“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.
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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
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…