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Saturday 9:00-10:00
Academic Papers 7 (Royal Salon D)
Bruce Ronkin, Moderator

Revenue from Recording Sales? Forgedabahid!

Stephen Marcone
Professor of Music, Coordinator of Music & Entertainment Management Programs
The William Paterson University of New Jersey

    With advent of the 360 deals and the dismal CD sales, money generated from the sale of recordings has been minimalized to what many consider an artist’s ancillary revenue stream.  No longer does one witness the number one album of the year selling anywhere near 10 million units as they did at the turn of this millennium.  In fact as reported, one hundred different titles sold one million copies in 2001, compared to only thirteen in 2011.  This has forced artists to consider if the revenue stream from the sale of their recorded music can still be considered a potential primary source of income.

    When examining the data on the sales of recordings, it becomes conclusive that the overwhelming majority of artists almost never receive a royalty check.  The expenses related to the producing, manufacturing, and promoting of releases coupled with the system of being paid approximately 10 cents on the dollar after recoupment, result in failing to push artists’ royalty accounts into the black.  In a discussion with Aaron Van Duyne III, a prominent CPA and business manager for several successful popular artists, it was determined that until you become a superstar, the high cost of production and promotion along with the small percentage of the revenue from sales makes it close to impossible to see any money.

    This paper will examine the Nielsen Soundscan sales data for 2011 (or if available, 2012) recorded music, the costs related to releasing a recording, and the industry accounting practices, to determine what percentage of recordings generate revenue and what percent of artists collect royalties for him/herself from the sale of recordings.  To verify the Nielsen data, information from actual artist royalty statements will also be presented.

Budgeting for Crowdfunding Rewards

Peter Alhadeff
Berklee College of Music

Luiz Augusto Buff
Digital Cowboys

    Musicians, artists, and music business entrepreneurs need cash to start a project and nurture it to fruition. They are hardly unique in this respect, and face many of the considerations that the general public does: i.e., is the need for money for the short term or for the long term, is there a small or a large amount of risk involved?

    Today, fortunately, there is more flexibility in the marketplace. Resources can be marshaled on a piecemeal basis, as needed by entrepreneurs or musicians to achieve a particular and often tactical goal.  Crowdfunding and venture capital are two examples of a new type of milestone or ad hoc financing that both blurs the distinction between short and long money and helps defray risk. The implication for artists, musicians, and music business entrepreneurs could be momentous.

    This paper will focus on crowdfunding only. It suggests a simple methodology for a musician or music entrepreneur to budget her own project. The costs of rewards for fans are variable and depend on the number and category of fan pledges. Knowing ahead of time what the possible distribution of such rewards may be is key, and so is the expected value of a typical pledge.
The authors argue that raising funds online in return for rewards is based on too much guessing, when it should be more informed. Starting from recent Kickstarter data, they show, step by step and with a spreadsheet, how to prepare a professional crowdfunding budget that includes taxes, service fees, and contingency arrears. This type of budgeting is not as obvious as it seems, and the paper fills a gap in the current music business literature.

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