iTunes: where your money goes

There’s a fascinating article in today’s Guardian (by musician Tom Robinson) that shows how digital downloads aren’t as lucrative for musicians as the music business might have you believe.

Out of that 79p, the person who actually wrote the song gets just 6p to share with their publisher. Even the credit card company sees 7p per individual download, while Apple takes about 12p for administration costs.

The remaining 54p goes to the record company, which assigns a share to the recording artist, typically 6p-12p. This may seem stingy, but wait, it gets better. Almost all recording and promotion costs are recouped from the artist’s modest share of the earnings.

…Say a label risks advancing you £100,000 to record and promote your new album. Let’s say (for simplicity) it’s sold only on iTunes, at a cost of £7.90, and that your royalty rate is 10% of that price. Result: for each album sold, the label receives £5.40 and knocks just 79p off your £100,000 debt.

At 20,000 sales the label has broken into profit and made £8,000. You still owe them £84,200. At 50,000 the label has made £170,000 while you owe them £60,500. At 100,000 the label’s profit is £440,000. You still owe £21,000. Only at 130,000 do you finally recoup and earn £2,700 in royalties. The record company has meanwhile made nearly £600,000.

None of this information is particularly new, of course, but Robinson’s explained it beautifully.