The Internet lit up earlier this week when rumors began spreading that Gwyneth Paltrow -- whose singing side-career has been ramping up over the past few months with her starring role in "Country Strong" and appearances on "Glee" and the Grammys -- had signed a $900,000 record deal with Atlantic Records. And while there was no confirmation at press time that a deal has actually been signed, we couldn't help digging out the calculator to see just how it might add up.
Of course, a pop-oriented album released by a New York label would not have the same marketing, promotion strategy and budget as one released by a Nashville-based country imprint. But assuming that Paltrow's hypothetical album had the usual costs associated with a big country album that sells from 1 to 2 million units, how well would it need to sell for Atlantic to recoup its costs?
If Paltrow's release had a typical superstar country budget, it would need to sell about 710,000 track-equivalent albums to break even, based on the typical album expenses shared by a Nashville record executive who chose to remain anonymous. (The track equivalent album metric converts tracks into albums by adding one tenth of track sales to album sales.)
A $900,000 album deal would actually cost significantly more than $900,000. That amount is a recording fund that pays for the cost of making the record. A superstar country artist's album can cost around $300,000. The remaining $600,000 would be given to Paltrow as a recoupable advance.
The meaty part of the deal would be the marketing and promotion expenses. This executive says the budget for a superstar country artist's album can easily reach $2 million. Within that sum are three or four singles -- which require videos and radio promotion -- in addition to packaging (photo shoots, graphic design, etc.), new media, consumer advertising, TV advertising and the cost of doing television appearances (which Paltrow is likely to do).
Here's the breakdown of the breakeven point based on our source's numbers and Billboard's math: Between the recording fund and the additional expenses, the project would have outlays of about $2.9 million. CDs and digital albums have a gross margin of about $4 per unit while $1.29 tracks have around a 60-cent gross margin and $0.99 tracks have around a 40-cent gross margin. Assuming Paltrow sells two tracks for every one album, and assuming track sales are evenly split between the two price points, her album would break even with sales of about 465,000 albums and 930,000 tracks.
Of course, there's more than recorded music involved; today's multi-rights deals also include touring and merchandise. Young artists tend not to earn much on the road early in their careers, so labels don't participate in that revenue right away. Country artists tend to land sponsorships if they're an established name, and those sponsorships are usually attached to tours. Paltrow could tour, and would have a head start on a similarly inexperienced country act. But given her acting career, it's doubtful Paltrow would sign away the rights less-established names must give to labels. For this reason, those elements are left out of the calculations in this example.
Also, celebrity is no guarantee for success in country music. Jessica Simpson sold just 186,000 albums of "Do You Know," the country album she released on Epic in 2008. The album has also sold 419,000 tracks.
On the flip side is the case of Darius Rucker, who wasn't a famous movie star but, as the frontman for Hootie and the Blowfish, entered Nashville from the outside. To date Rucker's first solo album for Capitol Nashville, "Learn to Live," has sold 1.5 million units and another 2.3 million tracks. His latest album, "Charleston, SC 1966" is off to a good start with sales of 418,000 albums and 470,000 tracks in 21 weeks.