360° Digital Artist

Major artists and labels have found success selling digital music on iTunes, but is it a feasible distribution model for independent artists? Can independent artists actually make money at it? That, of course, all depends on the number of songs an artist is able to sell. How many songs will an artist need to sell then in order to make a profit? For this post, I’ll discuss some of the costs involved, how to know when a project breaks even, and how to figure profit. I’ll also include a few tips along the way on how to actually sell your music on iTunes.

First of all we look at the costs involved.  There are fixed costs, which are the costs for the project that will stay the same no matter how many songs are sold. There are also the variable costs, which are the costs associated with each song sold.

Fixed Costs
Our first fixed costs are the recording fees. For the purpose of this post, we will say that it takes 6 hours to record one song at a cost of $50 per hour. Of course your mileage as far as studio times and costs will more than likely vary. This gives us a fixed cost of $300 for recording.

The next fixed cost will be mastering. Although the studio doing the initial recording can take care of the mastering as well, I prefer to take the project to a mastering house that specializes in mastering tracks. It also gives you a “second opinion” on the mix of your track. I would recommend taking a look at The SoundLab at Disc Makers. You can have the song mastered for $100 ($99 technically).

Although not entirely necessary, it is good to have an album cover that will accompany the song on iTunes. It helps to give a visual appeal and attract potential fans for the song. If you think your stunning looks can sell records, setup a photo shoot with a local photographer who will allow you to use the photos within the artwork for your album cover. Look at spending at least $200 for the photos. The prices you find will more than likely be different, but make sure the photographer produces quality work.

To create the actual album cover, acquire a graphic designer to do the work for you. I would suggest looking at a service such as 99Designs where various designers compete to design your project. You can post the photos from your photo shoot for the designers to work with and let them listen to a streaming copy of your song to give them ideas for the cover.  (use SoundCloud to stream the song) For the purpose of this post, we will say that $200 is spent in a design contest for the creation of your album cover.

Our final fixed costs is that of actually getting your song onto iTunes. We will let TuneCore take care of the distribution at only $10 ($9.99) per single. That gives us a combined fixed cost of $810.

Variable Costs
Our first variable cost per song sold will be the fees that iTunes takes when selling your single. iTunes pays out 70 cents for each 99 cent song sold. So the fee per single is 29 cents.

If the song was written by someone else besides you, for instance you performed a cover, you will need to pay mechanical licensing fees. These licenses can be obtained through the Harry Fox Agency. For the purpose of this post, we will say that the fees are 9 cents per song sold. This gives us a combined variable cost of 38 cents per song.

Breaking Even
The money left over after selling a 99 cent song and subtracting the variable cost is known as the Contribution Margin. This amount would be 61 cents. This is the money that is available to pay off the fixed costs. Once the fixed costs are paid for, this then becomes the amount of profit as songs continue to sell.

Once 1,328 songs are sold, the fixed costs have been paid for. ($810 Fixed Costs divided by the 61 cent Contribution Margin per song) This is the point where the artist breaks even on iTunes.

Profits
After selling 1,328 songs, the artist then begins to realize a profit. To figure the profit, multiply the number of songs sold past 1,328, by the 61 cents Contribution Margin. If you sell a total of 2,000 songs, which is 672 songs past the break-even point, you realize a profit of $409.92. That is not too bad if you can sell that many songs.

To decrease the number of songs required to break even and increase your profit potential, look for ways to decrease your fixed costs. Writing your own songs as opposed to licensing music from others will reduce your variable costs.