November 26, 2012 Major Labels Still Invest in Music (Kinda)
My friend George Nunes, GM for the record label Show Dog Universal Music, emailed me this interesting article the other day regarding how much major labels still invest in music acts.
In the graphic below you’ll see how major labels are currently advancing and promoting acts, primarily pop acts, in order to break them to the general public. It’s an interesting refresher in how much major labels are still able to put towards music, albeit music we may not care for. Their options are minimal and their expectations are high. With this still hefty investment, it makes you wonder how successful they could be pushing smaller, touring groups instead of putting all their eggs into one basket. 
Let’s break these numbers down for an indie act:
1. The typical advancement they pay ALONE will cover a bands’ wages for at least a couple years. Think about giving a band with 4 members this type of advancement. They could be on the road CONSTANTLY and still have rent paid while they were away. Where would the record company be making their money back? That’s for them to figure out. I’m just breaking down this number.
2. The recording costs in this graphic suggest they are using professional studio time which is interesting considering how powerful home studios are now. The great recording studios of the 70’s and 80’s are a dying breed. Considering the fact that most pop music is over compressed and mastered at a high volume you wonder why this is even necessary. A $25,000 budget can easily meet the criteria of any indie album since you don’t need to actually write the music in the studio. Most independent acts like to find that rustic “hole in the wall” to record. Here in Portland, OR we have a studio called Type Foundry that usually goes for $350 a day…A DAY! Let’s say you budget $4,000 for incredible mastering, that leaves you $21,000 to make an album. If you used a studio like Type Foundry that would give you 60 days in studio. TWO MONTHS STRAIGHT to record an album. Considering albums don’t sell like they used to the band will probably release more of a long EP, so you could get one album for $25,000. That leaves you with either a $275,000 surplus OR it covers 10 more albums just like it in the artist’s contract. That is content, constantly being created, to constantly be marketed.
3. VIDEOS DO NOT NEED TO BE EXPENSIVE. Azealia Banks is a great example. She shot the video for “212” with a single cam and that video got her a deal with Interscope (and yes some other things were in play). Reality is videos don’t have the marketing strength they used to. People love the visual aspect but it doesn’t need it to be cray cray. An indie band/label could easily get 3 videos for around $3,000 each. That’s $9,000 total. So that leaves, on the high end, a $290,000 surplus. 4. Tour Support is actually where $100,000 makes sense. In fact I think it could be more. Touring is where bands are making their brand really stick. The internet just confirms the consumers love for the band. The growing complication with touring is the “Festival Mentality” that keeps eating up acts throughout the year. A lot of bands aren’t touring during the summer because festivals are going on. But anyone can tell you that festivals, while pretty awesome socially, are not an ideal way to see your favorite bands. The best sound, lights and vibe are in a venue that caters to only them and the touring support. An indie band doesn’t normally get these kinds of amenities so imagine their pleasure when they find out they are going to tour with an established act? $100,000 should be used for a touring expenses, touring vehicle and marketing. With that budget a band should be able to tour the US and Europe for two years EASILY.
4. Marketing and Promotion should be a huge money suck but the reality is that if you gave an indie band $200,000 - $500,000 to promote themselves they wouldn’t even know what to do with it. That’s because the main difference between large major label acts and indie bands is the way the artist themselves connects to their fans. Indie bands thrive on having personal relationships with their fans. Knowing them and staying in touch with them. This can be done insanely cheap. Fans that hold that strong personal relationship tend to be constantly in tune with the band. Major labels need to spread the pop act as far across the market as they can since most of their fans are going to be more fleeting and apathetic. Its incredible how much money needs to be spent on marketing for a Nicki Manaj record when EVERYONE knows its coming out. Everyone knows it. I’m sure the marketers for large labels have numbers to back it all up, but it is still mind boggling why it requires that much money to remind her fans that the music is going to be available. I look at bands like The XX, and while I don’t know how much they spent on marketing for their latest album, I am pretty sure it pales in comparison to the Bieb’s latest. Marketing dollars do tend to relate into sales but $200,000 to $500,000? An indie band would probably require $100,000 for an album to be promoted and then proceed to tour their asses off and get to know their fans. That is the reality, that is the way of life for them.
I really don’t know what Major Labels’ profit margins are now a days. That would be a pie graph I’d actually be interested in seeing. But given the basic budget information in the above graphic it’s hard to understand why they don’t see potential in developmental artists. Artists with smaller egos, with more humble expectations and with a stronger support system. I still believe that record labels are where artists are truly born and brought to the public, but they need to re-evaluate their budgets so they can maximize their roster potential.
Reader Comments (6)
Soundgarden has been advertising on Palladia non stop. Almost every break it seems like there is an advertisement for the new album. I am lucky enough that I get to work from home a lot, so I see these daytime adds, but who else is seeing them!! It seems like such a massive waste of advertising money. Soundgarden fans are not sitting at home during the day watching Palladia. Well, I am, but I'm the lucky one.
I can't wrap my head around the industries refusal to change with the times.
Thanks for this article, Hoyt!
I think you have some great points here. A lot of the money could be reallocated or not spent at all, making it easier to reach that crucial break-even and profit point.
nice piece. Love the breakdowns. Where did the info for the catalyst graphic come from? would be interested to hear if that's an average monetary graphic including all the A-list acts AND all the shelved "new" artists that will most likely never see the light of day.
Your evaluation of the costs and needs of recording an album in section 2 seem to indicate that you haven't had much experience in that world. Compression and "high volume mastering" only make crummy recordings louder and bring out their shortcomings, they don't cover or make up for that. I also don't think you have the correct day rate for Type Foundry and of course if that is the studio rate you forgot to include any costs for producer or engineer or session musicians or any of the other costs of really making an album.
I won't even question where the rest of your "facts" come from in this piece, but I just hope people don't read this and think the recording information is researched, valid or comes from real experience, as I really don't think it does.
I was kind of thinking some of the numbers looked low as well. 100K for tour support seems like nothing, but I guess it depends on the act.
Hey guys thanks for the comments/criticisms.
Here is the article that contained the graphic: http://www.digitalmusicnews.com/permalink/2012/121112major#XqlPO0xKApZZOtUPwhuPrw
I know some of the numbers aren't adding in certain costs, as Larry noted, but they were meant to be representational not factual. I've been part of numerous independent albums from start to finish and the numbers are meant to reflect what I saw spent by the artist compared to what a major label might be able to offer. I think we can all agree that it doesn't cost an independent artist $250,000 to record an album. Also feel free to correct my assumption that most Radio/Mainstream friendly songs are over compressed and high volume mastered.