hi there,
my name is joe and i've started a new record label in my town of chico. i just had a few questions about how profit splitting with the band works?

1. if i sold a CD on my website for $12.00 and the wholesale would be about $5, do i split the extra $7.00 50/50 with the band?

2. when selling copies of a CD to the band for tour what would be a good price, a few dollars more than the whole sale rate? it's a full length cd 40+ minutes?

3. so if i sold the CD to the band for tour for about $7.00 each unit, and they turn around and sell it for $12.00. is the band supposed to split the profit of $5 with the label? or since i'm selling for a couple dollars more, than they keep the extra $5.00?

4. when recouping cost for a project... do labels recoup cost based on wholesale prices, or a mix of retail and wholesale. ex: if i sell a cd on our site for $12, would the whole $12 go towards recouping our cost, or only the wholesale rate of $5? what would happen to the extra $7? does that get split with the band, or does the label just pocket that?

5. when lables sell CD through their site, are they like a retail store in a sense, so the extra $7 is for the label to keep?

any help would be great! just want to make sure i do everything right and fair for our bands.

I don't have any idea about this sort of stuff, and you'l probably have a hard time finding anyone else that does either, because bands, artists, and labels are really secretive about this kind of thing for some reason. Not really sure why.

If I were you, I'd try to contact some other indie label founders, tell them your situation, and see what they tell you.

Good luck!

I don't know what common practice is with labels, but if you sell the band copies of the CD at cost and they make money selling them on tour, you're not gonna get a cut. I think if the answer to #1 is NO then the answer to #3 must be NO.

A few books might help:

Here's one, and here's another.

Ultimately, I don't think there are 'musts' here. You can run your label as you want. The more fair the artist(s) find your practices, the less likely you'll have problems keeping them around.

quote:

Originally posted by Joe1977:
1. if i sold a CD on my website for $12.00 and the wholesale would be about $5, do i split the extra $7.00 50/50 with the band?

This is what Dischord records does. I say do this.

quote:

2. when selling copies of a CD to the band for tour what would be a good price, a few dollars more than the whole sale rate? it's a full length cd 40+ minutes?

English is obviously your second language. The band should sell cds on tour for $10, so you should be selling it to them for $7 ($6 if you really want these guys to make a little money and believe in these guys). That's the usual going price at a show. Selling it for more than that is usually unreasonable, seeing as its harder to make change that way and most of the people there have already spent money on cover.

quote:

3. so if i sold the CD to the band for tour for about $7.00 each unit, and they turn around and sell it for $12.00. is the band supposed to split the profit of $5 with the label? or since i'm selling for a couple dollars more, than they keep the extra $5.00?

If I were you, I'd let the band take the majority of the tour CD sale profit. They hawked it, they were out there on the road, you weren't.

quote:

4. when recouping cost for a project... do labels recoup cost based on wholesale prices, or a mix of retail and wholesale. ex: if i sell a cd on our site for $12, would the whole $12 go towards recouping our cost, or only the wholesale rate of $5? what would happen to the extra $7? does that get split with the band, or does the label just pocket that?

Per usual, splitting profit with the band is ideal in this situation.

quote:

5. when lables sell CD through their site, are they like a retail store in a sense, so the extra $7 is for the label to keep?

Its arguable. You could have the label site and the touring band compete, in a way, to see who could move more units, but ultimately a label should be a facilitator/distributor and not there to make any significant profit.

This is why most people who run labels are producers/musicians as well, so they feel like they're a part of the entire process of the music business, they have creative control and they make a little more money.

I hope this is your situation and, whatever you decide to do and however this works out, I hope you succeed. We need more people like you in this world. God bless ya.

thanks yay! just to clarifuy... so if a project cost $2,000 and i'm selling cd's on my website for $12.00, does the whole $12.00 go towards recouping my $2,000, or only the cost of about $5.00? do i just set the $7 aside to later split with the band once our cost are made back?

Set it aside.

one more thing... about recouping cost. how do you base when you recoup your cost? let's say i press 5000 copies. do i wait to make back my money from the cost of 5000 to cover the cost of manufacturing?