Your opinion on the cut, some music stores are taking out of online music sales

Jason@GetItOut · 5th August 2009

What is your opinion on the cut that some music stores are currently taking out of online digital music sales?

Prices vary from retailers but on average an independent music artist or label will receive $6.00 - $7.00 per album and 60 – 70 Cents per single.

Even though distributors will collect, on your behalf, and give you 100% of the royalties, this figure is actually 100% of the net income, the amount left after the music stores have taken their cut. It could be 100% of 50% of the actual music price.

It seems that some of the most popular music stores are taking a big cut and given the high volume of online sales from some of the bigger stores, no names mentioned, it seems to be very un-justified especially when you consider how much it actually costs to host and deliver the individual files.

For an industry that a lot of people consider to be struggling, it's amazing that there are still billions of dollars worth of music sales going through each year.

If the larger music stores that set fixed prices for music took less of a cut from the sales, the overall price of music could be considerably cheaper without effecting the take of the label/artist. This intern may attract more buyers and could level out the price drop for the music stores.

???

rack gear · 5th August 2009

whole sale prices of physical product are much higher then the wholesale prices of digital music. physical product is much more expensive - manufacturing, shipping, returns, and most importantly RETAIL PRICING AND DISCOUNTS etc.

for example an $18.98 list title probably has a gross wholesale cost to retailers of about $12.00

then take 10% of off that for I/O discount
PAID TO THE RETAILER
so 12.00 - 1.20 = $10.80

then it cost probably about $3 per unit in coop (stocking) costs
PAID TO THE RETAILER
so $10.80 - $3.00 = $7.80

and there you go - the label ends up w/ about .80 more on physical product (before returns, shipping costs and warehousing costs)

this is also why frontline 18.98 list CDs can sell at retailers for $9.99-$11.99... and why list price is no longer relevant in the states as a basis for royalty calculations.

Jason@GetItOut · 7th August 2009

iTunes roughly take 50% of the sale and I think around 49% of this is profit. Even if they took 3% of the sale they would still make a fortune due to the large quantity of sales that pass through the digital store each day.

I personally think that they take too much but that's just my opinion. Less known artists would stand a much better chance of earning a full time living if this changed.

rack gear · 7th August 2009

Jason - your data is wrong. Itunes deals are pretty transparent. they take 30% off the top.

So on a 9.99 album, they pay $7.00 to the label.
on a .99 song, they pay .70 to the label.

it's pretty straight forward. if the label has to go through a middle man, to get to itunes than maybe that's an additional fee... but Itunes is only taking 30%.

The label pays the publishers directly.

The label pays the artist royalties.

If someone is being told itunes is taking 50%, someone is being lied too.

Check out tune core - I think they pay 100% of what Itunes pays out, after an set-up charge and an annual flat fee.

EDIT: Itunes/Apple for their 30% has substantial costs of network servers, staff, etc. If you can run the same business on a 3% margin - people would love you! Get on that!

Quote:

Originally Posted by Jason@GetItOut

iTunes roughly take 50% of the sale and I think around 49% of this is profit. Even if they took 3% of the sale they would still make a fortune due to the large quantity of sales that pass through the digital store each day.

I personally think that they take too much but that's just my opinion. Less known artists would stand a much better chance of earning a full time living if this changed.

BlueSprocket · 7th August 2009

You can look at this all kinds of ways. But here's how I feel.

How much would it cost you to do it yourself? You need to purchase a server, get it online, keep it updated and maintained. Next develop an E-commerce system that will provide access to the given files and guarantee that all sales will be accurately tracked so that at the end of the quarter you can receive payment for your product. How much would that cost (realistically...and include your time please).

I'm not even taking into account the convenience provided by these services of "Hey you dig this...maybe you'll like this". Without that you need to double your potential advertising to drive people to your own setup.

Sure, Apple and other digital music distributors could charge less for their services to artists and labels. However, they developed and provide a stable and effective service. They are in their right to charge whatever they want for it.

