We have all heard that artists make very little money from their songs, and get "ripped off"by record labels and other folks in the chain. I have always had mixed reactions to this. I have no doubt that, with zero power and a burning desire to "make it big", young acts sign uneven deals with record labels. However, I find it hard to believe that Beyonce is getting hosed in that negotiation.
I saw this chart in TechDirt about where the money consumers spend on music goes (I think this is for a CD sale):
So the performers themselves get about 9% of the retail price after everyone in the chain is paid. That certainly seems paltry -- after all, they are the owners and creators of the music. Everyone else is just in the service chain to make sure the music reaches the customers, all the accounting is done, the legal documents are correct, etc.
But it turns out that they may not be doing that badly. I am a shareholder of ExxonMobil (XOM). I own a piece of all the oil that XOM owns and controls, along with all the other shareholders. Think of us as the band, though a really big band with lots of players. That oil we own, like the band's music, has a ton of value. When sold as raw crude, it goes for $40-$60 a barrel nowadays. When sold in pieces (such as gasoline, or asphalt, or lubrication oil) it can sell for hundreds of dollars a barrel.
But out of those proceeds, we have to pay people to help us. We have to pay managers, and lawyers. We have to pay oilfield services companies and equipment companies and transportation companies. We have to pay retailers. When all those payments are made, before taxes, in 2014 we were left with just under 8% of every dollar we sell. We own all this oil and we are not even getting as much as a musician!
And XOM shareholders do pretty well. Owners of Wal-Mart only get about 3% of every dollar they sell. In my company, I get about 5% of every dollar I sell. And those evil health insurers? Their shareholders get just over 2% of every dollar sold (all based on 2014 full-year financials).
Does that mean that Exxon shareholders are getting "ripped off" by Haliburton and Burlington Northern? Is Wal-Mart getting ripped off by Proctor and Gamble? Is Humana getting ripped off by GE imaging? No?
I will reveal the ugly secret: There is one person who is "ripping off" all of these folks, from Exxon to Rihanna to me. That person is.... the consumer. Yep, there are certainly many examples of people signing bad contracts in all these businesses, but the only entity systematically and consistently ripping all these folks off is us. Because in a capitalist economy, we have the ultimate power. We drive down the street to get the gas that is 10 cents cheaper, we now shop for our books and TVs at Wal-Mart and Amazon rather than at Borders and Best Buy, and we buy 99-cent individual songs on iTunes instead of buying a whole CD of songs we don't want for $14.99.