Typical Album Project: How Labels Would Invest and Get Returns

We all know that the album culture is on its death bed in Kenya, largely due to the large investments required and which the labels/artists can’t find and also, there is the piracy issue. You will notice I have intentionally left out fans not buying the music as a problem because I feel this can easily be averted. So, I came up with a research into how much money an album project would cost and what strategies would guarantee returns, plus, what the profit margins would be like. I have also included marketing objectives, project assumptions and a detailed analysis of the cash spent, possible revenues and finally, the bottom-line: profits.

Album Project Objectives:

  1. To produce, promote, market and distribute a quality album that would sell 100,000 physical copies (CDs).
  2. To take advantage of the album marketing and promotion to sell merchandise for the artist and the record label.
  3. To promote the album using tours, as this would also act as a revenue stream.
  4. To position the artist and record label to get product endorsement deals and partnerships.

Album Project Assumptions:

  1. The artist or band whose album is to be released enjoys national support.
  2. The figures we are using are conservative and only serves the purpose of illustration.
  3. The record label is able to financing of the project.
  4. The Artist has a good manager who can supervise his/her creative process, recording and distribution.
  5. The record label has its own production equipment, otherwise we will assume a production cost.
  6. The album project contains between 12 and 15 singles and for illustrative purposes we will call it The UnBeatable Project.
  7. The label has access to retail points like record stores, supermarkets, bookshops or boutiques.

A. Project Costs

a) Recording and Mastering

We are going to assume a Ksh. 200,000 production fee. This would include recording, mixing and mastering expenses. Also in this, we assume that the record label will provide vocalists and a voice coach, wherever possible.

b) Promotion and Marketing

This is where the musicians and labels fail, more often. For purposes of understanding, I will say that one must ensure that the marketing strategy they utilise, focuses not on just gaining fans, but consumers too. Or, you must convert the former to the latter. Fans wait until you release music on Youtube and then Tweet about it; consumers go further and ask where the album copies are available.

  • 3 Music Videos (Ksh. 150,000)– these videos for three singles off the album, will serve the purpose of promoting the project and may be released as follows: two before album release and one in the week of release.
  • Album Cover and Photography (Ksh. 10,000)– a well illustrated album cover and professional artist photographs are a good way to promote the album.
  • Twitter Promotion package(Ksh. 100,000)– this will be used to pay influencers with the purpose of creating an online buzz.
  • Facebook Ads (Ksh. 50,000)– You will need to create Facebook Ads  and I suggest you use it only after release so that the purpose is to drive consumer traffic to download/sales website and your retailing points.
  • Publicity Costs (Ksh. 50,000): As previously assumed, the artist has a manager and so you’ll only need a publicity guy to communicate with the radio, TV, blogs and clubs about the project and create the buzz on the media.
  • Touring and Road shows (Ksh. 400,000)– This will ensure that the artist performs in a number of venues, mostly in the remote areas of the country to promote the album there too.
  • Content marketing expert (Ksh. 100,000)– this guy will ensure that the online audience is engaged with videos informing them of the album news and features of the artists. Also, the content marketer will create a small blog say, theubeatableproject.com so as as to post news,  videos and details about the album.
  • 100 Promotional CDS (Ksh. 20,000)– these will be taken to media houses.
  • 200 promotional teeshirts (Ksh. 40,000)– tee-shirts will be given out during club shows, media tours and roadshows.
  • Other promo items  Ksh. 80,000 – This includes poster, flyers and banners.

TOTAL Marketing/Promotion Cost = Ksh. 1,000,000

See Also : Is It not entirely wrong to pay Djs for airplay?

c) Distribution Costs

As already indicated, sales projection is 100, 000 copies each at Ksh. 300. (Retail price is to be Ksh. 400). CD pressing/manufacturing is assumed to be Ksh. 150. To save on initial investment cost, the CDs can be pressed in batches of 10,000 copies.

  • Pressing and branding of CDs: 100,000 copies X Ksh. 150 per copy = Ksh. 15,000,000 (since we are doing only 10,000 at a time, we will spend Ksh. 1.5 million per batch.)
  • Warehouse: for storing the consignment before dispatch to various retailers. We will rent a store for Ksh. 30,000 for ten months. That comes to: Ksh. 300,000
  • Distribution cost: use of 4 lorries and transport personnel to dispatch the boxes to various destinations in 10 days. These will be able to deliver to all locations.    KSH. 10,000 per lorry X 4 lorries X 10 days=Ksh. 400,000

TOTAL DISTRIBUTION COST = Ksh. 15,700,000

Thus, GROSS Total= 200,000 + 15,700,000 + 1,000,000= Ksh. 16.9M

(Total amount for production marketing and distribution is Ksh. 16. 9 million)

See Also: >>Solving Distribution Problem In Kenya

B. Project Revenue

a) CD sales

We assume, 95% will be sold.

95% X 100,000 CDs X 300 per CD wholesale= Ksh. 28,500,000

b) Album Streams/Downloads 

Streaming revenues from Spotify, iTunes plus local services like Waabeh and Mkito woul likely bring in Ksh 200,000

c) Album-related Merchandise sales

  • Over the 10-month period, sales would be 1000 shirts at a profit of 300 per shirt i.e Ksh. 300,000
  • 400 Caps at a profit of 200 per cap= Ksh. 80,000
  • Other merch sales: Ksh. 30,000

Total Merch Sales= Ksh. 410,000

d) Returns from Touring and shows:

We assume that the label will get a Ksh. 200 per attendee for 50 shows with an average attendance of 150 people.

=> 50 shoes X 150 people per show X 200 per person = Ksh. 1,500,000

e) Sponsorship or Product Endorsements during tours and club gigs.

At least Ksh. 1 million

Thus, Total Revenue  > 28.5 Million + 0.2 million + 0.41 Million + 1.5 million + 1 million= Ksh. 31,610,000

C. Project Profits

Profit=> Total benefits- Gross Total costs= 31.61M-16.9M= Ksh. 14.71 Million

CONCLUSION:

We can now comfortably agree that there would be profits awaiting, should all that pertains to quality production, proper promotion and marketing and utilisation of the best distribution system is duly considered.

{REMEMBER to COMMENT below. Do you agree with me either entirely or fully, do you disagree and why? What changes can be made?}


By Phillip Nyalenda

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