If anyone attending the Country Radio Seminar still doubted the troubles facing the recording business, a presentation of case-study profit-and-loss statements by artist and label representatives cemented the position March 2 during “Show Me The Money: The Economics of the Radio and Music Industry,” an opening-day panel at the three-day event.
A record company now has to sell 544,000 copies of a headline-level artist’s album just to break even, according to a series of representative P&L statements displayed by Universal Music Group Nashville executive VP Ken Robold. That’s an increase of 115,000 from the break-even point in 2004, when albums sold in greater numbers.
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Yet that same record company is the only entity that keeps a new country artist with two or three hits from making as little as $30,000 in gross annual income, Flood, Bumstead, McCready & McCarthy business manager Chuck Flood demonstrated. That new act typically boasts a $1.185-million revenue stream between concert fees, average merchandise sales of $60,000 and a royalty advance of $25,000.
The bulk of the income, however, is depleted by commissions and tour costs, and that artist would likely have a pre-tax income of $104,000. Some $75,000 of that comes from tour support — money the record company shells out to keep the act in front of potential fans.
Sales, of course, have dropped dramatically. CD sales dropped a whopping 70% from 2000-2010, Robold noted, and online sales are not filling the gap. When consumers paid as much as $18 for a CD in 2004, the gross margin for the label — after paying for distribution, manufacturing, copyright fees and artist royalties — was approximately $7 per unit.
When an album sells for $7 via iTunes, the label now gets a larger percentage, but it’s still less money: a $4.39 profit.
Meanwhile, a 99-cent digital track brings the record company a total of 70 cents, and 43 cents of that amounts to profit.
One prediction from that panel: the days of artists playing free listener-appreciation concerts for radio stations may be coming to a close.
An even more difficult pill for aspiring artists to swallow: of those who even get two or three hits, only one out of 10 is likely to make it to the next level. Thus, finding someone willing to bankroll star aspirations has become increasingly difficult.
“It’s not the kind of business model,” Flood said, “that can attract investors.”
CRS, presented by the Nashville-based Country Radio Broadcasters, continues in Nashville through Friday.