a superstar producer demanding a per-track fee could get $100,000 per track. That’s not an insubstantial amount of money and can significantly increase the production costs.”
Lawyer Ryan Smith, partner at J Ryan Smith & Associates P.L.L.C., a New York-based entertainment, corporate, and intellectual property law firm, and co-host of BETJ’s My Two Cents, adds, “For pure independents, the costs weigh a lot more significantly into marketing and promotion. If we’re talking about promotion on the Internet, then it could be in the thousands or more depending on the promotional effort launched. For something more than that, it can be tens of thousands or even hundreds of thousands.” But indies face other significant costs as well. “Also, packaging and distribution of CDs isn’t cheap. There’s often a 20% to 25% packaging fee for CDs that comes off the top of the royalty computation price from independent distributors.”
According to Davis, however, there are several benefits to going independent that add to an artist’s bottom line. Copyrights are a significant deciding factor. Though indie artists won’t get a six-figure up-front advance like major label artists do, they own the copyrights in the recordings of their music, unlike most major label artists.
“In a traditional recording deal, the record company owns the intellectual property, which is tremendously valuable because if somebody wants to sample it or use it for a commercial, [the artist misses] out on the synchronization license fee and the master license fee,” explains Davis. Indies can build up a catalog of intellectual property and use it to acquire other capital down the road, she adds.
Royalties are another good reason to become an independent artist. Davis explains that, apart from the up-front advance, artists are paid in royalties. According to PerformerMag.com, an online resource for musicians, most major label artists earn a 10% to 15% royalty rate. The problem is that royalties are paid only after recoupment of recording costs and are not generated by the majority of major label releases. Every expense delays the point at which royalties are payable, such as costly sample clearance, producer fees, recording studio crew, promotion, music videos, etc. Before an artist can receive royalties, he must pay back all debts, including advances, which range from $150,000 to $300,000.
Daylle Deanna Schwartz, a music consultant to indie artists and author of I Don’t Need A Record Deal: Your Survival Guide for the Indie Music Revolution, agrees that most new artists signed to major labels don’t earn enough royalties to pay back recoupable expenses after they make their first CD. “The label recoups all of the recording expenses, advances, fees to producers, engineers, tour support expenses, and other things agreed to in the contract,” she says. “It all comes out of the small royalty the artist earns per sale which ranges from 65 cents to maybe $1.75 per CD. Everything else from the sale goes to the label.”
In Your Pocket
“This has, of course, been completely upended with the digital distribution and the digital promotion of music,” explains Davis.