Got this from another board:

WHY RAPPERS AREN'T MILLIONAIRES
by Wendy Day - Rap Coalition
(this article appears on the back jacket of the Instant Rap Star 12" record)


Who is the incredible bonehead who said rappers are millionaires? Wrong, wrong, wrong! Because fans expect their favorite artists to be richer than Bill Gates, 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 who work in the industry, who expect the artists to pick up the dinner check or buy bottles of Moet. 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.

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 an expensive 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 10 and 15 points (there are 100 points in an album - 100%). What that means is 10% to 15% 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, half the radio promotions, etc.). All these amounts are deducted from the artist's tiny share (10-15 points). The artist has to sell a huge amount of 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: $14.98 less 15% packaging deduction (usually 20%) $12.73 gets paid on 85% of records sold ("free goods/breakage") $10.82 So the artists' 12% is equal to about $1.30 per CD 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). Bear in mind that in the year 2000, only 45 rap records sold more than 500,000 units out of almost 1,000 releases. Of these 45 records, less than 10 were by new artists.

GOLD RECORD = 500,000 units sold x $ 1.30 = $650,000. Looks like a nice chunk of loot, huh? Watch this. Now the label recoups what they've spent. Half of the independent promotion, half of the video cost, some tour support, all those limo rides, all those out of town trips for the artist and their friends, the advance, etc.

$650,000
-$50,000 half the indie promotion
-$ 75,000 half the video
-$ 25,000 tour support, trips, etc.
-$200,000 recording costs
-$ 70,000 advance
_____

$230,000

Still sounds OK? Watch... Now, a third of the $650,000 stays "in reserve" (accounting for returned items from retail stores) for a year or so, depending on the length specified in the recording contract. So the monies are actually subtracted from $429,000 (the other $221,000 is in reserves for a year and a half the way accounting statements are figured). Now, there's also the artists' manager, who is entitled to 20% of all of the entertainment income, which would be 20% of $650,000, or $130,000 (although many managers do not commission the recording costs). Remember, the artist is the last to get paid, so even the manager gets paid before the artist.

So the three artists actually receive $33,333 each for their gold album, and in a year and a half when the reserves are liquidated, IF they've recouped, they will each receive another $73,666. Again, 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 everything 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. This is why almost all artists go into their next album "in the red." From artists like DMX to Slick Rick, they are always in a debt position with their record label even though the label is making millions of dollars per release. For example, on the Gold album example we're illustrating here, at a wholesale price of $11.41 per CD, 500,000 units would bring the label a gross amount of $5,705,000.

Even after the reserves are paid, each artist only actually made 21 cents per unit based on this example. The label made substantially more. This example 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 $107,000 from record sales. After legal expenses and costs of new clothing to wear on stage while touring, etc, each artist has probably made a total of $90,000 before paying taxes which probably took another 28% to 33%, plus accountant fees. 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 8 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 from 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 $64,800 (after taxes) for a three year investment of time, which averages out to $21,600 per year. In corporate America, that works out to be about $10 per hour. Think about this next time you see your favorite artist drive by in that new car - I do.

Further proof that slavery is alive and well in certain circles. I think I read somewhere that there are only three artists who actually make money from record sales. Most artists make their money from writing and touring.

OH YAH SLAVERY

AND IF THE RAPPERS DO SEE SOME MONEY USUALLY MEANS THEY HAVE TO FORFIEGHT MASTER, OR COPYRIGHTS FOR THEM
AND BE GIVEN THE PREVERBIAL GOLDEN PARACHUTE
[Edited 1/17/05 10:16am]

...And that doesn't even mention the chunk Uncle Sam gets! It's scary.


There r things that r standard practice in the music industry that r actually illegal in other forms of business!

As far as "especially rappers" goes, the bottom line is this; the artist always gets screwed, regardless of genre. Although it is interesting 2 note that in a 1995 "Esquire" interview, Prince brought up the fact that black stores don't always have the electronic scanners. So a big-selling rap artist who is said 2 have sold 2 million, may have in fact sold 20 million. Again, I'm not sure what the hard evidence is on that, but it certainly is an interesting point.

npgmaverick said:

Whatever man, rappers still make a lot more money than the average (9 - 5) working stiff so that article can kiss my negro ass. There are about 10 rappers with actual talent. The others get on with gimmics or by dissing/beefing with all the popular rappers, or by having Dr.Dre produce all your fucking beats. Please don't get me started. NO sympathy from me.

guitarslinger44 said:

"SLAVERY"!!!! BOOOOOL-SHITTTTT!!!!

Go wash your brains out and then look up the definition of slavery. If you find it says "Being paid to do what you love to do", I'll burn my copy of "Roots".

You mean to tell me that all these one-release rappers are just frontin' when they talk about being in da club night after night consuming crates of Cristal and afterwards cruising to one of a number of mansions in one of a number of Benzos that they own with a backseat full of bitches?

Aren't they all about keepin' it real?

I just don't believe it. Y'all just hatin'



tA

Tribal Disorder

http://www.soundclick.com...rmusic.htm

npgmaverick said:

They're probably paid on units shipped, not scanned, so I don't see what difference it would make except on chart position.

usually

Artist get a Balloon Payment, by the Recording industry,
usually about 300,000

etc...

this is really a Loan,...
whenever you release an album the label takes a sum out of your portion of the cut

thats why you see that artist release an album every year, because... their broke...

Videos are Promotion so thats the Record companies job,


the average artist gets about 2$ out of the average 18$ C.D.
thats why its quite important for an artist to go platinum cause thats an easy, 2 million...
taxes usually takes half,
the recording fee... etc...
the artist has generated about a cool 700,000
still not bad

but still not millionair status

for a normal artist finacial appetite, this is pennies
accounting, lawyers will take away about 200,000 on a yearly basis
so theirs only 500,000 which goes into their own expenses...

if the album doesn't dow ell, they usually end up in debt

Artist thrive on Touring and merchandising
thats how they get money

People think Britney Spears has a whole ton of money because of what she's worth
thats onlt by assets
she litterally is still paying her record execs her debts , loans etc.. failed businesses etc...

I been known half of these cats are frauds...Keeping it real has more or less become an image...sure they aren't struggling like everyday common folks,but half of the shit isn't as glamorous as they try to protray it. Alot of these cats for one get in the game with $$$ in their eyes and can't even count thats why so many get tooken to the bank...just overall bad money management,how you gonna buy a iced out chain to put around your neck before you secure your future? The slavery comment I agree is BS,nobody is holding a gun to anyones head making anybody do anything.

Artists (not just rappers) also tend to believe they are rich once they get signed. This leads to spending all the money they get for their first, and often only, hit. It takes a while for the ball to get rolling and get the artists some real money. It does happen after a while, though. Some rappers ARE millionaires. But the real money is in touring.
[Edited 1/18/05 10:38am]

Chris Rock said:

This article assumes that the only $$$ an artist makes is from royalties. Uh...NO!

The creative accounting here though reminds me of how IFC Studios "proved" that My Big Fat Greek Wedding (Cost: $5M Gross: $241M) was actually a money-loser. Why did they need to "prove" that? They were being sued.
[Edited 1/18/05 13:48pm]