Income

There are many different sources of income, but the four main ones are from writing/recording, publishing, personal appearances/performing, and merchandising. Writing/Recording are the lyrics and the songs(Industry 3; Personal Interview 1/19/98). Personal appearances /Performing refers to concerts, radio, and television appearances(Industry 3; Personal Interview 1/19/98). "Publishing is often confused with printing," but publishers do a lot more than just print sheet music. "They control all the exclusive right to perform the song in public," like on the radio(Publishing 1). The publisher gets 6.75 cents for each song sold. He/she splits the money with the artist. Usually, it’s split 50/50, but if the artist has a song that the publisher really wants, he/she has a kind of power, or "clout", over the publisher, and may try to get more money. Publishing money also comes from royalties paid to the artist from the record company for the right to make copies of the record, public performances, and licenses for songs to be used in TV shows, commercials, and movies. Merchandising includes any promotional items with the artist’s name on it(Industry 3; Personal Interview 1/19/98).        Also, "an artist earns money under a recording contract from" mechanical royalties and sales royalties(Recording 2). Mechanical royalties are paid to the publishing company and are divided "according to the publishing contract"(2). Sales royalties are paid directly by the recording company to the artist(2). To calculate the sales royalties use the formula (Sales Price X Royalty Rate) X Records Sold = Royalty Due. "The actual process is much more complex"(2). One of these complications is that the "sales price" is not the actual sales price. "Instead, record companies often use a fictional number, called the ‘Suggested Retail List Price’ or ‘SRLP’"(2-3). This number is usually the highest price retail stores charge for new releases, usually $15.98 for CDs, and $9.98 for cassettes, "but may be based on some percentage of the company’s wholesale price to dealers or on some formula contained in the contract"(3). Since the Internet source that I got my information from was written in 1996, the price may have been different. I think that the SRLP now(1998), for CDs is $16.99 and $10.99 for cassettes.        Major contracts can adjust the SRLP by reducing the packaging charge. The standard deduction for CDs is 25% and 20% for cassettes, but it varies by the company. The SRLP with the packaging deduction is usually called the "Royalty Base Price"(Recording 3). But the majors rarely pay the whole "Base Royalty." For example, for CDs, BMG pays only 75% of the Base Royalty while Sony/Columbia only pays 50%. "Also, all majors reduce the Base Royalty for such items as singles and EPs, for non-topline sales, and for all sales outside the U.S."(3).        "Most recording contracts also manipulate the number of records sold"(3). For example, the Sony/Columbia contract "states that Columbia will pay ‘the applicable percentage...of the applicable Royalty Base Price in respect of Net Sales....’ The contract defines ‘Net Sales’ as ‘eighty-five percent(85%) of gross sales’"(3). Warner does pretty much the same thing by "refusing to pay royalties on ‘free goods’ which they define as 15% of the albums distributed(3). Warner also distribute an additional 10% of the albums as Special Free Goods, on which they also refuse to pay royalties(3).        After all the adjustments, the formula becomes Royalty Rate = (SRLP - Packaging Deduction) X (Base Royalty - Royalty Adjustments). Royalty Payable = Royalty Rate X Net Sales. The Royalty Rate, though, can be "misleading" because it includes the producer’s portion and management commissions.