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November 4, 2011 • Music Diary

Music Diary News: Major Label Artists Get $0.08 for Each Digital Song Sold for $1!

This week we got news of rapper Chuck D suing Universal Music Group (UMG). As part of the court documents analyzed by Digital Music News, his lawyers revealed the payout process … and if you can figure out what all of the stuff in the image at the top MEANS – let me know!

The bottom line is that on a $1 recording sold on iTunes (or Amazon MP3 for that matter), Apple gets 30%, the artist gets 8% and the label gets 62%.

Looking deeper, the document is based on 1,000 unit sales – which would be $1,000 … we start with the total units, but then suddenly there is a discount taken – in terms of units! This means that 15% comes off the top, not from the MONEY but from the units sold. I can only guess that this is a way to keep the contract numbers high while taking a larger cut.

So now we have only ‘sold’ 850 units as far as the artist is concerned. Fine. Taking the 70% remaining after the iTunes cut, we have $595 (of the $700 UMG collected), which then gets cut by 25% for a “Container Charge for Audiophile Records”, leaving ~$450. The next line tells us the artist is SUPPOSED to get 24%, so this should be ~$112, right? Wrong – because that “audiophile deduction” is back to take 25% of THAT away … leaving the artist with just over $80!

I am not suggesting that the label shouldn’t get a sizable chunk – they are shouldering most of the risk and the overhead etc. But as shown on the document above, they are SUPPOSED to be getting 24%. Shouldn’t that mean that the artists would get $168 out of every 1,000 copies sold? I mean, that IS a simple 24% of the 70% cut UMG gets from the 1,000 sales. And, in fact, it is how many other places like TuneCore work.

But like so much in the music business … nothing is ever quite as it seems.

4 Responses to " Music Diary News: Major Label Artists Get $0.08 for Each Digital Song Sold for $1! "

  1. Anonymous says:

    There’s a great deal of pertinent information missing here.

    How much did the label spend to produce this particular recording and market it? How many units were sold? Is this the arrangement before or after the upfront costs incurred by the label have been recouped?

    An 8 percent residual would not fair at all assuming all the actual (non-inflated) expenses are paid, but 8 percent is probably fair until all expenses are paid off.

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