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.

6 thoughts on “iTunes: where your money goes

  1. Tim Worstall says:

    So, er , Robinson is claiming that the songwriters get “more” from iTunes than the regular 4%?
    And, that, if a recording is “only” promoted on iTunes, that the record companies will be charging against advances to promote it elsewhere?

  2. Gary says:

    So, er , Robinson is claiming that the songwriters get “more” from iTunes than the regular 4%?

    I don’t think so, no – once you take the publisher’s split into account the songwriter gets 3p (give or take a few points), which I think works out at around 4%.

    And, that, if a recording is “only” promoted on iTunes, that the record companies will be charging against advances to promote it elsewhere?

    It wouldn’t surprise me. Certainly until very recently record contracts had deductions for CD – decades after it became established, it was a new and risky format that attracted a lower royalty rate in contracts – and breakage deductions, which in some cases were 20% – based on breakage rates for shellac records, not sturdy CDs. Record company accounting is a fascinating subject.

  3. Squander Two says:

    > digital downloads aren’t as lucrative for musicians as the music business might have you believe.

    Well, potentially they are, precisely because they provide a sales model that doesn’t require record companies’ involvement. Any musician who thinks they’ll get the financial benefits of that even if they involve a record company is being a tad foolish.

    Mind you, the same technology that makes distribution so much easier also makes recording easy enough that £100,000 is overkill for recording an album. You can do an excellent job for a twentieth of that.

  4. Gary says:

    Yeah. It’s going to be interesting to see what yer Radioheads et al do now they’re out of contract.

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