In my music business course in college we were assigned to go to a local music store and get the grand tour. I went with a few people and we saw the stock in the back, the repair shop downstairs, and the Audio and Electronics section in the back. They had a Plasma television on display for $8,000. This was a few years ago, so Plasma TVs were pretty new.
One of the people I went with said something like, “Wow, you guys must make a lot of money on those!”
“Actually,” replied the guy giving us the tour. “Not really.”
It occurred to me that there was a big flaw in the music business program at the time. We were being taught all kinds of licensing terms, how a recording gets made and how royalties work, but we weren’t really being taught things like profit margins, cost, and other general, fundamental, essential reasons to even consider going into a market.
$8,000 seems like a lot, but at the time I’m guessing it cost the store maybe $7,000-$7,500 to buy. You won’t sell many TVs for $8,000, and when you did you made maybe $1,000…12% margin. Meanwhile, you get things like replacement styluses for a Nintendo DS selling for $8 for 2. $4 for 1 stick of plastic that couldn’t cost more than $0.30 to make. Which one’s the better deal for the vendor?
Granted, it was a music business course, and if we wanted to learn more we should’ve taken a broader class. But musicians don’t take business courses to hang out with “the suits.” They take it because they want to play the drums for a living or become the next American Idol on their own terms. They want to be professional rock stars. That’s all well and good, but that won’t happen unless you know the fundamentals about where money’s going and where it’s coming from. Even then, it takes more than a semester of classes. You’ve got to have a product that people are willing to buy, which means it’s actually got to be a good product.
In a student newspaper article for the student-run record label the label head discussed how they filed for a copyright for their first release versus mailing the record via the postal service because “It holds up better in court.” This article was more about how there was even a record label on campus, but it should’ve been a good marketing opportunity to discuss the acts on the CD. People don’t buy a Radiohead album because it’s from Capital Records.
The release was a compilation of songwriters and bands from the college community, some appearing more than once on the CD. Plus, the record wasn’t mastered. The end result was an unfocused mess of music, levels meandering from track to track, that ended up collecting dust on the college bookstore’s shelves with a $5 price tag on it, covering up the $10 price tag below that. Before they released a compilation album they should’ve built up a larger library to pull from and built the compilation from that.
In their defense, it was only a test run to see what they could do, and they held auditions for this compilation and assumedly took the best of what they got. I suppose that doesn’t say much for one of the most popular music schools in the state.