For what it's worth, and as someone in the music industry, let me just try to clarify one thing: From the outside, big labels must seem like corrupt businesses considering the finances involved in making and selling a record. I mean, $50 million to produce and sell a CD? Well the truth is that nearly 90% of all albums produced do not generate enough sales to cover their cost of recording (paying the studio, the session musicians, copyright fees, etc); therefore, it is up to the remaining 10%(ish) to make up for the lost revenue. It is those top few grossing CDs that are relied on to allow the creation of everything else (most likely the music YOU listen to).
Because of piracy, even those top grossing CDs are no longer producing enough revenue to support the vast majority of “small” artists, and so the record labels are forced to cut off the bottom rungs one by one. This, in turn, has caused those lesser known artists to turn to independent and P2P methods of sale, which (in turn) draws even more revenue from the companies.
I recently had the pleasure of talking with Steve Barnett, chairman and CEO of Columbia Records, who acknowledges this very serious problem and desperately seeks change from all parties involved. He explained that back when he was AC/DC’s manager, bands weren’t expected to have a hit record until maybe their 3rd or 4th album. A&R reps would look for bands based on their potential to grow, not their immediate potential to earn profit. However, because record labels can no longer afford to take risks due to low record sales, only those artists who they can guarantee to have a hit record are picked up, and all those potential talents are swept aside. In today’s market, as he explains, little bands like the Beatles, Led Zeppelin and the Rolling Stones never would have made it because no one would have taken a chance on them.
Think of all the wonderful artists we’ll never hear about because no one can afford to take the risk today…
