SyXified
Member
To be fair, saying bands make 100% of merchandise, but only a small % of CDs is a bit misguiding. Technically in both cases you make 100% but then there are deductions. With merch the deductions are VERY tangible - cost of graphic designer to design shirts, costs to produce shirts, cost to run online site for sale of shirts, cost of shipping. With CD's the costs are a little less tangible because of costs like marketing efforts, publicity, jewel cases and album art.
The reason for the disparity in actual profit is because shirts have a large profit margin (relatively cheap to make and fetch a decent price), whereas CDs are VERY expensive to make, market, and distribute and sell fairly cheaply all considering. Plus as Jax mentioned, illegal downloading really hurts the selling model for CDs (which is TINY profit margin per unit sold, so better sell a million copies if you want to recognize decent gains).
Current statutory rate is 9.1 cents per song per CD so on a 10 song CD (to make the math easy) $0.91. That's for the Sound Recording performance. Then a band like X would likely get about 15% MSRP per unit sold (which is generally about $18.00) so $2.71, for the compositions.
Together that's $3.61, then cut that down to 75% because the artist and the performer are the same person is $2.71. From that original total take 20% off for packaging and an additional 10% off for breakage and new media ($1.08 in deductions) and you wind up with $1.63. So that's how you get to $1-2 dollars per CD. Its been a while since I did those calculations so I'm probably botching a few things a little bit, but generally speaking that is the bulk of the breakdown.
