The Business That Is Music
The art of music in itself is entertainment. People think of different songs as their lives' melodies, based on how the tunes have become part of, and reflected certain of their successes and failures. Music is also used to effectively create ambience for all occasions and all places.
It wasn't long before music became more than just a form of entertainment for people everywhere to enjoy. Various record companies have seen the potential of music to become a business success. Aided by modern technology, selling of music recordings has gained one of the biggest shares of the market pie. It penetrates all markets encompassing all ages, gender and economic status. The music business is one of the most stable industries all over the world.
Despite its stability, the music business is considered to be highly risky. Data from the Recording Industry Association of America reveal that roughly 90 percent of the music records that top recording labels released don't' reach their profit standards.
Business people who run independent labels always make sure that there is a careful selection of recordings to produce a reasonable allocation of their expenses. The truth is, independent labels are not as financially capable as major labels when it comes to covering sale and profit failures. The advantage, however, is that they are able to produce and promote their records at much lower costs, and can meet expected profits with much fewer records sold.
The RIAA discloses that for major music labels, budgets planned for selling and making recordings are tied to their estimated sales. This means that knowledge in the quantity of recordings that are estimated to be sold aids in creating the budget that covers recording costs.
Accordingly, recording costs are not borne by record companies but by recording artists. Manufacturing costs which include replicating, packaging and recorded material are dependent on the quantity of manufactured music records. Recording labels generally bear these manufacturing costs.
Additionally, record labels make payments of royalty to the performing artist. There is also a mechanical royalty paid to publishers and composers.
Promotions are a key part of selling music records. Major labels selectively allocate budget and funds based on some sales projections made for each recording artist. For independent labels, around 10% of projected sales in the gross amount is generally budgeted. The promotional costs for music records cover printing, designing and packaging of promotional materials. These media include internet sites dedicated to the music, press kits, radio advertising, television music videos and public relations, among others. These expenses are dependent upon royalties and certain agreements on contracts.
RIAA data reveal that a general projection for a record company's gross income plays around $10,000,000.
Given the expensive process in the music industry, music artists and companies were made furious by certain websites that permitted free music downloading for online users. This resulted in a huge dip in sales, where some major music companies literally lost millions. Hence, after stiff court battles, there are now sites for downloading music legally. Through constant advocacy, people have also realized that paid music downloads assist in the progress of the music industry.