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Should You Sign With a Record Label?
It seems like the ultimate dream of most artists, is to get signed. Why do we want to get signed? For promotion and to actually make some money with our music. Sounds reasonable. But let's talk about the real world.
Since the beginning of time, people were making music. But most of the time, musicians weren't rich. In fact, musicians that did make money were more like beggars, preforming on the streets, and hoping for donations from by-passers. But usually, music was just something you did for leisure, collectively, as in evening dances or festivities; or to worship God.
Music can only be sold in societies were people have time and money to care about things other than food. So came the 20th century and more and more people in many parts of the world began to have both. African Americans in the '50s could really make good music that people would pay for. They begin travelling around the United States doing shows and selling records. So begins the music business.
Finally, musicians were able to do what they enjoy doing full time, and get paid for it! The biggest problem was... promotion. In our noisy world, to sell anything, you need to know how to market your services. A totally different field of expertise. That's where record labels come in. They let you focus on the music part, while they focus on making connections with retailers and organizing shows.
But keep in mind, they are businessmen. They are interested in maximizing their rate of return on musicians they invest in. If some artist's music doesn't appeal to the masses, they lose money. To account for that, they start taking away more from the royalties of their musicians. Let's take a look at how much you actually make as a signed artist.
Here are some calculations taken from howstuffworks.com. Suppose you record an album and it sells at a typical price of $15. Let's say, it becomes a hit, and 1 million of them are sold. So the raw profit should be $15,000,000. Now let's start our deductions.
The first deduction comes for packaging costs, which usually is 25%. That leaves us with $11,250,000.
The artist is usually paid 8% - 25% royalties by the record label. The actual percentage depends on how popular you are. Only top artists in the world make the higher percentage. Most artists fall into the lower range. As a beginning artist you make about 10% of the suggested retail price. So that would be $1,250,000. Still, not bad, huh?
About 10% of those albums would be given away as freebies by the record label for promotional purposes. That leaves us with $900,000.
Then we come to the recording and performing costs.
Recording Costs - $300,000, Promotion Costs - $200,000, Tour Costs - $200,000, Music Video Costs - $400,000. When we subtract all of that, we are left with $212,500.
Now we need to pay the manager (usually 20%), leaving us with $170,000. Then we probably would need to pay the producer and several band members, (remember they were touring with you throughout the year?).
So if you break it up like that, musicians don't make much even in our days. The way the system is set up, is so that only the very top artists make money. Quality control is pretty effectively enforced, I guess. But of course, what you do get, is exposure. You get to appear in the charts, gain some popularity (if you're really good, that is).
The alternative way of doing music, would be to slowly but patiently build your listener base. It's possible, especially with the invention of the internet. There are more venues for independent artists than ever before. But it would be a harder way. Just like any business, you get paid pretty much nothing in the beginning, but if you persist, you build a fortune in the long run, a fortune much bigger than the employees who were working for somebody all this time.
The moral of the story is... Signing with a record label can greatly help with promotion, helping you focus on music, while letting the professionals handle the marketing and management. But don't think that getting a record deal is heaven for artists. Read the contracts carefully. Perhaps you will find it more beneficial to move at your own pace, letting your fan base grow slower, but reaping better revenue rewards in the long run. Try thinking like a businessman/woman yourself. Are there other things that you enjoy doing, which could supplement your income? Are there venues near-by that need musicians? There may be more opportunities than you think, if you look hard enough.
Outside sources: http://entertainment.howstuffworks.com/music-royalties6.htm