Music business and lockdown—has the industry gone digital?
Many consumers appreciate the value of a real disc for modern CDs. So even today, many new albums are available in the CD format to meet demand as best as possible. Still, with streaming services and other options for digital procurement, classic CDs are nowhere near as hip as they were a decade ago. But how has the profit for musicians in CD sales changed? And what kind of revenues are still possible with physical recordings? In this article we show you whether CD sales are worthwhile.
CDs have long been the measure of all things in the music industry. Buyers could put the musical works of their favorite singers directly on the shelf and play them when needed. What is also possible today through digital downloads, however, has its very own meaning through the physical disc. Even today, CDs have their own charm and make it possible to take your favorite music out of your CD shelf in the living room the old-fashioned way.
However, a classic CD is not only about the content of the music. Often the new albums are designed with very personalized inserts, making the CDs contain, for example, a manual or a small poster. So it is above all the overall package that is decisive for potential buyers of CDs, and justifies the comparatively higher price. Thus, the collection for one's own music is not only visible in the form of a digital list, but also on a nicely filled shelf. In the following, we take a closer look at whether CD sales are still worthwhile for musicians.
At first glance, an album is quite expensive at around 15 euros in a store. However, it should be mentioned that the CD contains more than just one song. If we consider that a digital song could go for 1.29€, the CD price could be more appealing with an overall lower cost per-track. But how much of your 15 euro purchase actually reaches the artist? You should keep the following cost points in mind for the new CD:
After deduction of all cost items, a profit of about 10% remains for the respective musicians. If external authors for lyrics or other service providers for the beat are used for the creation of the album, the profit must be further divided still. So while you as a musician receive on average around 1.50 euros for an album costing 15 euros, this sum does not always remain with you in full.
This question can hardly be answered in a blanket manner, since this always depends on the conditions of the label and the profit of the trade. Nevertheless, the general standard shows that CDs used to be much cheaper, but the production and distribution costs have also been lower. Some sources speak of profit margins between 4 and 7%, whereas the 10% from our example would already be very high. It is clear that the profit share per digital sale is higher for musicians, but the costs also remain lower.
In today's world, an interestingly designed CD no longer has the sole aim of convincing customers in the store. The more unusual the marketing idea behind the CD, the more likely customers are to be interested in other products. This can apply to merch for the new album as well as to concerts and live performances. Artists and musicians earn much more from sold-out stadiums and venues than from the sale of a single CD.
Digital download or streaming in the form of a subscription is also already widespread, giving potential buyers many alternatives to the classic CD. The following options are very popular and should always be considered in advance:
While your earnings on Spotify and similar platforms are usually very low, such providers are essential for more awareness. In the best case, having your music on Spotify will convince other listeners to buy your new CD later on.
Digital downloads are much more attractive for your earnings. Since no CDs have to be manufactured and produced in these cases, the manufacturing costs are also significantly lower. While there are other costs involved, your profit remains higher with this method.
Selling CDs through your own store on the internet is possible without any profit-sharing to producers or platforms. Many artists decide to sell CDs via their own website and thus contribute to more awareness of their music.
Another enticing factor for musicians is how the profit from a download compares directly to the album as a CD. Let's assume a sales price of around 1 euro, whereby Germany’s statutory VAT of 19% also applies. In addition, there are costs of about 25–30% for the label, about 5% for the publisher and another 12–15% for the ongoing distribution. Depending on the type of sale, your store may charge up to 10% as a sales commission.
Further costs arise with about 1% for the GEMA, with about 4% for costs for the acceptance of payments and if necessary for the cooperation with other authors or external service providers. Depending on the type of marketing and sales, each digital sale leaves you with around 15 to 20% profit as a musician. However, the download cannot replace the CD.
CD production is still worthwhile today, both financially and strategically. The orientation of your own music plays a decisive role in order to get as many fans as possible to buy your CDs. The higher the print run of your CDs, the easier it is for you to sell the new albums at a profit. How high the price must be, so that the CD sale is worthwhile for you, determines your distribution. Smaller musicians can orient themselves for their own listing at the cost points, which we have summarized for you above. This makes it easy for you to keep track of the costs on the way to the final CD production.
While the profit from selling a CD may seem very small at first glance, it is significantly higher than the earnings for downloads or streams. Therefore, CDs are still an important source of income for musicians. However, the production costs in particular are becoming a real danger, as large runs are no longer produced like they once were. This leads in some cases to strong price increases depending on the album. Nevertheless, CDs are still indispensable for many collectors when it comes to their favorite music.
How does it look for you as a musician? Do you still work with CDs or is your music only available digitally? Feel free to use our platform for musicians here at mukken and learn more about this topic. We would be happy to connect you with the music industry. If you want to learn more about music streaming, you can find more exciting articles about the music business here on our blog.
Originally published on November 21, 2022, updated on November 21, 2022