So How Much Does It Cost a Major Label to Break a New Act?

Major labels work like banks. When they issue a contract to a new act, they advance (i.e. loan) money to that act so they can get things going. Once–if–the act turns a profit (i.e. makes more money than their advance) they start to make some money.

Labels will say that their business is a risky one because no matter what they do with an artist, it’s impossible to predict if the public will bite. Theirs is a dangerously speculative industry. Yes, there are hits, but a ton of money ends up going down the drain.

According to new figures by the International Federation of Phonographic Industry, a group representing the interests of record labels around the world (keep the source in mind), this is what it typically cost to launch the career of a new performer. (Via Hypebot)

  • The cost of breaking an act is between $500k and $1 million.
  • The typical advance averages between $50k and $350k
  • Typical album recording costs are between $150k and $500k.
  • The typical video production goes from between $50k to $300k.
  • Tour support is between $50k and $150k.
  • Typical marketing and promotional costs are between $200k to $700k.

The article goes on to claim that major labels spent $4.6 billion on A&R (that is, looking for and developing new acts), which is equal to 27% of their budget. That’s a bigger percentage than what the pharmacology industry spends on R&D.

Anyone wanna comment on these industry figures?

Alan Cross

is an internationally known broadcaster, interviewer, writer, consultant, blogger and speaker. In his 40+ years in the music business, Alan has interviewed the biggest names in rock, from David Bowie and U2 to Pearl Jam and the Foo Fighters. He’s also known as a musicologist and documentarian through programs like The Ongoing History of New Music.

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