The article on the root covers more of those categories Cheryl and I mentioned above. The amount mentioned paid to a songwriter and publisher on a per recording basis may seem small, but not really when you consider downloads, for example, selling for 79 cents to 99 cents. In other words the combined amount going to the songwriter and publisher from the sale of a single song is about 10%. That is 10% based on the gross figures.
The diagram still doesn't explain where this percentage is in relation to the $1000 of music spend, which as the songwriter and publisher share is based on gross, it really should. Equally the diagram still doesn't explain or assign the costs. According to the diagram:
Of $1000 spent, 13% goes to the band ($130) and 18% of that goes to the musician ($23.40). There is no wiggle room here. For $1000 spent to turn into $23.40 the band had to get $130, which is exactly 13% of $1000.
I should point out my argument with the chart is less about the accuracy of what the band is paid but more about the in accuracy of what happens to the money in the top circle. The top circle should have costs, which include the license they pay to use the song, so costs should at a minimum be 10%, more likely closer to 50% of that top circle could be eaten by costs depending on digital downloads versus physical media. After costs are deducted the split may well be as indicated in some cases.
The book the article refers to by Donald Passman is indeed absolutely excellent, however the illustration and conclusions used in the example for the article is definitely flawed. My guess is that the percentages used in illustration are put together by the root site interpreting Mr Passman's book. I don't see Donald making that sort of fundamental flaw in a million years.
What it does show us I think is close. They tried to demonstrate real world numbers when really it illustrates the division of profit. In reality the band as a whole may get 13% (an individual member getting 2.34%) of net while the songwriter gets 4.5% of gross to himself / herself (unless they collaborated) is closer to the mark yet still I think the share isn't quite right. In essence this translates to something closer to the band getting In the region of 6.75% gross and the individual member getting something like 1.17% gross. The band then doesn't see a cent until they have paid their advance back.
Where labels make money hand over fist is in the provision of in house services, or in the servicing of debt. For example, the label advances band members money to live on, which they then have to pay back before they see a single cent, is just one form of debt. If the label pays for a new video to be made, kerching the band, as a business, owes another $200k +. That debt has to be serviced. As mentioned in a previous post, the label may, like a bank, add to your lending by pushing you to borrow more, but the push the artist to spend that money with businesses they get a kick back from, or in some cases they own, or with in house services. In other words they lend you the money to spend with them!
So the label makes money from the money they advance you.
They keep advancing you money, which apart from the personal share used by band members to live on, is largely spent with the label, it's subsidiaries and it's partners, associates and affiliates. This keeps you in debt, which works FOR the label in several ways.
Yes they take a risk with the initial investment.
But then they use that and as a money making machine that they stoke with just enough that the band grows, and so does the level of debt the band owes. Meanwhile the label creams off the profits, an ongoing and increasing skim of the profit made. Meanwhile the band are in more dept, working lots and desperate to do more, to record a new album and get a new advance.
By keeping you in debt they keep you mailable, pliant, easy to manipulate. A band is a commercial entity, and thinking commercially does not come naturally to most musicians. Keeping you in debt also helps keep the band focused on making money, on making commercially sound choices. Most labels don't give a toss about artistic merits, they want hits. To make more hits they want you focused. To keep you focused they want you owing them. They want you grateful.
They do take a risk by investing in bands, but thereafter they get the band to take the risk and bear the costs.