans, and they deal in cash, whereas iTMS, eCommerce, and even the internet itself are still unknown or unavailable concepts to some people, and credit is not readily available to everyone, either.
Call the record companies greedy bastard weasels all you want, but don’t pretend they aren’t driving the sales. They most definitely are.
PC Apologist,
You’re making a lot of assumptions. Most of the new music I buy these days comes from discoveries made through iTMS. I see new releases on the front page of the store front and listen to things I think may be interesting. I also pay a lot of attention to the “Top Artist Downloads”, iTunes Essentials”, “Listeners Also Bought”, “Top Rated iMixes”, “iTunes Originals” and “Celebrity Playlists”, all of which are iTMS marketing. I don’t listen to the radio, so my new music purchases are nearly 100% driven by iTMS marketing. I realize that most consumers are not like me, but again, I am strictly talking about their attitude toward selling music through iTMS. Everything you talked about them having to do, they would have to do to sell through brick and mortar stores anyway. Selling through iTMS adds no additional expense, but they get the bulk of the money from it, then complain that it’s not enough.
Your hatred of all things Apple has clouded this issue. The record companies are greedy. It isn’t anything new. I was a professional musician for several years, and I met many people in the business. Most of them, not all, but too many, were greedy leeches, always looking to take advantage of any and every situation. The digital era is proving to be a crossroads for them, and now they’re desperately trying to cling to their money machine.
Eric,
…don’t sign any recording contracts with those math skills….or better yet, the companies would LOVE you to sign some of their contracts….
revisit the Dixie Chicks/Sony contract dispute…..it is amazing what artists get charged against their take. It is not Apple’s fault or solution. You should be covering them in the wholesale price to Apple.
….I would like to see how much it costs the record companies to run the hosting solution equivalent to the itunes store….and lets see what how they charge *that* back to the artists….
Hopefully in a years time some of these problems will be sorted out. We all know the music labels are greedy and will screw anyone they can for a bigger piece of the pie. If Apple continue to have a stranglehold on the music download business, I believe that they will begin to dictate the deals more. If iTMS becomes the defacto standard, then licensing is a real possibility for Apple. They could charge a small fee per song and make almost as much money out of other services as they currently do with their own. Plus it will get them out of the monopoly issue. I can’t see the labels being eliminated for a while but I can see Apple forcing a better deal for themselves and possibily for the artists too.
PC apologist,
Your assumptions are incorrect. Half of my purchases on iTunes were self-discovery, a mix of random searches for styles of music, ITMS suggestions, and banner ad promotions. For example, I knew nothing about Zero 7 until stumbling across their music on itunes.
Misplaced unhappiness. Someone’s confused. Either the artist and his manager is not realizing he’s the idiot that signed the lousy contract to begin with, so who’s to blame? Or, the reporter is confused because the example was a song on iTunes. The point isn’t iTunes remuneration. The problem is the label’s contract with the artist, but anything iPod or iTunes or iTMS has a gravitational field that just confuses reporters to no end.
apple isnt in direct contact with the artists. thats the music labels. theyre the ones who negotiate the contracts with the artists.
a flat rate on apples part is the fairest thing they can do, and i believe the only way they can maintain control of there own system. why let the music industry control what they didnt create??
the music industry is about $$$$. thats all. never forget that.
What I find amusing is that the Movie Studios seem so eager to cozy-up to Wal*Mart and their new “Movie Download Service.” Wal*Mart INVENTED the idea of the retailer setting prices.
So the entertainment industry is mad at Apple for setting prices on iTunes, but then then gets in bed with Wal*Mart? I think with respect to movies they just cut off their nose to spite their face.
The entire entertainment industry is rotten to the core.
Diddle my penis, laddy!
Grow one…