ARTISTS DON'T MAKE MONEY FROM RECORD DEALS
original article from: RapStation.com
by Wendy Day from Rap Coalition

Who is the incredible bonehead who said rappers make mad loot? Wrong, wrong, wrong, wrong, wrong!! Because the fans expect their favorite artists to be crazy paid and livin' large, this puts an incredible amount of pressure on the artists to appear wealthy. And it's not just the fans; I can't tell you how many times I've been out with rappers along with people in the industry, and the industry slobs have expected the artists to pick up the dinner check. I've even seen people cop an attitude if the artist doesn't pay for everything. This is small minded and ignorant because the artist is ALWAYS the last to get paid.

		Rap Coalition, a not-for-profit organization, keeps rap artists from being unfairly exploited. Since rap music has become profitable, many artists are being taken advantage of, portrayed unfairly, and abused by the media, the industry, management, and record labels. Rap Coalition protects rappers from this hostile environment, and provides artists with a place to turn when they need help or support. Wendy Day, who founded Rap Coalition, has been an avid rap fan since the late 70's and brings a strong business background to the organization along with strength, commitment, and determination. With experience in media, advertising, marketing, and public relations, she has an irreverent take-no-prisoners approach to her role as organizer. The main priority is to make this a strong and supportive organization with a unified goal-- to support and protect rap artists! Rap Coalition is not-for-profit, and funded through its membership, its founder, and through donations from outside of the music industry.

Once an artist releases a record, the pressure is on to portray a successful image to their friends, families, fans, and people around the way. People expect the artists to be well dressed, drive a phat car, etc. Think about it. Don't you expect the artists "to look like artists?"

Sadly, when an artist gets signed to a label deal, especially a rap artist, he or she receives somewhere between 8 and 13 points. What that means is 8% to 13% of the retail sales price, after the record label recoups the money it puts out (the advance, the sample clearances, the producers, usually half the cost of the video, any cash outlays for the artists, etc.). The artist has to sell hella units to make any money back. Here's an example of a relatively fair record deal for a new rap artist with some clout in the industry and a terrific negotiating attorney:

ROYALTY RATE: 12% "All in deal"

We're going to assume that there are 3 artists in the group, and that they split everything equally. We're also going to assume that they produce their own tracks themselves.

Suggested retail list price:	$10.98
less 15% packaging deduction (usually 20%)	$ 9.33
gets paid on 85% of records sold ("free goods")	$ 7.93

So the artists' 12% is equal to about 96 cents per record sold.

Let's assume that they are a hit and their record goes gold (although it is rare that a first record blows up like this).

GOLD RECORD = 500,000 units sold x $ .96 = $480,000. Looks like a nice chunk of loot, huh? Watch this. Now the label recoups what they've spent. Independent promotion, 1/2 the video cost, some tour support, all those limo rides, all those out of town trips for the artist and their friends, etc.

$480,000
-$100,000	recoupable stuff (NOT advance)
--------
$380,000
-$ 70,000	advance (recording costs)
--------
$310,000

Still sounds OK? Watch... Now, half of the $380,000 stays "in reserve" (accounting for returned items from retail stores) for 2 to 4 years depending on the length specified in the recording contract. So the $70,000 advance is actually subtracted from $190,000 (the other $190,000 is in reserves for 2 years). Now, there's also the artist's manager, who is entitled to 20% of all of the entertainment income which would be 20% of $310,000, or $62,000. Remember, the artist is the last to get paid, so even the manager gets paid before the artist.

So the artists actually receive $19,333 each for their gold album, and in two years when the reserves are liquidated, IF they've recouped, they will each receive another $63,000. IF they've recouped. Guess who keeps track of all of this accounting? The label. Most contracts are "cross-collateralized," which means if the artist does not recoup on the first album, the money will be paid back out of the second album. Also, if the money is not recouped on the second album, repayment can come out of the "in reserve" funds from the first album, if the funds have not already been liquidated.

Even after the reserves are paid, each artist only actually made 50 cents per unit based on this example. The label made about $2.68 per unit. This example also doesn't include any additional production costs for an outside producer to come in and do a re-mix, and you know how often that happens.

So each artist in this group has received a total of about $82,000. After legal expenses and costs of new clothing to wear on stage while touring, etc, each artist has probably made a total of $75,000 before paying taxes (which the artist is responsible for-- remember Kool Moe D?). Let's look at the time line now. Let's assume the artists had no jobs when they started this. They spent 4 months putting their demo tape together and getting the tracks just right. They spent another 6 months to a year getting to know who all of the players are in the rap music industry and shopping their demo tape. After signing to a label, it took another 8 months to make an album and to get through all of the label's bureaucracy. When the first single dropped, the group went into promotion mode and traveled all over promoting the single at radio, retail, concerts, and publications. This was another six months. The record label decided to push three singles off the album so it was another year before they got back into the studio to make album number two. This scenario has been a total of 36 months. Each member of the group made $75,000 for a three year investment of time, which averages out to $25,000 per year. In corporate America, that works out to be $12 per hour (before taxes). Think about this next time you see your favorite artist drive by in that new Benz. I do.