Jason@GetItOut · 7th August 2009

Quote:

Originally Posted by BlueSprocket

You can look at this all kinds of ways. But here's how I feel.

How much would it cost you to do it yourself? You need to purchase a server, get it online, keep it updated and maintained. Next develop an E-commerce system that will provide access to the given files and guarantee that all sales will be accurately tracked so that at the end of the quarter you can receive payment for your product. How much would that cost (realistically...and include your time please).

I'm not even taking into account the convenience provided by these services of "Hey you dig this...maybe you'll like this". Without that you need to double your potential advertising to drive people to your own setup.

Sure, Apple and other digital music distributors could charge less for their services to artists and labels. However, they developed and provide a stable and effective service. They are in their right to charge whatever they want for it.

I understand your point to a certain aspect. The audience that iTunes provides is something that would be almost impossible to replicate however they most probably wouldn't come across your music on iTunes unless you were someone big.

In terms of the whole server thing, it doesn't actually cost that much to sell music online. A basic 1 page website can be as cheap as £50 and hosting can be as cheap as £3 per month. Google analytics can provide you with good page and link traffic statistics for free and paypal can provide you with a no-set-up fee payment gate way. I know of a company that can do the whole lot from start to finish for around £100. Obviously the more detailed you want the website design to be the more it will cost but that's more of an artistry thing than a technical expense.

Marketing and promotion would have to be done anyway to let people know that you are on iTunes or you'll never be found.

Jason@GetItOut · 7th August 2009

Quote:

Originally Posted by redvelvetstudios

Jason - your data is wrong. Itunes deals are pretty transparent. they take 30% off the top.

So on a 9.99 album, they pay $7.00 to the label.
on a .99 song, they pay .70 to the label.

it's pretty straight forward. if the label has to go through a middle man, to get to itunes than maybe that's an additional fee... but Itunes is only taking 30%.

The label pays the publishers directly.

The label pays the artist royalties.

If someone is being told itunes is taking 50%, someone is being lied too.

Check out tune core - I think they pay 100% of what Itunes pays out, after an set-up charge and an annual flat fee.

EDIT: Itunes/Apple for their 30% has substantial costs of network servers, staff, etc. If you can run the same business on a 3% margin - people would love you! Get on that!

Yes you are correct. Apple/iTunes do take 30%. I would love to see a service running on 3% too though lol!

Most digital distributors take a annual set-up fee and digital music stores take a percentage of the each sale.... why not merge the 2 businesses and only charge for 1 of these? I don't think there is much technical differences between an online digital music store and an online digital distribution service.

mogWai · 14th August 2009

Quote:

Originally Posted by redvelvetstudios

Jason - your data is wrong. Itunes deals are pretty transparent. they take 30% off the top.

So on a 9.99 album, they pay $7.00 to the label.
on a .99 song, they pay .70 to the label.

it's pretty straight forward. if the label has to go through a middle man, to get to itunes than maybe that's an additional fee... but Itunes is only taking 30%.

The label pays the publishers directly.

The label pays the artist royalties.

If someone is being told itunes is taking 50%, someone is being lied too.

Check out tune core - I think they pay 100% of what Itunes pays out, after an set-up charge and an annual flat fee.

EDIT: Itunes/Apple for their 30% has substantial costs of network servers, staff, etc. If you can run the same business on a 3% margin - people would love you! Get on that!

No mate, iTunes take a straight 50/50 cut.

My friend runs a record label and get exactly half of his sales. Its ****ing outrageous.

rack gear · 14th August 2009

Quote:

Originally Posted by mogWai

No mate, iTunes take a straight 50/50 cut.

My friend runs a record label and get exactly half of his sales. Its ****ing outrageous.

sorry dude - I run a record label, they take 30%... if they're taking 50% from him there's someone else in the mix...

also - check w/ tunecore - they may publish the rates, I'm not sure. but Itunes is not a 50/50 deal.

rack gear · 14th August 2009

http://www.rollingstone.com/rockdaily/index.php/2008/10/01/apple-talks-tough-threatens-to-close-itunes-if-royalty-rate-rises/

Apple Talks Tough, Threatens To Close iTunes If Royalty Rate Rises

10/1/08, 2:15 pm EST
A ruling by the Copyright Royalty Board tomorrow could spell trouble for Apple’s iTunes. The National Music Publisher’s Association has asked for a 66 percent increase on the royalty rate paid out on the sales of digital music — from nine cents per track to 15 cents. In a statement submitted to the board last year, Apple warned that they may shutter digital-music service iTunes if the request was approved.

