The cost of making a hit single
I've been listening to NPR's Planet Money podcast, and one of the recent episodes [mp3 link] is about how much it costs to make - and promote - a hit single. Or more accurately: to attempt to make a hit single.
A friend in the music industry asked me to write down their figures with so he doesn't have to listen to the whole podcast. So here they are. The record in question is Rihanna's "Man Down", which her record company Def Jam was hoping would be one of the anthems of the summer. The costs break down like this:
And then the marketing - advertising, (allegedly, and indirectly) paying DJs, other promotional costs. They don't break this down - there's an interesting debate about why payola is illegal and to what extent it still happens anyway - but they put an estimate on it of $1 million.
And the video: $200,000.
So the total cost of creating this single was about $1.25 million. And it wasn't even a hit!
There were three other hit singles on the album, it has sold 1.3 million copies - so they may have made their money back in the end. But this case certainly suggests, if no more, that the business model of the record industry is rather precarious.
The blame might be put on illegal downloads, or on a general change in how people consume entertainment, or on changes in how artists and the recording industry are perceived; or maybe you have your own theory.
Some people respond by suggesting artists cut out the record companies - and, by implication, all those marketing costs. That would presumably free up a higher proportion of the money to go to the artist (if they can still monetise their work). But on the other hand, maybe the marketing costs are necessary to get an audience, in which case there might be no way for most bands to make the free-plus-premium-box-set model work.
Maybe the marketing money is an implicit cross-subsidy to the radio stations (at least in the US) and keeps them afloat; or maybe most of the marketing money is burned in a status game, where the money spent on one song just cancels out the money spent on another. If we want to know what kind of business models will work for music, these are some of the questions that have to be answered.
A friend in the music industry asked me to write down their figures with so he doesn't have to listen to the whole podcast. So here they are. The record in question is Rihanna's "Man Down", which her record company Def Jam was hoping would be one of the anthems of the summer. The costs break down like this:
- Initial demos made at a "writing camp": $18,000 (it costs around $200,000 to hire 10 studios for a couple of weeks and make 50-100 demos for Rihanna to choose between; this cost is apportioned over the 11 tracks on the album)
- Fee to lyricist: $15,000
- Fee to producer/composer: $20,000
- Fee to vocal coach/producer: $10-15,000
- Cost of other studios and recording costs: $10,000
And then the marketing - advertising, (allegedly, and indirectly) paying DJs, other promotional costs. They don't break this down - there's an interesting debate about why payola is illegal and to what extent it still happens anyway - but they put an estimate on it of $1 million.
And the video: $200,000.
So the total cost of creating this single was about $1.25 million. And it wasn't even a hit!
There were three other hit singles on the album, it has sold 1.3 million copies - so they may have made their money back in the end. But this case certainly suggests, if no more, that the business model of the record industry is rather precarious.
The blame might be put on illegal downloads, or on a general change in how people consume entertainment, or on changes in how artists and the recording industry are perceived; or maybe you have your own theory.
Some people respond by suggesting artists cut out the record companies - and, by implication, all those marketing costs. That would presumably free up a higher proportion of the money to go to the artist (if they can still monetise their work). But on the other hand, maybe the marketing costs are necessary to get an audience, in which case there might be no way for most bands to make the free-plus-premium-box-set model work.
Maybe the marketing money is an implicit cross-subsidy to the radio stations (at least in the US) and keeps them afloat; or maybe most of the marketing money is burned in a status game, where the money spent on one song just cancels out the money spent on another. If we want to know what kind of business models will work for music, these are some of the questions that have to be answered.
Comments
I went and listened to the song - and thought about it, treating it as professionally as one can (part of my business is culture tracking, but music judgements always have elements of taste.)
So I thought about it and this was a risky song to hang something on, it's a very distinctive reggae influenced style that lacks a particular hook for fans of other genres. I'm sure it was a solid contributor to the quality of the album, but it's not an obvious hit.
As such, it probably would have been a better bet to try and promote it in less expensive ways... The marketing costs are the obvious area to try and be more careful with. But that leads us back to my question... is there any way to even break even with this song?
-Bump
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