New music label
Schismatik, a new music label, has launched. It seems to me to say the right things, and to say them emphatically. But I’m not yet 100% convinced. (The company blog is here.)
Schismatik gives to the artist half of the price of a downloaded album and half of the profit on the sale of a physical CD. They expect the price of either to be $8, and the highest cost of manufacturing a physical CD to be $2.25. Obviously that’s much much more money going to the artist than in a standard label contract. But why 50% and not 40% or 20%? What service is Schismatic providing that justifies its cut? It doesn’t record artists. It doesn’t promote them beyond putting their work up on a site. It doesn’t give them an advance. The CDs are manufactured on demand so there’s no inventory cost and, essentially, no risk on Schismatik’s part. So, is 50% the right amount? And is $8/CD the sweet spot? I don’t know.
I think Schismatik’s attitude toward copyright is enlightened (= they agree with me), but I wish they addressed it more forthrightly. The term “copyright” does not show up in their FAQ, not even in the question “Do artists at Schismatik own their own material?” A: “…the artist always owns all of their music. The only powers granted to Schismatik are the powers to sell and license (non-exclusively) the artist’s product.” Artists can terminate their contract at any time and get a copy of their master tapes. And artists can simultaneously sell their music any other way they want without having to tithe Schismatik. So it sure seems that there’s no phony baloney going on with copyright. Fantastic. I wish they posted a copy of their standard contract, though.
BTW, the label is donating half of this month’s profit to American Jewish World Service for Sudan relief. Of course, how much profit is a label going to make in its first month of existence, with seven bands on its roster? This offer actually raised, not lowered, my cynico-skeptical antennae. Yes, that’s how jaded I’ve become on the Internet.
It’s entirely possible — even likely — that my concerns are unfounded and unfair, and that I’m being unrealistic about the “business model” that’ll work. But 50% seems like a lot for getting listed on a music portal.
I claim no expertise and am way open to being wrong about this. In fact, I’d love to be wrong. I’m so sick of the incumbents and thus feel crappy about worrying out loud about what seems to be a noble-hearted newcomer. A few tweaks to their FAQ might settle my doubts…
Schismatik replies in the comments section.
Categories: Uncategorized dw
CD Baby claims that: “When selling through CD Baby, musicians make $6-$12 per CD, and get paid weekly.” Their CDs seem to average 13 US$.
First of all, I thank you profusely for the blog entry. As far as the content of your entry…I can’t fault you for it. I’m a cynical bastard myself and the music industry is so chock full of well, absolute filth and shit, that it’s hard to not be jaded and cynical. I’ll attempt to address some of your concerns, but, really, the best I can do is let Schismatik’s actions speak for themselves. As far as 50%…it seemed to us like an ideal number…it’s half. I can’t say any sort of complex research or some sort of formula went into it…it was an intuition that we went with…perhaps it’s wrong. Perhaps the $8 price tag is wrong, too. Who knows? Only time will tell. I do want to take issue with the idea that ‘Schismatik’ is just a “music portal” or doesn’t do anything aside from “posting bands on its site.” We are still a traditional label…we may be taking some experiments in execution, but we make compilation CDs, send out CDs for review, arrange interviews, etc. (I am surprised at this assumption, since our FAQ explicitly points this out and you seemed to do such a good job of reading it otherwise). Of course, we do not have the budgets that major labels do…
I’d love to hear some more of the FAQ tweaks that you think would be nice…we can certainly add the info about copyright—honestly, it hadn’t even crossed our mind to mention it since we assumed that it was obvious (bad assumption apparently!)
Lastly, as far as genocide relief…I’m of the school that whatever can be done, should be done. It was our assumption (perhaps incorrect?) that Schismatik would receive the most press and hits when launching. I figured to take advantage of that by using that first month to do something positive. It is our goal to eventually release a compilation for the same purpose (that will be available always and will 100% go towards the purpose).
Aside from that, I can’t say much more, but very much appreciate your entry and your thoughts about Schismatik. The label was established because I saw some problems w/ the industry and wanted to fix them…the label is built on pluralism and thoughtfulness, and I believe being in dialogue with people like yourself can only help. All the best!
Dear Schismatik Owner,
Thanks for the reply. I’ll point to it from the main entry.
Sorry to have underplayed your promotional efforts. (In my defense, so do you in your faq.)
50% still seems too high to me. But, I’m hardly an expert in this field.
Dave:why does 50% seem high to you ??
David –
I respectfully disagree that 50% is too high—if you look at contracts…even at indies (to compare apples and apples), a band usually gives up rights, signs an exclusive contract, *and* only gets—if they’re lucky—one to three dollars per regular priced disc (which, for indies, could be anywhere between seven and fifteen dollars). And all of that is *after* the label recoups its costs.
*shrugs*
As I say, I don’t have confidence in my judgment about 50%. But, since pd asks, I’ll tell you what my semi-thinking is that leads me to question the percentage.
What it comes down to is: It depends.
One calculation looks at what the label needs to charge in order to make a reasonable profit. I don’t know what Schismatik’s expenses are, in part because I don’t know how much they’re planning on spending marketing their artists. Maybe 50% is what they have to charge to stay in business. I dunno and I can’t know.
