Study: MP3 generation still a bunch of pirates

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A penny per CD?

I'd like to know where this person can get CDs manufactured for less than a penny. Please tell me!

As a consultant for independent artists, a typical commercially manufactured CD run for an indie artist is 1,000 units. They pay about $1.20 to $1.50 per CD (depending on artwork) and about $200 to ship to one location for storage, with final manufacturing cost of about $1.40-$1.70 per unit. If we ordered a million units, perhaps 90 cents each, excluding shipping costs but that's still not under a penny. Then there are storage costs, marketing costs, promotion cost, touring costs, etc. I can tell this person has never produced a CD.

In reality, to sell one CD typically costs an indie artist between $3 and $6 per unit depending how how it is distributed, marketed, and economies of scale. From my experience, it cost most small indie artist about $5 per CD to sell it when ALL costs of manufacturing, shipping, storage, distribution and marketing are considered (and this doesn't include the one-time studio recording and mastering costs).

Selling their own CD for $7-9 will yield them $2-4 per unit. Certainly more than they would make on a 5% of the MSRP many major labels pay their artists (5% of $16.99 = 85 cents). However, the major label is much, much better at moving 100K or more units. The $85K a major label artist would make on 100K unit sales (before recoupment) would require an indie artist to sell over 21K units. That's an enormous task that the vast majority of indie artists just cannot do. The vast majority can't move 1000 units. It's very expensive to let the entire country know you have the greatest album since Dark Side of the Moon. You also have to prove it once you've told them and that's where the risk is.

A typical indie artist will move well under 1000 units regardless of how great their CD is, or their aspirations. I've seen it happen too many times. Without a very large marketing and promotion budget, they will not move a lot of units. There is a lot more to the cost of a successful CD than the actual manufacturing costs of the physical product.

The greatest expense for a successful CD is marketing and promotion. If you don't have $200K minimum for marketing and promotion, forget about the world beating a path to your door for it. Even then, it would be a stretch, I don't care how good it is. Really good CD marketing and promotion starts at $500K if your goal is to have a nationally successful album.

Reznor would not be able to do what he has done had a major label not risked its capital to promote him and his band originally. Same for Radiohead, Prince, Madonna, etc. None of them would be where they are today, or have the following they have, without the push from the major labels in the early days of their career. It's the labels that created these artist's fan base, and once their contract was completed, could then take their fan base with them.

Without the label, Reznor would be like 50 thousand other bands on MySpace with great music that nobody has time to listen to, because there are not enough hours in the day to hear it all. Someone has to tell you what to listen too, and that's marketing and promotion. The only indie bands making it big today have backers, investors, or venture capitalist behind them.

I've heard songs from some truly great, and truly marketable artists, all extremely commercially viable, but the costs of promotion and marketing are barriers to entry for all but the most well heeled. I advise them of this, but they still believe that great music will find an audience and sell itself. Wrong. Great music with great marketing and promotion will find an audience. Without a substantial marketing and promotion budget, most indie artists are just making coasters. Without a large budget to get it "out there" nobody that matters will ever hear it, let alone buy it.

Major labels are still the way to go for those that get that opportunity. They have the marketing muscle and promotion network already in place. Indie's don't, even if CDs did cost less than a penny to manufacture.

Posted by: timali   Posted on: 06/17/08  (Edited: 06/17/2008 @ 01:07) You are currently: a Guest | Members login | Terms of Use

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