Playback and payback series; (part 20) 150 Records = 50 Percent of Revenue

Every now and again (in the recent past), Billboard columnist Ed Christman would sit down with his SoundScan figures and a calculator and crunch the numbers, determining what percentage of music released is really selling, and what actually makes a profit in the record business. These often alarming numbers offer a great insight into the business’s woes. And while the numbers seemed to distress him, they didn’t seem to surprise him. In fact, they surprise him less every year.

Christman determined that in 2000, 35 516 new titles (including reissues) hit the stores. The major record companies released 6 188 of them, and 29 328 came from independent labels. These new releases accounted for 37.8 percent of the records sold that year, just less than 300 million scans. Of those titles, 24 585, or not quite 70 percent, sold less than 1 000 copies.

In terms of per-unit sales, the figures look a little better, but still pretty bleak in terms of the overall picture. The average major label release in 2000 scanned 41 109 copies, while the average independent release garnered 1 438. As we’ll discover later on, much of this has to do with the way music is promoted. After all, how can we know we want to purchase a record if we don’t know it exists? The traditional means of promoting recordings, for nearly a century, has been radio. The following cycle has made the recording world go ’round since the 1920s:

1. the consumer hears something on the radio

2. the consumer likes it

3. the consumer goes to the store and buys it

But as radio stations tighten playlists, follow formats, and generally concentrate their programming centrally rather than locally, they become less and less willing to take a chance on anything new. The stakes are just too high. Unfortunately, the record companies have only slowly woken up to this reality and started to try to revise the promotion-equals-radio equation.

Christman also analysed the sales of all records in print for the year. During 2000, SoundScan tracked 288 591 albums, which sold 784 million units. Now simple division tells us that the average release, therefore, sold 2 717 copies.

Of those nearly 300 000 albums SoundScan tracked:

1. 88 sold in excess of one million units

2. 114 had sales between 500 000 and 999 999

3. 204 raked in sales of 250 000 – 499 000 units

4. 818 other albums sold over 100 000 units

Added up, 1 224 albums accounted for 440.6 million sales. That means that, it SoundScan provides a statistically accurate sample (which it does, by all reckoning), 0.42 percent of all albums sold accounted for 56 percent of album sales.

For a long time, the conventional wisdom in the music business has stated that most albums don’t pull their weight. “We estimate that 80 percent of the 45 rpm singles do not recover their production costs, and 75 percent of popular LPs don’t recover their costs,” former RIAA chief Stanley Gortikov said in the 1970s. “That leaves a very small percentage of albums and artists to pay for the records that don’t make it.

Conventional wisdom in the music business also states that for the average major label album to break even, it needs to sell between 250 000 and 500 000 copies. Albums that sell less than this don’t even make back their money for the record company, let alone bring the artist anything like royalties. Therefore, only 406 albums (assuming that all or most of the CDs under discussion as selling over that 250 000 figure were part of a major label’s active catalog) broke even. The major labels in the year 2000 operated on profits generated by about 0.14 percent of the records they released.

Granted, tracking the albums released in a calendar year includes some released in November and even December (though December releases are generally rare), leaving little time for them to hit the break-even mark. The November releases, however, are some of the strongest of the year, the ones designed to feed the vast holiday buying frenzy. These are the releases the record companies are counting on to get people into the stores before the end of the year.