Another calculation looks at what traditional labels charge and what competitive new-school labels charge. We all can agree that the incumbent labels rip off their artists, so 50% by that measure is a huge increase for artists. When it comes to new-school labels, my understanding is that Magnatude charges 50%, Apple gives artists about 62% and CD Baby lets the artist set the price and takes a flat cut. I think it’s too early, though, simply to use what other labels are charging as your sole guide to what your own label should charge.
Another calculation looks at the value the label is providing. Personally, I don’t yet see Schismatik providing half the value, but maybe I’m underestimating how well they’re going to market their artists’ work.
So, if 50% is what the label has to charge to stay in business, that’s the end of the story. Otherwise, 50% seems too high, but, once again, there are a lot of unknowns here, plus the known quantity of my ignorance about this topic.
(BTW, book authors typically get 10-15% of the cover price of a hardback and about 8% of the cover price of a paperback.)
From what I always understood, the cut the artist gets is based on the retail price. That means VAT and the cuts of the retailer and the distributor have to be accounted for, which could be up to 80% of the retail price.
If the musician gets 10% of the retail price, then 50% might seem high. If the musician gets 10% of the profits for the label, 50% may not seem so high.
The web changes the playing field, because retailers and distributers get taken out. (Contrary to what RIAA and friends are suggesting, the effect of the internet is not so much bad for the musician and the record company, as it is for your mom-and-pop cd store, who are relegated to selling blanks.) If the record company takes over the duties of distributing and selling songs, it means that the record company is suddenly taking in much more money than before. If the record company gives 50% to the artist, then the artist is better off too, but whether that’s fair or not?
I expect more of these Direct Through The Web labels to spring up, and some kind of equilibrium to establish. I wouldn’t be surprised if you’d get the musical equivalent of vanity press, where artists actually pay the label to get sold (which is currently how the CD based model works–artists sell out on everything, just to be able to get with a ‘real’ label).
Hi guys,
Thought I’d stick my tuppenyworth on this one – I play in one of the bands on Schismatik and stumbled across this conversation. I think the attitude being taken by Schismatik and the resulting conversations (such as this!) can only be healthy for the industry.
Our agreement basically works along the lines of we produce the art, Schismatik provide the business. Based on the fact that one cannot exist without the other, 50/50 after expenses seems fair. Add to this the fact that the material remains the property of the artist, as opposed to a piece of contract work subsequently owned by the label, and you have a situation that resembles two organisations working together and nobody is constrained in any way. As the motto goes – free music, freer people.
Only time will tell if the model works but if anything it is a step in the right direction!
Very interesting discussion.
First of all, David – You mention Magnatune, Apple, CD Baby, etc. (all of whom are, in my opinion, wonderful companies…with Apple being the dearest to my own heart due to making such great computers :) These companies, though, *are* music portals. Schismatik is not a music portal, nor is it a record label…it’s something in between, hence, us using the term “record label movement.” We want to operate as a traditional label while also acting like a music portal and building a community around our label/idea.
As far as the 50%. Well, Branko asserts that by cutting out the middleman, labels, are, in theory “taking in more money.” This is a mistaken assumption. Distribution and the costs associated with it…well…cost money. Yes, of course, distributors mark up the price more, but what one shouldn’t forget is that a label gets money from a distributor for X amount of CDs (i.e. a whole shipment). (I am ignoring for the moment many distributors who happen to be shady and take months to send payment.) That means a label actually receives a lot of money at one time and hence can use it for marketing or for whatever it is that they use that money for… Labels that operate in the fashion that Schismatik does, receive money *as they sell albums*. Of course, Schismatik realized this and hence offers CDs on a print-on-demand fashion…thereby drastically cutting these costs. But they still exist. Our figure of 50%, as I mentioned, was arrived at largely due to intuition, but it is by no means an *unfair* figure. (It may be the *wrong* figure, economically), but ethically, I do not see how you can make the argument that it is an unjust or unfair one.
I can tell you honestly, and of course, this is the Internet, and so honesty may be rare and not particularly convincing or easy to spot, that my goal in forming Schismatik was never to make money. Not to toot my own horn, but I have a graduate degree from one of the finest institutions in the world, and could have easily found a job where I would make a lot of money ™. Instead, though, my goal was and will continue to be: disseminating good music and acting as a moral example to the rest of the industry.
SO, as you say, you arrived at the number of 50% through intuition, so no-one can tell if it is fair or not. :-)
I was working from the assumption that if companies work with legions of middlemen, then both the stock holders and the state coffers want to be fed from what those middlemen take in. Then again, these middlemen may not need to invest the same amount of money as you do, because they did that earlier.
I linked to a fairly emotional, anecdotal story of how American artists make their money. There’s a slightly more factual study of how German and British artists earn their keep, and the conclusions do not seem that different. Musicians get money from performances, from teaching and from jobs. Copyright licenses only matter to the top 10% of the musicians, and may actually hurt the others, as samples prove hard to clear.
Also, at the bottom of the market, there are a lot of musicians trying to get in. This means their bargaining power is weak, and this may account for the percentage musicians typically get for their first record deal.
I’m italian and I’d like to invite you to listen my music… http://www.myspace.com/angelaesmeralda
are you looking for new bands?
thanks.giorgia