Everyone knows that record companies aren’t making like they did during the late-‘90s and early ‘00s. Many labels are trying to tap in and find the next big and in some cases like Justin Bieber and Katy Perry, they’ve succeeded. But the question is at what cost?
Well, global label trade group IFP (via Digital Music News) discovered that majors spend up to $1.4 million on developing a new artist. Not surprisingly, pop acts are the ones that cost the most when extra costs like additional songwriters, recording costs and parents are included in the budget. Not surprisingly, rock bands provide a better return on investment since the costs affiliated with them are significantly less.
Talent is the ultimate indicator of success and when a label believes in an artist, then they are willing to spend as much as it takes to make sure they can create something that will make them money for years to come. Faith in talent evaluators, though not listed, is perhaps the most important element in getting a label to fork over the funds to help make a successful artist. If that artist flops, then not only does he or she get dropped, a lot of power decisionmakers do as well.
However, no matter how you look at it, these economics provide an interesting insight to why the music business is the way it is.