Apple already pays 70 cents of each song purchase to the record companies, who aren’t willing to pay for the increase themselves. Since they would essentially be operating the service at a loss, Apple would rather shut the store down than raise their prices beyond 99 cents per track. While it’s hard to fathom that Apple would close the world’s most successful digital music store — possibly cutting into the sales of iPods and iPhones, where they make their real money — the fee hike would definitely have some adverse effects, most likely on the consumers’ wallets.

5th August 2009	#1
Jason@GetItOut Gear interested Join Date: Apr 2009 Posts: 28 Thread Starter	Your opinion on the cut, some music stores are taking out of online music sales What is your opinion on the cut that some music stores are currently taking out of online digital music sales? Prices vary from retailers but on average an independent music artist or label will receive $6.00 - $7.00 per album and 60 – 70 Cents per single. Even though distributors will collect, on your behalf, and give you 100% of the royalties, this figure is actually 100% of the net income, the amount left after the music stores have taken their cut. It could be 100% of 50% of the actual music price. It seems that some of the most popular music stores are taking a big cut and given the high volume of online sales from some of the bigger stores, no names mentioned, it seems to be very un-justified especially when you consider how much it actually costs to host and deliver the individual files. For an industry that a lot of people consider to be struggling, it's amazing that there are still billions of dollars worth of music sales going through each year. If the larger music stores that set fixed prices for music took less of a cut from the sales, the overall price of music could be considerably cheaper without effecting the take of the label/artist. This intern may attract more buyers and could level out the price drop for the music stores. ??? __________________ jason@getitout.com

7th August 2009	#5
BlueSprocket Gear addict Join Date: Feb 2008 Location: Harrisonburg, VA Posts: 396	You can look at this all kinds of ways. But here's how I feel. How much would it cost you to do it yourself? You need to purchase a server, get it online, keep it updated and maintained. Next develop an E-commerce system that will provide access to the given files and guarantee that all sales will be accurately tracked so that at the end of the quarter you can receive payment for your product. How much would that cost (realistically...and include your time please). I'm not even taking into account the convenience provided by these services of "Hey you dig this...maybe you'll like this". Without that you need to double your potential advertising to drive people to your own setup. Sure, Apple and other digital music distributors could charge less for their services to artists and labels. However, they developed and provide a stable and effective service. They are in their right to charge whatever they want for it. __________________ "No stone throwing regardless of housing situation."

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14th August 2009	#10
rack gear Lives for gear Join Date: Mar 2008 Location: the big rack Posts: 9,120 10 Reviews written	http://www.rollingstone.com/rockdaily/index.php/2008/10/01/apple-talks-tough-threatens-to-close-itunes-if-royalty-rate-rises/ Apple Talks Tough, Threatens To Close iTunes If Royalty Rate Rises 10/1/08, 2:15 pm EST A ruling by the Copyright Royalty Board tomorrow could spell trouble for Apple’s iTunes. The National Music Publisher’s Association has asked for a 66 percent increase on the royalty rate paid out on the sales of digital music — from nine cents per track to 15 cents. In a statement submitted to the board last year, Apple warned that they may shutter digital-music service iTunes if the request was approved. Apple already pays 70 cents of each song purchase to the record companies, who aren’t willing to pay for the increase themselves. Since they would essentially be operating the service at a loss, Apple would rather shut the store down than raise their prices beyond 99 cents per track. While it’s hard to fathom that Apple would close the world’s most successful digital music store — possibly cutting into the sales of iPods and iPhones, where they make their real money — the fee hike would definitely have some adverse effects, most likely on the consumers’ wallets.