DYM - Newsmail / How high should the expenses for music be?

Dear friends of “Danza y Movimiento”!

Finally, there is another newsletter dealing with the topic “How high should the expenses for music be?”, which we started early this year! I promised some weeks ago to explain the costs of a CD production to give you an idea. Would you like to know how much a Tango or Salsa CD costs? Then please keep reading:

These days, I have had to do some research for a new Tango CD project, but no matter if Tango, salsa or Samba, the costs I am mentioning don’t depend on the genre.

My calculation takes the following components into account:

1. The recording and the mastering are done in an inexpensive recording studio. The musicians earn some pocket money. The recording and the mastering do not take more than 18 days and they do not exceed 20.000 Euro inlcuding royalties and incidentals.

2. The format will be a digipack for aesthetic reasons. There is a booklet with some basic information on the CD. The costs for the layouters and photographers involved is 3000 Euro.

3. The production of the CD and the necessary print material is 1,50 Euro per CD.

4. For the promotion of the CD we budget the (ridiculous) amount of 5000 Euro. (this budget does not allow to place ads or to print posters... But we cannot spend more than that.)

5. The CD enters the market as a high price product. If the shops sell the CD for 17-18 Euro, the label which has produced the CD will get 7 Euro per CD.

6. The GEMA (society for author’s rights) gets 10% of the price the shops pay. At the moment, this price is about 10 Euro for high price products in the case of the big department stores which get a very high price reduction (there are hardly any small and independent world music shops left on the market). This means: the GEMA gets approximately 1 Euro per CD. They are obliged to forward the money to the authors and composers.

7. And then there are the artists performing on the CD who should get a percentage of the sales. They receive about 17% of the price the shops pay according to our contracts. In other words: the artists get 1,70 Euro of every CD sold in the case of the example given.

The result of this calculation is: The label has to sell more than 10.000 copies of a CD in order to gain a single cent.

Such sales figures are illusory. Working in the niche of world music, everybody dreams of these figures, but hardly any artist achieves them. Plus, the sales of new artists has decreased siginifantly in the last years. Even in the Mainstream-Pop business, the majors (Universal, Sony, BMG etc) start to open a bottle of champagne if the sales figures hit 10.000. An unknown world music artist sells 2-3000 albums, if he sells well. If it doesn’t work out so well, the sales figures can end at 500 copies.

So we return to the question: How should a record label calculate the production of a CD? Let’s say, the new CD does not work so well and sells only 1000 copies. 1000 is a realistic number. In this case, the loss for the record label is 26.000 Euro. But even if the CD sells 5000 albums, which would be really a lot, the record label would still lose 15.000 Euro.

So why do people still produce world music CDs? One of the major arguments must be the unbeatable idealism of the people involved.

In practise, this means in the example of the CD mentioned above: The CD is produced in a very inexpensive recording studio in Latin America. The majority of the people involved do not charge any fees. This saves a lot of costs.

But even by working on these self-destructive conditions, the record label has to sell about 2000 CDs for the shop price of 18 Euro in order to count the first Euro.

How can record labels reach a break even point? Let’s say, a new production sells 1000 CDs. The price of a CD in the shops would have to be 56 Euro (including the German VAT of 16 %) in order to finance the low budget production.

If you are willing to pay this price for a CD, we will happily produce CDs with new artists!

Many regards
Matthias Möbius

Additional information 1: A major part of the current world music CDs is already financed by foreign money. Somebody who earns enough money as a building contractor or in the fashion business, can also finance a small world music record label... :-)

Additional information 2: Are downloads the solution to the misery? Shortly, there will be another mail dealing with that topic.

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