I’m doing my taxes this week.
If it helps you maintain my “image”, imagine I’m A.) really sad about it, philosophically pondering how Western Civilization and Capitalism got to the point that I, one whose job it is to write poems and sing them so that we can momentarily forget about these things, am sitting at a computer figuring up royalties to the .000000000000001th decimal point. (this part is actually true.) and B.) Not wearing glasses and my hair looks super cool. (this part is not true.)
I know a lot of you are also hoping that one day, you’ll be able to pay your bills making music. (Hallelujah.) So over the next few weeks, I’m going to try to help, by filling you in on the Top 10 “interesting” (ha) things I discovered while doing my taxes. Even if you make enough money that you can pay an accountant to do these things, I feel like it’s important to know what’s going on with your money, so you don’t get Leonard Cohen’d.
NUMBER ONE: iTUNES
If you put your music on iTunes via CDBaby, as I’ve done in the past, your accounting doesn’t tell you how much the websites charged for your music. You need to know that number, because the difference between that number and the amount you got paid is a fee. You are paying a store to sell your music, so it’s a tax deduction.
Now hang on, because this is going to get SUPER NUMBERS-Y, HERE.
(Edit: This section was originally wrong. I had called CDBaby.com to get some details on how the math was figured, and the guy on the phone told me wrong. Below, you can see the comment that Chris from CDBaby left to clarify. SO: the numbers have been edited to accurately reflect this.)
The report I get only tells me how much I ended up with ($0.637/song, after CDBaby’s 9% fee, if you’re wondering). I tried to come up with the simplest equation to figure out exactly how much was taken by each party. I ended up with a few that worked, but here was the simplest one:
p = original price on the store (in this case, 99.9 cents)
s = amount kept by the merchant (in this case, iTunes)
c = amount paid to CDBaby.com percentage (9% of the “post-s” total)
x = actual money that came to me ($0.637)
Since we know a few of these factors, the equation looks like this:
.999 – s – c = .637
.999 – s – (.09(.999*s)) = .637
I’ll spare you all the steps because you either don’t care, or you already know how to do this, and skip straight to the answer:
p = $0.999
s = $0.292929292865656
c = $0.063636363642091
x = $0.643434343434344
Chris from CDBaby says that iTunes takes 30%; I have it at 29.3%.
I don’t know if 30% is an estimation, or if their price is closer to 99.999999999999 cents. Either way, it’s probably not important unless you care about millionths of a cent. (Which I do, because I’m an independent musician. )
29.3% to the store feels like a high percentage, but you have to consider that most large venues take somewhere from 10 to 25% of the artist’s physical merch sales at any concert. After an album is recorded, mixed, and mastered (which, let’s not forget, costs tens of thousands of dollars) it costs me approximately $1.50 to print up a CD, and $4.50 to print up a vinyl record. It costs me approximately $0.00 to print up more iTunes copies.
What I’m saying is that 29% feels like a rip-off, but not as big a rip off as 15% of my physical merch feels. (I’ll go into profit margins of physical merch in a later entry.)
I want to go back and revisit something. I set the price of a track in iTunes to 99.9 cents a minute ago. That’s because I noticed that I was being paid $0.637 for a 99-cent song, and $6.37 for a $9.99 album. There were only two possibilities:
Scenario #1: iTunes was employing the old gasoline-prices trick and actually charging 99.9 cents per song,
(Scenario #2) they were charging the artists a higher percentage to sell an albums than a single.
Scenario #1 made more sense to me, AND, when filtered through the equation, left their percentage closer to the 30% that Chris told me they took.
In case you’re curious, I ran the numbers on Amazon while I was at it, and they charge almost exactly the same. I have them at 28.5%. The biggest difference is that they sell my album for $1 less, so I make $5.92 per album instead of $6.37.
If you’re willing to shop outside the “usual” places, you’ll find stores that give artists a bigger cut. CDBaby recently dropped to a 9% charge for digital if you buy straight from their site. Bandcamp takes 15%. But some people will only buy music from iTunes or Amazon, so taking it down from there would mean a net loss, even though it feels like a lot of money to pay for the privilege of being there.
Those of you that have never seen Office Space are probably wondering why I would be digging in to figure out discrepancies that amount to $0.009/album.
And you might have a point. It’s probably curiosity more than anything. It’s not going to be the difference between forced retirement and buying a house; but it’s important for me (and you) to know that for every $1,000 that ends up in my pocket from sales on iTunes, you guys were charged APPROXIMATELY …..$1,554.1603198653830
Think about that for a sec. When you buy music on iTunes, even for artist not dealing with the various legalities/expenses of being on a label, iTunes gets more than half as much as the artist.
If you’re asking me where to buy music (You’re not, I know.) I’d first say buy my music however you like. I’m just happy you’re still buying songs. (THANK YOU.)
Later this week, we’ll look at Spotify, Tour Income, Cost of Merch, Profit Margins, How to Budget a tour, and whatever else pops up.
If you are still reading at this point, I wonder what went so right in your life. I’m proud of you. YAY MATH.
Levi Weaver is an independent artist and plays as a one-man band with his loop pedals, dual mics, and a violin bow which he occasionally takes to his guitar strings. But more than anything, he is a story-teller. Levi is currently at home in Nashville working on the follow-up to 2011’s The Letters of Dr. Kurt Gödel and 2012’s I am Only a Tiny Noise; the new album is anticipated to drop in 2013. Read more from Levi on his blog here, follow him on Twitter @leviweaver or join him on Facebook.