Study shows the percentage of revenue artists are getting compared to their labels. The clash between musicians and labels.
While the music industry is booming, a relatively new study shows that the artists claim only 12% of their revenues.
Citigroup published Music Industry report for 2017, showing that from the $43 billion generated in revenues, the artists themselves have earned only 12% of the money. The graphs below are taken from the Citigroup report and show the allocation of the music revenues and the proportion of revenue available to artists.
How Can Labels Be Justified?
After looking at the graphs and the 12% allocated for the artist(s) who put so much effort into creating music we cannot stop but think - Is it fair?
The music business is complicated matter and little amount of the money in reality goes to the artist. Most of the revenues from a song are allocated to the artist’s label and their efforts to publish and promote the song.
According to the International Federation of the Phonographic Industry Record (IFPI) companies invest 26% of the industry revenues in artists and repertoire (A&R) combined with the respective marketing efforts. Thus, investing in new talents is a major cost driver, where between $500,000 and $2,000,000 are allocated for recording, music video production, tour assistance and promotional costs. Moreover, labels often pay advances to reimburse the artist. The graph below, provides us with the cost allocation of the investment.
This leads to the ultimate question of this topic:
Is the Artist Getting Their Rightful Share?
The answer is Maybe. Label companies discover, protect and promote talents, which as shown in this post takes a lot of resources and initial investments. However, it must be taken into consideration that more artists choose to become independent from their record labels on the prejudice of having more freedom and remove the intermediaries that rake their revenues.
The main problem is that there are so many intermediaries and third parties that are linked with the making of the music, thus increasing the artist management and investment costs. Another problem is that nowadays there are so many ways of music consumption across dozens of platforms, where the artist earns little share of the total revenues.
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