Online music shops, a fair split?

The music business continues to suffer the consequences of unregulated downloads. Without having all the necessary information to form an educated opinion, many users, some without any relationship to the music business, assert how online music distribution should work and about the incomes the artist should receive.

That said, I am really surprised that none of my producer colleagues, label managers and other music professionals have spoken out about the actual split between record labels and mp3 shops, which in my opinion, is far from fair.

I want to reveal some facts and offer my opinion on the “pieces of the cake” that are split amongst the online shops, record labels and artists.

Often, the artist and the label negotiate a 50/50 split on the online downloads. Then the label splits its share in half with the online shop.

In the past, physical support sales (i.e. vinyl and CDs) had some very clear disadvantages. For one, they required an actual physical space, which in turn limited the amount of copies each shop can carry depending on available space. Transporting those records also cost money. Additionally, shops are only open part of the day and reach a limited amount of customers due to time and location constraints. This led to many shops popping up all over the world.

Nevertheless, with the emergence of online shops, traditional rules have changed. Now, only a few shops cover 95% of total world-wide sales, they share the same catalog of songs covering all genres, and are open 24/7. Now, most DJs throughout the world buy music from the same 6 or 7 online shops. This further increases the inequities in the music industry.

Not including taxes and transaction costs, a single electronic music production generates approximately 1,5€ on each download. From that, the artist will get 0,37€ (25% of the total sale after all splits), the label will get another 0,37€ (25%) and the shop gets 0,75€ ( the remaining 50%). More specifically, let’s say that on any given day each label sells one download. This is the profit breakdown:

Artist: 0,37€ * 1 track * 1sale = 0,37€ Label: 0,37€ * 1 track * 1 sale = 0,37 € Shop: 0,75 €* 1 track * 5000 labels = 3750 €

I hope the above scenario helps clarify the inequities this typical split creates. In addition, the music business as a whole is going through a global crisis. The contracts the labels offer to the artist are less than favorable to the difficulties that the label faces with the tiny profit they receive from each download.

Due to this, I think that we should look for ways to protect the producer, who is after all the creator who makes this industry possible and feeds the labels, shops, magazines, clubs, booking agencies and many more companies and professionals.

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