|
|
| Advances: |
| Advance amounts used in the M.A.R.C. should include all monies given directly to the artist. (Except royalties). On major labels, typical Advances are $250,000 for each of the first 2 albums, $350,000 for the third and $500,000 for each album beyond that. You will have to produce your album out of this money. This will likely absorb 90% of the Advance. If you want to calculate for one album, enter $250,000. For two albums, enter $500,000, for three albums, $850,000, and so on. Independent label Advances are typically between $5,000 and $50,000 per album. |
|
| Retail Price of Record (SRLP): |
| Whether you are calculating for a major label or for an indie label deal, you will need to calculate an average of CDs –to other types of media, like downloads, and ringtones and, believe it or not, cassette tape & 12″ vinyl sales. Cassettes and 12″ vinyl still make up about 10% of world wide sales for some artists and will generally sell for about $8.98. Regardless of the fact that many CDs, at time of release, have a list price of $17.98, most CDs really sell for the marked down list price of $12.98. For this reason $11.98 is selected for you, because it is a close approximation of the weighted average of what a combination of CD, downloads, cassette tapes and 12″ vinyl record will sell for. If you are calculating for an independent record deal, which is usually about 80% CD sales and 20% other types of media use $13.98 as a base. If you are calculating for Super Star status on a major use $17.98. |
|
| If your sales statistics don’t figure into these pre-packaged percentages and you want to figure out your own weighted average, here’s the equation: |
|
Let
“X” = the percentage of CDs sales. |
|
|
[(.X) (price of CD)] + [ (1 – .X) (average price of other media)] = weighted average price of unit sale.
|
|
|
Example: [(.75) ($12.98)] + [ (.25) ($8.98)] = $11.97 (closest button – $11.98)
|
|
| Artist Royalty: |
| Many record contracts may say that the label is giving you a 15% royalty or higher, but there are hidden deductions, usually called “new technology adjustments,” that will invariably bring it down to 12%. The trend is moving away from this deduction since CDs are no longer considered “new,” but this deduction still appears in many contracts. Only artists with proven track records maintain a royalty higher than 12%, therefore, 12% is selected for you. |
|
| Promotion Money: |
| On a major label deal, the promotion budget will typically be about $500,000. Therefore this is selected for you. If you want special packaging, posters, limos to the Grammy’s, or there has been a bidding war for your contract, they may give you more; maybe $750,000 per record. But remember, the more they spend, the more you owe. Indie promotion ranges from $25,000 to $50,000 per record. If you have a Pressing and Distribution deal with a label (where they only distribute the CD for you and do no promotion) then select $0.00. |
|
Producer’s Royalty:
|
| Producers get between 3% or 4% for most projects. The important element is if they are paid from “record one.” This means that the producer gets his royalty as records sell (from the first record sold) and does not have to wait for the record company to recoup of all the money spent on the artist before they start paying royalties. A “record one royalty” is the most common for a new artist, so “yes” is clicked for you. If the artist is established and the producer is looking for his break, then click “no.” |
|
| Packaging Deductions: |
| ALL major labels, and 90% of the independents, charge the artist for the record’s packaging, which includes the liner notes. Typically, it’s 25% of the retail list price of the unit (yes, even for downloads where there is no “packaging”). Everyone knows that this is absurdly high, but only super stars seem to be able to get this reduced. 23.75% is selected for you because it is the weighted average for a major label deal where you are likely sell a ratio of 75%:25% CDs to other types of media like download and ringtones. For an independent deal, where you more likely to see a ratio of 80%:20% CD to other types of media, 24.5% is the weighted average. 25% should be used for CDs only, such as P&D (Pressing & Distribution). In rare super star contracts the packaging deduction is reduced to 18% or waived completely. |
|
| Percentage of Sales Paid: |
| Until you are established, most label contracts have a series of deductions that pay you on only 80% of actual sales. Some deals say 80% for the first record and 90% for the second. Some artists get 100% of sales after they sell over 1.5 Million units. |
|
| Breakage: |
| Breakage is a left over scam from the old days when vinyl records were fragile and crumbled while shipping. The label would not pay the artist for broken records and so they estimated the “breakage” at 10% and deducted it from the amount of records sold. They still deduct this 10%, even though CDs are made of an almost indestructible material. When you are established you can get this thrown out and get a 0% deduction for breakage. Indie’s routinely waive this deduction, but majors don’t, so 10% is clicked for you. |
|
| Advanced Tips: |
|
|
|
| 1. |
|
How to make the number of record to break even lower:
|
|
|
You may have noticed that, on a major label deal, you will have to sell in the area of a million records before you are owed any additional royalties. A first line of defense for this is to ask for higher royalties, but there are other ways. Try the following techniques: |
|
|
|
|
a.
