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?