Behind the Record Company Curtain: Costs Part II

I believe it’s important to know a little bit about the value proposition behind the music you purchase…at least in the audiophile world. A couple of days ago, I wrote Part I about the costs associated with making an entirely new production. A new production means you start with nothing except an idea. Compilations and remastered music are different and much, much cheaper to produce and release.

Here’s the continuation of the post:

Then there’s the cost of printing, replication, packaging, shipping, and distribution. Everything costs money. The actual cost of goods for a typical Blu-ray disc – including all of the things mentioned above – is around $15 per unit, if you think you’re going to sell 2000 copies. This business is brutal and it’s no wonder that little audiophile labels like mine struggle to stay viable. I have to sell at least 2000 copies of each record to break even. That’s not too hard when you have a name artist like Jennifer Warnes or even John McEuen. But it’s not so easy when the artists are relatively unknown or the genre is out of the audiophile wheelhouse.

After you’ve got the package in hand, there’s a black hole that you can pour money into for promotion, social media campaigns and free copies to reviewers. I try to limit my outlay when it comes to independent promoters and search engine optimization people. Instead, I show up at trades and try to make people aware of my productions through this blog, my FB page, and by word of mouth (which can be very powerful), which has been the primary driving force behind the success of AIX Records.

Artists on AIX Records make money from song publishing and royalties. If they wrote the song, there’s publishing money paid on each track of each unit produced and sold. Once I’ve recouped my hard costs (dollars that I’ve actually spent for outside services for camera rentals or replication and printing), then the artists are paid between 15 and 25% of all dollars received from the sale of the title. If I sell around 3000 units, they get a pretty good chunk of money…not the huge dollars paid to major celebrities but thousands of dollars…AND publishing money from unit one.

Then there’s the opportunity to license a tracks or tracks for promotional or commercial purposes with a major company. I was in the SF Bay area last week and was close to the headquarters of Creative Labs. Years ago, they had me prepare a custom DVD-Audio title to be bundled with their Audigy II card. They didn’t pay me to produce the disc, but instead gave me a few pennies per copy. I put a lot of classical music and songs by artists wanting the promotional bump on the disc so that there would be no publishing headaches. In the end, those few pennies that I got per unit added up and there were some substantial checks issued by Creative Labs to AIX for a few years. I still do a lot of licensing…companies like Acura, Porsche, Intel, Microsoft, and others use my tracks to help show off their products.

To be continued…