It was with great amusement that I read the recent spate of stories about the Record Labels attempting to lean on the Credit Card processing companies to deny payments to music sites in places like Russia. The logic is impeccable. Cut off the money, and they’ll have to close down.
The only problem that the Record Labels, and now the Book Publishers have, is that the artists have come to the same conclusion, and THEY CAME TO IT SOONER. Writers and Musicians are flocking to sell their wares directly through the online stores that Apple, Amazon, and other companies have set up.
Consider the economics for a writer. Most writers earn between 4 to 6% on the sale of a book. If they get a $5,000.00 advance, and sell 10,000 copies of a $10.00 paperback at a 5% royalty rate, they break even. That’s not a lot of money. If they sell 20,000 books, the numbers look a lot better, they get an additional cheque for $5,000.00. If the writer produces one book per year, this is starvation wages. They’d better not quit their day job, and heaven help them if they get downsized.
Selling EBooks is different. First, there is no advance. But, the royalty rates are higher. The lowest royalty rate I’ve seen is 30% – which is the rate on EBooks priced at $1.00 or less. Let’s say that the same author decided to sell their book for $1.00, and ignore any effects that Industrial Economics say the lowered price would have. If the writer sold 10,000 books, the total return would be $3000.00. Doesn’t look so good, does it? But the royalty rate is 70% for books sold with a price higher than $2.00, so say the writer set the price at $2.50, and sold 10,000 copies? They would make $17,500.00! If they sold 20,000 copies, they could make $35,000,00, which is nearly enough to live on. And that assumes that they don’t write any other books…
It’s a similar situation with music. If an artist records a song, and pays for all of the production work themselves, and sells it in electronic format through the online stores that are available, the artist gets a huge part of the cut, and doesn’t have to share it with the label.
Contrary to what most people assume, writers and musicians are business people. Yes, most of them love what they do. They are doing it because they love it. But they are very conscious of the business side of what they are doing. They have to be, if they want to eat.
And while some of us may suffer from Dyslexia, and have problems with math, most of us don’t. We know all about money. We know where money goes. We know who is no longer giving us the best deal. And we vote with our feet. Like the Record Labels, we’ve decided to starve the enemy.
Which is why artist after artist is abandoning the Record Labels and the Publishers to go it alone. It’s sad to see these companies in trouble. But it was inevitable.
And this has those companies terrified. This is why they are screaming for Bill C-32 to be passed in Canada. It’s the companies that want it, not the artists. My guess is that they hope to use it as a springboard for further legislation, which would halt or slow the migration of the artists towards the better option.
But for now it’s up to them. Can they reinvent themselves, make themselves relevant once more by providing a service that will be valuable enough to make me and others like me want to use them?
I doubt it. But I’ve been wrong before.
Tuesday March 15, 2011