|
Do a configuration with the same royalty but no packaging deduction. This should teach you that a higher royally rate is not as valuable as lower packaging
deductions. |
|
|
|
|
b. |
Do a configuration with the record-one button in the “no” position. You will have to sell fewer records if the producer is not paid on record-one. Try to get this when negotiating with your producer. |
|
|
| c. |
Try a configuration with less money spent on promotion but a higher royalty rate. Notice that for every $50,000 spent on promotion means you must sell approximately another 70,000 units to break even. (How important are those first class hotels now?) |
|
|
| 2. |
|
A five album deal on a major label: |
|
|
If you want to see approximately how many records you would have to sell to get paid on a typical five album contract, enter the total amount of money for all five records into the advance slot. Then, $2.5 Million for the promotion slot and click 15% (weighted average over 5 albums) for your royalty. This works, because all records on most major labels deals are tied together; Debts from one record are attached to the debts of the others. |
|
|
|
Advance: |
budgets for all 5 records |
SRLP:
|
15.98
|
Royalty:
|
15%
|
Promotion:
|
$2,500,000 |
| Producer’s Royalty: |
3% |
| Record One: |
yes
|
| Packaging Deductions: |
23.75% |
| Percentage of sales paid: |
80% |
| Breakage: |
10%
|
|
| 3. |
|
Independent deals (one off deals): |
|
|
On indie deals royalties are bit higher, but Advances are substantially lower. Enter only $25,000 in both the Advance and Promotion slots. A 14% Royalty, 90% of sales, 4% producer’s royalty not paid from record one, and no breakage charge. SRLP’s tend to be higher, around $13.98. For five-album deals use the same logic as the major label deal above with the following numbers: |
|
|
|
|
| Advance: |
$25,000 (per album) |
SRLP:
|
13.98
|
Royalty:
|
14%
|
Promotion:
|
$25,000 (per album) |
| Producer’s Royalty: |
4%
|
| Record One: |
no
|
| Packaging Deductions: |
24.5% |
| Percentage of sales paid: |
90%
|
Breakage:
|
none
|
|
| 4. |
|
A P&D deal (Pressing & Distribution): |
|
|
Many artists these days opt to do the promotion and production of their record themselves and to have the label only distribute their record. For this type of deal the Advance is the same as the budget for your CD. SRLP is a bit higher for reasons too complex to go into here. Entries to approximate a typical P&D deal are:. |
|
|
|
|
|
|
Advance:
|
budget for record |
|
|
SRLP: |
15.98 |
|
|
Royalty:
|
75%
|
|
|
Promotion: |
$0.00 |
|
|
Producer’s Royalty: |
0% |
|
|
Record One: |
—
|
|
|
Packaging Deductions: |
25% |
|
|
Percentage of sales paid: |
90% |
|
|
Breakage: |
10%
|
|
|
|
|
| 5. |
|
Self distributed: |
|
|
For the do-it-yourselfers, selling your home-spun CDs at your gigs, try this configuration. The answers given are pure profit and have already accounted for the pressing and packaging cost of the CD. |
|
|
|
|
|
|
Advance:
|
budget for record |
|
|
SRLP: |
11.98 |
|
|
Royalty:
|
75%
|
|
|
Promotion:
|
$0.00 |
|
|
Producer’s Royalty: |
0%
|
|
|
Record One: |
0% |
|
|
Packaging Deductions: |
— |
|
|
Percentage of sales paid: |
90%
|
Breakage:
|
0%
|
