How are royalties paid to artists?

 

1. Rising star prog band The Cat's Whiskers record their new album, financed by their record label Purrfect Records.

2. Purrfect tell the distributor a new album has been made and the distributor pays for and places an order for let's say 10000 cds with Purrfect.

3. Purrfect then pay for the manufacture of however many the distributor wants, in this case 10000.

4. The distributor then sells his 10000 cds to Amazon (and/or any other retailer).

5. Amazon then sell the cds to us. If any are left unsold they eventually end up in bargain bins, or there may be a sale or return deal with the distributor.

 

The record label get's paid at 2. Is the artist royalty generated at at 4 or 5? If 5 how is it tracked, as the retailer might not sell all their stock?

Of course all this only applies to bands on traditional labels, as bands that sell cds direct from their own websites have a much more direct method of being paid.

Or am I completely wrong?! Can anybody put me striaght?

 

Presume the main case, records/CD issued by record companies and sold by the retailers or web mail order firms. Here, typically (unless there is a sale or return agreement) these are paid by exchange of monies between record company and retailer, based on the amount ordered in. Then the retailer will mark up and add on local purchase/VA tax and sell to theee and me. The money received by the record company then gets split a large number of ways, manufacturing costs, artist royalty (should have been fixed by contract and then depends on the artists and the agreement), composer royalty, profit, advertising, etc. etc. Then artist might expect a quarterly or half yearly cheque with their cut - but record companies are notorius at deducting recording, advertising, and other promotion costs from the artist royalties. Police for instance paid their own recording costs of their first album, and licensed to A&M Records to minimise start-up debt. Many prog and jazz artist have a more modern approach, especially being unsigned to a label, in recording and producing their own CDs and selling at gigs and via the web. One musican told me he and his band could survive and indeed record a follow-up, by selling 5000 copies minimum per annum, since manufacture cost of the CD + package/postage was less than one tenth of the sales price. (The band had been dropped by a record label for failing to sell 50,000 copies minimum of their previous album). Other formats are more difficult, e.g. vinyl release - there is a need for special mastering and manufacturing facilities. MP3 and other digital formats are clearly offered on sale by Apple IPod, Amazon and many others and  numerous indie artists enter into contract to sell single and albums this way - need somebody else to explain the economics here. However, quite a few bands now offer recordings of live performance (e.g Umphrey's Mcgee) through what appears more independent and artist-oriented websites, can we assume monies get paid much more quickly this way.

 

But then being a successful song-writer  is another story - how do you think Dolly Parton's Dollyworld got financed? Another of my friends admitted that he happily surviving as an independent musician on the royalties he got from two international hits, 15 years after their original release dates -  you would recognise the artist's name who had the hits. As an indicator here, it was reckoned Gerry Marsden made a quarter of million sterling in royalties, because 'Ferry Across The Mersey' was on the flipside of the single 'Relax'  recorded by Frankie Goes To Hollywood. Hence the bitching by Ginger Baker and Eric Clapton that Jack Bruce continues to make most money from Cream 40 years later, mainly because of songwriting royalties - but this gripe subsequently didn't stop Clapton from opening his Autobiography compilation with  Bruce/Brown composition......