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Monday, June 6, 2011

Making Your Own Music-CD Royalties

Compact Disk Royalties

Today I will discuss more about royalties and how they are computed today. Record companies decided to go to a newer system which was implemented in 2006. Older contracts involved royalties on cassettes and not CD's. This is not entirely true. When compact disks came out they were super expensive to manufacture than cassettes so in turn the record labels paid a lower royalty out to the artists. There was no set percentage. This had to be worked out in the negotiation process.

1. Your royalty rate for compact disk was however a reduced  percentage of the cassette rate.

2. The computation of the suggested retail list price for CD's varied from company to company. A majority of the the companies use what is called the uplift of the wholesale price, meaning they multiplied the wholesale price by a percentage usually being 130% for the major labels. So let's say the wholesale
price is $10, the uplifted price would be $13. This is 130% of $10. Your royalty rate would be applied to the constructed retail price or new price.

3. The packaging deduction for CD's was 25% as opposed to 20% for cassettes, and 10% for vinyl.

*Here is some info form the past that does not exist today. Their was a time that artists only got 90% of net sales because records were made of shellac and were easily breakable. So the record labels developed a practice for paying on 90% of the shipment and keeping the remaining 10% to cover there breakage. This was one of many ways to nickel and dime the artist.